Retail-strategy Unit 10

8/6/2019 Retail-strategy Unit 10

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Subject:Retail Management


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RETAIL STRATEGYRETAIL STRATEGY

A clear and definite plan outlined by the retailerto tap the market

A plan to build a long-term relationship with theconsumers

Process of strategy formulation in retail is thesame as that for any other industry

It starts with the retailer defining or stating themission for the organization

The mission is at the core of the existence of theretailer

Other aspects of the strategy may change over aperiod of time or vary for different markets


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RETAIL STRATEGY

1. Establish Mission

2. Analyze Situation Objectives

3. Identify Options

4. Set Objectives

5. Obtain & Allocate Resources

6. Develop Implementation Plan

7. Monitor Progress & Control


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RETAIL STRATEGYDEFINE MISSION OR PURPOSE

Mission statement is a long term purpose of theorganization

It describes what the retailer wishes to accomplish in themarkets in which he chooses to operate

Retailers mission statement would normally highlight thefollowing

1. The products and services that will be offered

2. The customers who will be served

3. The geographic areas that the organization chooses tooperate in

4. The manner in which he firm intends to compete


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RETAIL STRATEGYCONDUCT A SITUATION ANALYSIS

Once the retail mission is defined, the retail organizationneeds to look inwards

Understand what its strengths and weaknesses are

Look outwards to analyze its opportunities and threats

Situation analysis helps the retailer determine his positionand his strengths and weaknesses

Helps formulate a clear picture of the advantages and

opportunities which can be exploited The weaknesses need to be worked upon

This forms the basis or the core element of any strategy


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RETAIL STRATEGYIDENTIFY OPTIONS / STRATEGIC ALTERNATIVES

After determining the strengths and weaknessesvis--vis one environment retailer needs to

consider various alternatives available to tap aparticular market

Igor Ansoff presented a matrix which looked atgrowth opportunities

He focused on firms present and potentialproducts in the existing and new markets

Ansoffs matrix also helps to understand theoptions available to a retailer


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RETAIL STRATEGYIDENTIFY OPTIONS / STRATEGIC

ALTERNATIVES

The alternatives available to a retailer are :

Market Penetration

Market Development

Retail Format Development Diversification


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RETAIL STRATEGY


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RETAIL STRATEGYMARKET PENETRATION

Strategy may focus either on:- Increasing the number of customers- Increasing the quantity purchased by customers(basket

size)- Increasing the frequency of purchase

Increasing the number of customers can be achieved by addingnew stores and by modifying the product mix

Another approach is to encourage salespeople to cross sell Market penetration strategy is the least risky one, since it controls

many of the firms resources and capabilities

However, market penetration has limits Once the market approaches saturation, a new strategy needs tobe pursued if the firm is to continue growth


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RETAIL STRATEGYMARKET EXPANSION / DEVELOPMENT

When a retailer is said to reach out to new market segments orcompletely changes his customer base

This strategy involves :- Tapping new geographical markets- Introducing new products to the existing range that appeal to a

wider audience Expansion by adding new retail stores to existing network is an example

of geographical expansion Introducing a pharmacy in a supermarket (eg. The medicine Shoppe at

the Haiko Supermarket in Mumbai) is an example of a retailerintroducing new products, appealing to a different audience

Another example is McDonalds who introduced ice creams for Rs.7 This not only created add on sales, but also brought in customers who

had the perception that McDonalds is an expensive fast food restaurant


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RETAIL STRATEGYRETAIL FORMAT DEVELOPMENT

When a retailer is said to introduce new retail format tocustomers

Example fast food retailers like McDonalds and Subway offerlimited menus inside large department stores

Another example is bookstore chain Crosswords, openingsmaller format stores by the name Crossword Corner atShoppers Stop

Strategy may be appropriate if the retailers strengths arerelated to specific customers, rather than to specific

products In this situation retailer can leverage its strengths by

developing a new product targeted to his existing customers


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RETAIL STRATEGYSET OBJECTIVES

Translation of mission statement into operational terms Indicate1. Results to be achieved2. Give direction to and set standards for the measurement of performance3. Management sets both long term and short term objectives4. One or two year time frames for achieving specific targets are short term

objectives5. Long term objectives are less specific and reflect the strategic dimension

of the firm

Two important focus areas of retailers - Market Performance- Financial Performance

Objectives are set keeping these focus areas in mind Sales volume targets Market hare targets Profitability targets Liquidity targets Returns on investment targets


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RETAIL STRATEGYOBTAIN AND ALLOCATE RESOURCES NEEDED TO COMPETE

Resources needed by a retailer - Human Resources

- Financial Resources

1. Human Resource

HR plan must be consistent with overall strategy of the organization

HR management focuses on issues such as recruiting, selecting,training,

compensating, and motivating personnel

These activities must be managed effectively and efficiently

2. Financial Resources

Takes care of the monetary aspects of business

Shop rent, salaries and payments for merchandise


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RETAIL STRATEGYDEVELOP THE STRATEGIC PLAN

At this stage strategy is determined through which retailer will achieve objectives

1. The retailer determines and defines his target market2. The retailer finalizes the retail mix that will serve the audience

Target Market that segment of consumer market that the retail orgn.decides to serve

No definite process of deciding and selecting the target market

Most retailers look at the entire market in terms of both size and consumer segments towhich it might appeal

From these segments he identifies smaller number of segments that appear promising These become possible targets

Variables like growth potential, investment needed to compete, the strength of competition,etc are evaluated.

This enables the retailer to arrive at the best alternative that is most compatible with theorganizations resources and skills


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Considerations for successful market segmentation

1. Measurable : The segment should be measurable andidentifiable?

2. Accessible : Focusing market marketing efforts on aparticular market segment should have a positive impacttowards bringing out the desired response

3. Economically viable : The expense and efforts of focusing themarketing efforts in potential segments should be justified.

4. Stable : The consumer characteristics are indicators ofmarket potential. Hence stable indicators to be considered.


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After choosing the target market the retail mix needs to be developed

This process involves the determination of the merchandise mix

the pricing policy types of location the retail stores would be located at - services to be offered - communication platform that would be adopted by the retailer

Next is the formulation of positioning strategy. This refers to the image the retailer wants the customers to have in their minds

about

the products and services


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RETAIL STRATEGYIMPLEMENT THE STRATEGY, EVALUATE AND CONTROL

Implementation is the key to success of any strategy

Effective implementation of the retailers desiredpositioning requires

1. Every aspect of stores to be focused on the target market

2. Merchandising must be single-minded

3. Displays must appeal to target market

4. Advertising must talk to the target market

5. Personnel must have empathy for the target market

6. Customer service must be designed with the targetcustomer in mind


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RETAIL STRATEGYIMPLEMENT THE STRATEGY, EVALUATE AND CONTROL

After implementation the management needs feedback and should focus on

1. Performance

2. Effectiveness of long term strategy by periodic evaluation

3. Ensuring that the plans do not degenerate into fragmented ad-hoc efforts

4. Ensuring that all efforts are in harmony with he overall competitivestrategy of business

Management can also use the process to decide on

1. Any future policy change2. Modifications if any, in the plan, to ensure that the combination of the

retailing mix variables support the firms strategy

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Retail-strategy Unit 10