Lecture Retailing management (6/e): Chapter 5 - Levy Weitz

Chapter 5 - Retail marketing strategy. This chapter describes the development of a retail market strategy. In this chapter, we will address the following questions: What is a retail strategy? How can a retailer build a sustainable competitive advantage? What steps do retailers go through to develop a strategy? What different strategic growth opportunities can retailers pursue? What retailers are best positioned to become global retailers?

Retailing Management, 6/e Copyright © 2007 by The McGraw­Hill Companies, Inc. All rights reserved.

Chapter 5 Retail Marketing Strategy

Retailing Strategy

Retail Market Strategy

Chapter 5 Financial Strategy

Chapter 6

Retail Locations

Chapters 7,8

Human Resource Management Chapter 9

“Strategy” Is Over Used

Retailers Talk About A Lot of Different

Strategic vs Tactical Decisions

Strategy statement Annual plan

Difficult to evaluate Easy to evaluate

Note: Success Comes for Having a Good Strategy and Executing It Well

Method for Satisfying Needs

• Bases for Building Sustainable Competitive Advantage

Defending Position Against Competitors

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Analyzing McDonalds’ Retail Strategy

What Is McDonalds’:

-Target market?

-Retail offering (format)?

-Bases for competitive

What is the target market, retail

offering, and source of competitive

advantage for each retailer?

Chico’s Strategy

Target Market

Woman 35 to 55 Who Want Comfortable,

Casual, But Stylish Apparel

Retail Format

Specialty Apparel Stores in Malls and Strip

Centers Selling Private Label, Coordinated

Strategy for Looking for a Job

Determine Your Target

Why Does a Retailer Need

to Focus on a Specific Target Market?

Why Not Sell to Everyone?

Retail Market Opportunities for

Women’s Apparel

Can A Retailer Develop a Sustainable

Competitive Advantage by:

• Building a Store at the Best

• Attracting Better Sales Associates

by Paying Higher Wages?

• Providing Better Customer

Service?

• Dropping the Price of Your

How to Develop a Sustainable

Competitive Advantage

s

What does loyalty mean?

Is It the same as liking a store?

…Going to the store frequently?

Loyalty

Digital Vision / Getty Images

How Retailers Build Loyalty

• Develop a strong brand for the

store or the store brands

• Develop clear precise

positioning strategies

• Create an emotional

attachment with customers

through loyalty programs

Royalty-Free/CORBIS

Example of Positioning

Creating Store Loyalty Mental and Emotional Attachments

• Elements in a Strong Brand

– Top of the Mind Awareness

– Associations with Brand/Store Name

• Methods Used to Develop a Strong Brand

– Massive Exposure

– Symbols to Reinforce Image

– Consistent Positioning Creating Strong

Associations

– Limited Brand Extensions

-Increase in breadth and depth-Decrease in prices

By decreasing costs here, the

is more money available to invest in:

StockTrek/Getty Images

Private Labels

Sears’ Kenmore appliancesFederated’s Inc – fine apparelKmart’s Martha Stewart homeJCPenney’s Arizona jeans

Jules Frazier/Getty Images

Vendor Relationships

• Low Cost - Efficiency Through

Coordination

– Electronic Data Interchange (EDI)

– Collaborative Planning and Forecasting to

Reduce Inventory and Distribution Costs

• Exclusive Sale of Desirable Brands

• Special Treatment

– Early Delivery of New Styles

– Shipment of Scare Merchandise

High Quality Customer Service

• Difficult to Achieve

– People Are Not Machines Inconsistent

– Retail Sales Associates At Bottom of

Labor Pool

• Goes Beyond Hiring Good People at High Wages and Training Them

Organizational Culture

• Low Cost, Consistent Image, Vendor

Relationships Reduces Flexibility

• Similar to Dating and Marriage –

Commitment to a Relationship (Vendor)

Reduces Flexibility

Growth Opportunities

Cross Selling – sales associates in one department sell

complimentary merchandise from other departments

Example: Manicurist sells services plus hand lotion or nail polish

Example: Salesperson sells leaf blower directs customer to electrical

department to purchase a 100 foot extension cord.

Why Do Category Killers and Supercenters Succeed Globally?

Developed operating expenses

Scale economies for buying

merchandise globally

Unique systems and standardization

formats that facilitate control over

multiple stores

Understand that consumers are

willing to forego service for lower

Key to Success in Global Retailing

• Domestic market leadership – strong base

• Exploiting core competencies –

competitive advantage

– Low cost - Wal-Mart, Carrefour

– Fashion Reputation - The Gap, Zara, H&M

– Category dominance – Best Buy, Office Depot

– Unique Image, Brand – Disney, IKEA,

Starbucks

• Adaptability

• Global Culture

• Long-term commitment

Succeeding Internationally

Adaptability Global culture Financial resources Global sustainable competitive advantage

PhotoLink/Getty Images

International Market

Entry Strategies

Direct InvestmentJoint Ventures

Strategic AlliancesFranchising

Lawrence Lawry/Getty Images

Steps in the Strategic

Retail Planning Process

Competitive rivalry Threat of superior  new formats

Technology Economic Regulatory Social

Financial resources Locations

Operations Merchandise Store Management Customer loyalty

Market Factors

• Market size – large markets attractive to

large retail firms

• Growing markets – typically more

attractive than mature or declining

• Business cycles – retail markets can be

affected by economic conditions – military base towns

• Seasonality – can be an issue as

resources are necessary during peak

season only

Questions for Analyzing the Environment

• New developments or changes

technologies, regulations, social

factors, economic conditions

• Likelihood changes will occur

• Key factors determining change

• Impact of change on retail market

firm, competitors

Competitive Factors

Competitive Rivalry

Bargaining 

Power of 

Vendors

Barriers to  Entry

Large  Customers

Threat of  Substitution

• High fixed costs

• Lack of perceived differences between

competing retailers

Royalty-Free/CORBIS

Performing a Self-Analysis

• At what is our company good?

• In which of these areas is our company

better than our competitors?

• In which of theses areas does out

company’s unique capabilities provide a

sustainable advantage or a basis for

developing one?

Stockbyte/Punchstock Images

Customers

Loyalty of customers

Illustration of the Strategic Retail Planning Process

Kelly Bradford – Owner of Gifts To Go

– Two Store Chain in Chicago

– Target Market – Upper Income Men and

Women Looking for Gifts between $50

and $500

– Strong Customer Loyalty Based on

Knowing What Customers Want,

Providing Good Customer Service

– Low Turnover Among Associates

Mission Statement for

Gifts To Go

“The mission of Gifts to Go is to be the

leading retailers of higher-priced gifts in

the Chicago and provide a stable income

of $100,000 per year for the owner.”

Define growth opportunities will and won’t

consider

Indicates objective of company

Situation Analysis of

Gifts to Go

• Market Factors

– Chicago is an attractive market (+)

– Relatively expensive gifts are not affected

much by the economy (+)

– Gifts are highly seasonal (-)

• Competitive Factors

– Many in area Primary department stores,

craft galleries, catalogs, and Internet

retailers (-)

– Lack of large suppliers, customer (+)

– Opportunities for differentiation (+)

– Limited competitive rivalry (+)

Situation Analysis of Gifts to Go (continued)

• Environmental Factors

– Potential Threat - Development of electronic

channel by traditional bricks and mortar retailers

(-)

• Strengths and Weaknesses

– Management Capability – Limited

– Financial Resources – Good

– Operations – Poor

– Merchandise Capabilities – Good

– Store Management Capabilities – Excellent

– Locations – Excellent

– Customer Loyalty – Good

– Customer Database - Good

Growth Opportunities for Gifts to Go (continued)

• Retail Format Development

– Sell non-gift merchandise to same customers in

present or new stores

– Sell similar gifts to same customers through an

electronic channel

• Diversification

– Manufacture craft gifts

– Open an apparel store targeting teenagers

– Open a category killer store selling a broader

assortment of gifts

– Increase size of present stores (low)

– Open additional gifts stores in Chicago area

(medium)

• Market Expansion

– Open gift stores outside Chicago area – new

geographic segment (medium)

– Sell lower priced gifts in present stores – new

benefit segment (medium)

Evaluating Growth Opportunities for

Gifts to Go (continued)

Market Attractiveness

• Retail Format Development

– Sell non-gift merchandise to same customers in

present or new stores (High)

– Sell similar gifts to same customers through an

electronic channel (High)

• Diversification

– Manufacture craft gifts ( High)

– Open an apparel store targeting teenagers ( High)

– Open a category killer store selling a broader

assortment of gifts (High)

– Increase size of present stores (High)

– Open additional gifts stores in Chicago

Evaluating Growth Opportunities for

Gifts to Go (continued)

Competitive Position

• Retail Format Development

– Sell non-gift merchandise to same customers in

present or new stores (Low)

– Sell similar gifts to same customers through an

electronic channel (Medium)

• Diversification

– Manufacture craft gifts (Low)

– Open an apparel store targeting teenagers (Low)

– Open a category killer store selling a broader

assortment of gifts (Low)

Market Attractiveness/Competitive

Position Matrix

Steps in Using Market Attractiveness -

Competitive Position Matrix

• Define strategic opportunities

• Identify market attractiveness and competitive

position factors

• Assign weight based on importance of factors

• Rate opportunities on market attractiveness

and competitive position

• Calculate scores and evaluate opportunities

Characteristics of

International Markets

5-9

Attractiveness Ratings for International Growth Opportunities

Competitive Position in International

Growth Opportunities