RETAIL STRATEGY RETAIL STRATEGYA clear and definite plan outlined by the retailer to tap the market A plan to build a long-term relationship with the consumers Process of strategy formulation in r etail is the same as that for any other industry It starts with the retailer defining or stating the mission for the organization The mission is at the core of the existence of the retailer Other aspects of the strategy may change over a period oftime or vary for different markets
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A clear and definite plan outlined by the retailer to tap themarketA plan to build a long-term relationship with the consumersProcess of strategy formulation in retail is the same asthat for any other industryIt starts with the retailer defining or stating the mission forthe organization The mission is at the core of the existence of the retailerOther aspects of the strategy may change over a period of time or vary for different markets
Mission statement is a long term purpose of theorganizationIt 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 offered2. The customers who will be served
3. The geographic areas that the organization chooses tooperate in
Once the retail mission is defined, the retail organizationneeds to look inwardsUnderstand what its strengths and weaknesses areLook outwards to analyze its opportunities and threatsSituation analysis helps the retailer determine his positionand his strengths and weaknessesHelps formulate a clear picture of the advantages andopportunities which can be exploited
The weaknesses need to be worked upon This forms the basis or he core element of any strategy
After determining the strengths and weaknessesvis-à-vis he environment retailer needs to
consider various alternatives available to tap aparticular marketIgor Ansoff presented a matrix which looked at
growth opportunities
He focused on firm’s present and potentialproducts in the existing and new marketsAnsoff’s matrix also helps to understand theoptions available to a retailer
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 mixAnother approach is to encourage salespeople to cross sellMarket penetration strategy is the least risky one, since itleverages many of the firm’s resources and capabilities
However, market penetration has limitsOnce the market approaches saturation, a new strategy needs tobe pursued if the firm is to continue growth
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 audienceExpansion by adding new retail stores to existing network is an exampleof geographical expansionIntroducing a pharmacy in a supermarket (eg. The medicine Shoppe atthe Haiko Supermarket in Mumbai) is an example of a retailerintroducing new products, appealing o a different audienceAnother example is McDonald’s who introduced ice creams for Rs.7
This not only created add on sales, but also brought in customers whohad the perception that McDonald’s is an expensive fast food restaurant
RETAIL STRATEGYRETAIL FORMAT DEVELOPMENTWhen a retailer is said to introduce new retail format to customers
Example fast food retailers like McDonald’s and Subway offerlimited menus inside large department storesAnother example is bookstore chain Crosswords, opening smallerformat stores by the name Crossword Corner at Shopper’s StopStrategy may be appropriate if the retailer’s strengths are related
to specific customers, rather than to specific productsIn this situation retailer can leverage its strengths by developing anew product targeted to his existing customers
Translation of mission statement into operational termsIndicate
1. 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 mindSales volume targetsMarket hare targetsProfitability targetsLiquidity targetsReturns on investment targets
RETAIL STRATEGYOBTAIN AND ALLOCATE RESOURCES NEEDED TO COMPETE
Resources needed by a retailer - Human Resources- Financial Resources
1. Human ResourceHR plan must be consistent with overall strategy of the organizationHR 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
After choosing the target market the retail mix needs to be developed
This process involvesthe determination of the merchandise mixthe pricing policytypes 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 tothe image the retailer wants the customers to have in their mindsaboutthe products and services
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 market2. Merchandising must be single-minded3. Displays must appeal to target market4. Advertising must talk to the target market5. Personnel must have empathy for the target market6. Customer service must be designed with the target
RETAIL STRATEGYIMPLEMENT THE STRATEGY, EVALUATE AND CONTROL
After implementation the management needs feedback and should focus on
1. Performance2. Effectiveness of long term strategy by periodic evaluation3. Ensuring that the plans do not degenerate into fragmented ad-hoc efforts4. Ensuring that all efforts are in harmony with he overall competitive
strategy 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 theretailing mix variables support the firms strategy
RETAIL STRATEGYConcept of international retailing (RETAIL INTERNATIONALIZATION)
More than just replicating retail stores in other countries and markets
Defined as “The management of retail operations in markets which are different fromeach other in their regulation, economic development, social conditions, culturalenvironment and retail structure.”
Typically retailers start as regional players
They develop operational efficiencies as they expand in size
Growth in size gives them financial resources
International expansion happens when retailer reaches a dominance in domestic market
Saturation in domestic market is also a reason for retailer to look at internationalexpansion
Organic growthReplication of retail format in a new non domestic market within theregulatory framework of the new market.
It gives retailer the kind of control that he requires
It also requires a great deal of investment
Factors affecting decisions on entry in particular markets
Position in the domestic market : Expertise, leader, new entrantAccess to global systemsAbility to adapt to requirements of global marketsLong term commitment towards business
Growth : Retailer grows from a single shop to a chain of retail stores.From a local to a regional and national presence.Strategy and planning becomes very importantRetailer should have a clear focus and strategy
Retail Strategy Models : Retailer can either become a pentagon player or atriangle
Triangle : The retailer’s focus on- Systems- Logistics- Suppliers
Above approaches to developing strategies are perhaps appropriate in maturemarketplaceAt present , retail in India is oriented towards the mass marketAs such the retailer must consider all aspects of strategy development, such asproduct , price, place, communication and the supply chain
There is an absence of a robust infrastructure and inadequate capabilities of theservice providers in India
Thus the retailer must necessarily invest in creating the appropriate supportstructure for its operations