retail mgmt m3 - retail marketing strategies

Retail Marketing Management

Module 3 – Retail Marketing StrategiesProf. Ashish J Shah

[email protected] 98952

Module 3 Agenda

• Retail Marketing Strategies– What is a retail strategy?– Target market and retail format– Building a sustainable competitive advantage– International growth opportunities– The strategic retail planning process

MPBIM - MBA, Managerial Communication, Ashish J Shah

Business Terms of the Day

• CIF• Acceleration clause• Bank Examiner• Badla system• Hawala

Assignment

• Do a ‘Gaps Model’ analysis of the Reliance Fresh store below BNSB?

• Personally visit the store and rate the stores on various attributes? Use of the multiattribute model is highly recommended.

• Conclude by giving a list of gaps and proposed solutions to fill these gaps?

• Give your opinions on the utility of the multiattribute model in this case.

• (Optional) In case you wish to propose any additions/exceptions to the Gaps model in this case, illustrate the same

What is a retail strategy?

• A retail strategy identifies:– The retailer’s target market– The format the retailer plans to use to satisfy the

target market’s needs– The bases upon which the retailer plans to build a

sustainable competitive advantage• Target market:– Market segment towards which the retailer plans

to focus its resources and retail mix


• Retailer format:– Suggests the type of retail mix used by the retailer

to satisfy the needs of the target market• Sustainable competitive advantage:– Advantage over the competition that is not easily

copied and thus can be maintained over a long period of time


• Examples of retail strategy:Case 1: Curves

i. Has more than 8400 franchises in all 50 US states and in 28 countries

ii. World’s top fitness centre by number of clubsiii. Targets the aging ‘Baby Boomers’ instead of the prized 18 –

34 classiv. Centres don’t have traditional equipment; instead have

hydraulic resistance equipmentv. Aim is to burn about 500 calories in 30 minutes with breaks

for jogging, walkingvi. Low fees - $ 29 / month


Case 2: Magazine Luizai. Brazil’s third-largest food retailerii. Targets low-income consumers by selling on credit: instalment

payments plans at affordable ratesiii. Brazil has some of the world’s highest interest rates and half

the population do not have a checking accountiv. Customer’s must return to stores once a month to make

payments; customers tempted to buy new merchandise on each visit

v. Also provides personal loans and insurance policiesvi. Default rates are 50 % lower than other retailers though 80 %

sales are through instalment payments

What is a retail strategy?• Case 3: Chico’s

i. More than 300 specialty storesii. Sells merchandise suitable for 33 – 55 years age group femalesiii. High degree of vertical integration and customer service

(flattering) provided to mature customers with active lifestylesiv. 1.2 million members on its loyalty programme that account for

80 % of sales with average transaction per member at $ 130 compared to $ 90 for non-loyalty members

v. Sells only its own brandsvi. Salespersons trained to form personal bonds with customers


• Case 4: Save-A-Lot (SuperValu subsidiary)i. Grown to more than 1000 storesii. US’ 13th largest supermarket chainiii. Only 1250 SKUs stocked compared to 20 – 30 k

in rival chainsiv. Most SKUs are private labelv. Price is 40 % less than rivalsvi. Buying power enables customisation of private

label merchandise

Target market and retail format

• The retailing concept– Management orientation that focuses a retailer on

determining the needs of its target market and satisfying those needs more effectively and efficiently than competitors do

• Retail market– Group of consumers with similar needs (segment) that is

serviced by a group of retailers using a similar retail format to satisfy them

• E.g.; retail market for women’s apparel – see Exhibit 5-1

Building a sustainable competitive advantage

• Final element in retail strategy• Involves building barriers around its market

position to protect form incursions• Over time, defences will weaken; stronger,

thicker, higher walls/barriers will however stand; barriers needs to be reinforced and rebuilt to protect turf


• Seven important opportunities for retailers to develop sustainable competitive advantages:1. Customer loyalty2. Location3. HRM4. Distribution and information systems5. Unique merchandise6. Vendor relations7. Customer service


1. Customer loyalty– Ways of building loyalty:

• Developing a strong brand for the store• Popularising store brands• Developing clear and precise position strategies• Getting customers emotionally attached through loyalty

programmes• Retail Branding

– Private labels or the store’s name itself e.g. aro at Metro, Reliance Select

– Certain brands available exclusively at certain stores e.g. Bajaj CFLs stocked at very few stores in Bangalore


• Positioning– Involves the design and implementation of a retail mix to create an

image of the retailer in the customer’s mind relative to its competitors

– Emphasises that the image of the store in the customer’s mind is critical

– See Exhibit 5-3» Retailers close to an ideal point are evaluated more favourably

• Loyalty Programmes– Loyalty cards e.g. Reliance One– Purchase information of loyalty customers stored in a data

warehouse– Customers segmented based on purchase pattern e.g. wine,

gourmet, dairy buying preferences, F & V


2. Location• What are the three most important things in

retailing? – Location, location, location

• Starbucks location strategy– Located in major areas of cities– One step at a time: moves to another major area and

another city once it has saturated a particular market


3. Human Resource Management– Retailing is labour intensive– Employees need to be knowledgeable and

committed e.g. Home Depot, Southwest Airlines– Competitive advantage sustained by:• Motivating• Incentives• Strong and positive organisational culture and

environment• Managing diversity


4. Distribution and Information Systems– Retailers succeed by maintaining lower operations costs,

ensuring stock availability and providing expected customer service

– The above are possible through use of sophisticated supply chain systems

– E.g. Wal-Mart, P & G: auto-ordering to vendors/DC


5. Unique merchandise– Most retailers sell popular brands!– Developing private labels (store brands) is a

means to competitive advantage– E.g. Tesco wine, cheese, vegetarian sausages– Store brands: + $ 50 billion US sales, 1 in 5

branded goods sales– Issues with store brands?


6. Vendor relations– By developing strong relations with vendors, retailers may

gain exclusive rights to:• Sell merchandise in a specific region• Obtain special terms of purchase that to available to competitors• Receive popular merchandise in short supply

– E.g. Ahold (Dutch retailer) works closely with Nestle to bring in foods tailored to local tastes


7. Customer service– Coaching and training essential– Considerable time and effort required to build a credible

reputation in retail market

8. Multiple sources of advantage– combination of value, service, quality e.g. McDonald’s– Retailers may focus on multiple areas to sustain CA

MPBIM - MBA, Managerial Communication, Ashish J Shah

Food for Thought

• Credit Rating•Work in Process• Blend Fund (MF)• Opportunity Cost• Serendipity


• Growth Strategies (See Exhibit 5-4)– Market penetration

• Involves realising growth by directing efforts toward existing customers using the retailer’s present retailing format

• Involves attracting consumers in its segment that don't currently buy from it

• get current customers to visit stores more often or buy more per visit

• Opening more stores in he area• Keeping stores open for longer• Encouraging impulse buys by displaying merchandise near tills• Cross-selling: salesmen from one department attempt to sell

complementary items from another department


– Market expansion• Involves using the existing retail format in new market

segments• E.g. weekender and weekender kids, Wal-Mart and

AsDa (however, George not as big in the US)


– Retail format development• Retailer develops a new format – format with a

different retail mix – for the same target market• E.g. Barnes & Noble (specialty book store) exploited a

new market when it started selling on the net • E.g. Best Buy offer professional services in terms of 24-

hours computer support and service through a Geek Squad; though directed at customers, it involves running a service than merchandise-based retail business


– Diversification• Retailer introduces a new retail format directed toward a market

segment that’s not currently served by the retailer• Related versus Unrelated diversification

– Related: some commonality shared with new venture e.g. same vendors, same information systems used

– E.g. Foot Locker, retailer of athletic footwear had Burger King and Afterthoughts accessory stores in the 90s

– Unrelated diversifications considered risky; ‘stick to your knitting’ e.g. JC Penny sold the Eckerd drug store chain to focus on its multichannel, department store-based market and Target sold its department stores to focus on its discount stores


• Strategic Opportunities and Competitive Advantage– Retailers have greatest advantage when they engage in

activities similar to their present ones– Retailers are most at risk when pursuing diversification

strategies– Successful retailers build on existing strengths when

expanding into new markets– A retail-format based success in a new market has

already built on its brand name / reputation and success in home markets

International growth opportunities

• Out of 50 large global retailers, 37 operate in more than one country

• Risky as retailers deal with:– Government regulations– Cultural traditions– Supply chain considerations– Languages


• Who is successful and who isn’t?– Successful retailers have offerings that have

universal appeal e.g. • Distinctive merchandise• Low cost

– Most successful global retailers are, for example:• specialty store retailers with strong brand pull and/or

unique merchandise e.g. – IKEA, McDonald’s, The GAP, Starbucks, Home Depot, Toys “R”

Us – offer broad assortments and competitive prices


• Discount and food retailers with low prices such as Wal-Mart, Carrefour, Royal Ahold, Metro AG• Category specialists and supercentre retailers may be

particularly suited to succeeds globally because:1. They are leaders in their use of technology to manage

inventories, control global logistics, tailor merchandise to local needs

2. Economies of scale buying3. Unique systems and formats that facilitate control of large

number of stores4. Self-service model adopted world over now, thus reducing

cost of customer service (ALDI, Carrefour)


• Some US retailers enjoy global support because of the influence of American culture on these countries e.g.– China has KFC, McDonald’s, Starbucks in its cities– Youngsters now prefer credit cards to cash, chicken nuggets to

rice and cola to juice/tea

• EU and Japanese retailers hire locals and stock more local products to increase appeal


• Keys to success:– Four characteristics of retailers that have

successfully exploited international growth opportunities are:• A globally sustainable competitive advantage• Adaptability• Global culture• Financial resources


– Globally sustainable competitive advantage:

Core Advantage Global Retailer

Low-cost efficient operations Wal-Mart, Carrefour

Strong private brands IKEA, Starbucks

Fashion reputation The Gap, Zara, H & M

Category dominance Office Depot, Toys “R” Us


– Adaptability• Successful retailers adapt to local cultural conditions• Colour preferences, cut of apparel and sizes differ across

cultures e.g. China - white for mourning and red for brides• Selling seasons: US - August is back-to-school time and

busy period for Gap, however EU is on vacation in Aug! Back-to-school in Japan is in April

• Store designs: US – one level discount stores, EU – multi-storeyed

• Social norms may restrict stocking of men’s and women’s merchandise next to each other


• Cultural values and government regulations have influence on store operations– e.g. Latin American culture emphasises greater family

orientation where US retailers may have to alter US-style work schedules to suit local conditions

– Boots had to have its Japanese checkout staff standing at the tills as it was offensive for customers to pay to a sitting clerk, but provided seating in Germany

• Adapting products: Starbucks has fairly even product offering around the world. However, it has developed green tea Frappuccino for Taiwan and Japan, strawberries-and-cream Frappuccino for the UK


– Global Culture• E.g. Carrefour truly global

– Encouraged local management leadership always; retains few expatriates in target market

– Multicultural leadership teams and place of origin not a barrier for CEOs e.g. Chinese can be CEO in Portugal

– International travel is more about the work than just career advancement back in France

– Financial Resources• Long-term commitment• Upfront planning


• Entry Strategies– Direct Investment– Joint Venture e.g. Bharti-Wal-Mart– Strategic Alliance– Franchising

The strategic retail planning process

1. Define the business mission2. Conduct a situation audit

• Market factors• Competitive factors

– Porters FFF– Economies of scale– Bargaining power of vendors– Competitive rivalry

» Hypercompetitive markets» Slow market growth» High fixed costs» Lack of perceived differences between competing retailers


• Environmental Factors– Macro and micro environments e.g. Reliance Retail in UP– Retailers must answer at least three questions to ascertain

environment impact on business:» What new developments or changes .e. new tech., laws,

social factors, economic conditions?» Likelihood that these environmental changes will occur?» How will these changes impact each retail market, firm

and competitors?


• Strengths and weakness analysis– Management capability– Financial resources– Operations– Merchandising capabilities– Store management capabilities– Locations– Customers


3. Identify strategic opportunities– Market penetration, expansion, diversification,

format development

4. Evaluate strategic opportunities5. Establish specific objectives and allocate

resources6. Develop a retail mix to implement strategy7. Evaluate performance and make adjustments

retail mgmt m3 - retail marketing strategies

Documents