1 Retail Strategy
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Transcript of 1 Retail Strategy
PPT 5-1
5th Edition5th Edition
PPT 5-2
McGraw-Hill/IrwinLevy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
Retail Marketing Retail Marketing
StrategyStrategy
Chapter 5Chapter 5
PPT 5-3
© Copyright 2006, Ignacio J. Vázquez All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the author.
© Copyright 2006
PPT 5-4
Retailing Strategy
Retail Market Strategy Chapter 5
Financial Strategy Chapter 6
Retail Locations Chapters 7,8
Human Resource Management
Chapter 9
Information and Distribution Systems Chapter 10
Customer Relationship Management Chapter 11
PPT 5-5
“Strategy” Is Over Used
Retailers Talk About A Lot of Different “Strategies” Sales Strategy Advertising Strategy Merchandise Strategy Location Strategy
Strategy Is Not Just Another Term for A Management Decision
PPT 5-6
Strategic vs. Tactical Decisions
Strategic TacticalDirection Implementation
Strategy statement Annual plan
Broad Specific, detailed
Unstructured Structured
Problem solving Problem solving
Creativity Analytical
External focus Internal focus
Irregular Regular
Long-term Short-term
Difficult to evaluate Easy to evaluate
Note: Success Comes for Having a Good Strategy and Executing It Well
PPT 5-7
Elements in Retail Strategy
• Target Market
Customer Needs
• Retail Format
Method for Satisfying Needs
• Bases for Building Sustainable Competitive Advantage
Defending Position Against Competitors
PPT 5-8
Chico’s Strategy
Target MarketWoman 35 to 55 Who Want Comfortable, Casual, But Stylish Apparel
Retail FormatSpecialty Apparel Stores in Malls and Strip Centers Selling Private Label, Coordinated Outfits
Bases for Building Sustainable Competitive AdvantageUnique Merchandise Sized 0,1,2,3
PPT 5-9
Analyzing McDonalds’ Retail Strategy
What Is McDonalds’:
-Target market?
-Retail offering (format)?
-Bases for competitive advantage?
What Threats Might McDonald’s Face in the Future?
PPT 5-10
Examples of Retail Strategies
• Starbucks
• Target
• 7 Eleven
• Olive Garden
What is the target market, retail offering, and
source of competitive advantage for each
retailer?
PPT 5-11
Strategy for Looking for a Job
Determine Your Target MarketArea of CountryType of CompanyType of Position
Assess and Exploit Your Competitive AdvantageUnique Skills,
Experience, Knowledge
PPT 5-12
Why Does a Retailer Need to Focus on a Specific Target Market?
Why Not Sell to Everyone?
PPT 5-13
Retail Market Opportunities for Women’s Apparel
PPT 5-14
Methods for Segmenting Markets
Demographics
Geographic
Lifestyle, Psychographics
Buying Situations
Benefits Sought
PPT 5-15
Criteria For Selecting A Target Market
Attractiveness -- Large, Growing, Little Competition MoreProfits
Consistent with Your Competitive Advantages
PPT 5-16
Can A Retailer Develop a Sustainable Competitive Advantage by:
Dropping the Price of Your Merchandise?
Building a Store at the Best Location?
Deciding to Sell Some Hot Merchandise?
Increasing Your Level of Advertising?
Attracting Better Sales Associates by Paying Higher Wages?
Providing Better Customer Service?
PPT 5-17
Internal and External Bases for Competitive Advantage
Retail Firm•Low Cost
•Large Size•Efficient Distribution, Operations
• Unique Knowledge• Loyal Employees
Sources ofCapital
Vendors, Suppliers Customers
PPT 5-18
Sources of Competitive Advantage
More Sustainable Location Customer Loyalty Customer Service Exclusive Merchandise Low Cost Supply
Chain Management Information Systems Buying Power with
Vendors Committed Employees
Less Sustainable Better Computers More Employees More Merchandise Greater
Assortments Lower Prices More Advertising More Promotions Cleaner Stores
PPT 5-19
What does loyalty mean?
Is It the same as liking a store?
…Going to the store frequently?
Loyalty
PPT 5-20
Approaches for Building Customer Loyalty
Unique PositioningCustomer ServiceInformation About Customers (Database
Retailing)Unique MerchandiseLocation
PPT 5-21
Example of Positioning
PPT 5-22
Basis of Loyalty, Commitment
CostsLocationFrequent Shopper ProgramsUnique Merchandise
Mental, Emotional Attachment
PPT 5-23
Creating Store LoyaltyMental 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
PPT 5-24
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
PPT 5-25
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
PPT 5-26
Critical Tradeoff In Developing Strategic Advantage
Focus Leads to Developing A Competitive Advantage
ButFocus Reduces Flexibility
Low Cost, Consistent Image, Vendor Relationships Reduces Flexibility
Similar to Dating and Marriage – Commitment to a Relationship (Vendor) Reduces Flexibility
PPT 5-27
Growth Opportunities
•Market Penetration
•Market Expansion
•Retail Format Development
•Diversification
Related vs. Unrelated
PPT 5-28
Growth Opportunities
PPT 5-29
International Growth Opportunities
Europe
China
Mexico, Latin America
Japan
PPT 5-30
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 - Toys ‘R’ Us, Office Depot Unique Image, Brand – Disney, IKEA, Starbucks
Adaptability Global Culture Long-term commitment
PPT 5-31
International Market Entry Strategies
Direct Investment
Joint Ventures
Strategic Alliances
Franchising
PPT 5-32
Steps in the Strategic Retail Planning Process
1. Define the business mission
2. Conduct a situation audit: Market attractiveness analysis Competitor analysis Self-analysis
3. Identify strategic opportunities
5. Establish specific objectives and allocate resources
7. Evaluate performance and make adjustments
6. Develop a retail mix to implement strategy
4. Evaluate strategic alternatives
PPT 5-33
Elements in a Market Analysis
0
50
100
1s t Qtr 2nd Qtr 3r d Qtr 4th Qtr
MARKET MARKET FACTORSFACTORS
COMPETITIVE COMPETITIVE FACTORSFACTORS
ENVIRONMENTAL ENVIRONMENTAL FACTORSFACTORS
ANALYSIS OF ANALYSIS OF STRENGTHS & STRENGTHS & WEAKNESSESWEAKNESSES
Barriers to entryBargaining power of vendorsCompetitive rivalryThreat of superior new formats
TechnologyEconomicRegulatorySocial
SizeGrowthSeasonalityBusiness cycles
Management capabilitiesFinancial resourcesLocationsOperationsMerchandiseStore ManagementCustomer loyalty
PPT 5-34
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
PPT 5-35
Porter’s Five Forces
Competitive
Rivalry
Bargaining Power of Vendors
Barriers to Entry
Large Customers
Threat of Substitution
PPT 5-36
Strengths and Weaknesses Analysis
Management Capability: Capabilities and experience of top managementDepth of Management--capabilities of middle managementManagement’s commitment to firm
Financial Resources:Cash flow from existing businessAbility to raise debt or equity financing
Operations:Overhead cost structureQuality of operating systemsDistribution capabilitiesManagement information systemsLoss prevention systemsInventory control system
Merchandising Capabilities:Knowledge and skills of buyersRelationships with vendorsCapabilities in developing private capabilities
Store Management CapabilitiesManagement capabilitiesQuality of sales associatesCommitment of sales associates to firm
Locations
CustomersLoyalty of customers
PPT 5-37
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
PPT 5-38
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
PPT 5-39
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. (+)
PPT 5-40
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
Situation Analysis of Gifts to Go
PPT 5-41
Market Penetration Increase size of present stores Open additional gifts stores in Chicago
area Market Expansion
Open gift stores outside Chicago area Sell lower priced gifts in present stores
Growth Opportunities forGifts to Go
PPT 5-42
Growth Opportunities forGifts to Go
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
PPT 5-43
Evaluating Growth Opportunities for Gifts to Go
Market Attractiveness
Market Penetration 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)
PPT 5-44
Evaluating Growth Opportunities forGifts 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)
PPT 5-45
Evaluating Growth Opportunities forGifts to Go
Competitive Position Market Penetration
Increase size of present stores (High)
Open additional gifts stores in Chicago area (Medium)
Market Expansion Open gift stores outside Chicago
area (Low) Sell lower priced gifts in present
stores (low)
PPT 5-46
Evaluating Growth Opportunities forGifts 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)
PPT 5-47
Market Attractiveness/Competitive Position Matrix
Mar
ket
Att
ract
iven
ess
Competitive Position
High LowMediumMaximum investment
Consolidate position
Invest to challenge leader
Opportunities investment
Build strength or exit
Selective investment
Build on strengths
Cautious investment
Harvest or divest
Protect position
Manage for cash generation
Harvest ordivest
Harvest ordivest
Aggressive investment
Cautiousinvestment
Minimal investment
PPT 5-48
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
PPT 5-49
Characteristics of International Markets
U.S. Germany Japan
Population (Millions) 266 82 126
Business Climate 3 10 24
Logistical Infrastructure Exc. Good Avg.
U.S. Germany Japan
Population (Millions) 266 82 126
Business Climate 3 10 24
Logistical Infrastructure Exc. Good Avg.
PPT 5-50
Attractiveness Ratings forInternational Growth Opportunities
PPT 5-51
Competitive Position in International Growth Opportunities
PPT 5-52
Evaluation of International Growth Opportunities
PPT 5-53
Risk and Rewards in Latin America: Country Risk Assessment
Source: Coopers & Lybrand Analysis, “Global Retailing: Assignment Latin America,” Chain Store Age Executive, April 1996, seciton 2, p. 4.
RISK
Mar
ket
Siz
e (G
DP
Bil
lion
s) 400
350
300
250
200
150
100
50
0
Low Medium High
Short-Term RiskLong-Term Risk
Chile Colombia
PeruVenezuela
Argentina
Mexico
Brazil
PPT 5-54
Evaluation of Retail Market Opportunities in European Community
High Low
UNITED KINGDOM
NETHERLANDS
Op
enR
estr
icte
dM
AR
KE
TS
SPAIN
ITALY
FRANCE
GERMANY
BELGIUM
PORTUGAL
LUXEMBOURG
IRELAND
GREECE
DENMARK
GROWTH
PPT 5-55
Market Attractiveness Ratings for Growth Opportunities in Merchandise Categories
Weight
Market size
Growth
Vendor power
Competitive intensity
Social trends
Score
Junior’s (2)
Men’s (3)
Children’s (4)
Furniture(5)
Cons. Elec. (6)
Soft Home (7)
Women’s(1)
Factors
20
20
15
20
25
10
9
4
5
4
5
540
7
3
4
3
5
445
5
6
10
10
6
720
4
5
9
2
6
505
5
4
2
5
6
485
6
8
1
2
4
435
7
6
8
10
9
805
PPT 5-56
Competitive Position Ratings in Merchandise Categories
Weight
Location
Vendor relationship
Costs
Skills of buyers
Image with customer
Score
Junior’s (2)
Men’s (3)
Children’s (4)
Furniture(5)
Cons. Elec. (6)
Soft Home (7)
Women’s(1)
Factors
20
25
20
10
25
100
9
8
8
6
8
800
9
7
8
7
8
785
8
5
5
5
5
560
6
7
6
9
6
655
4
4
3
5
5
415
2
3
1
4
2
225
4
7
7
8
8
675
PPT 5-57
Evaluation of Merchandise Category Opportunities
1,00
0
Mar
ket
Att
ract
iven
ess
High LowMedium
Soft home
Men’s clothing
Women’sclothing
Children’sclothing
Consumerelectronics
1,000 667 333
Low
Hig
hM
ediu
m
333
667
Junior’sclothing
Furniture