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8/13/2019 Retail Mgmt - Retail Marketing Strategies
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Retail Management
Module 3Retail Marketing Strategies
Ashish J [email protected]
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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
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What is a retail strategy?
A retail strategy identifies:
The retailers target market
The format the retailer plans to use to satisfy the
target markets 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
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What is a retail strategy?
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
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What is a retail strategy?
Examples of retail strategy:
Case 1: Curvesi. Has more than 8400 franchises in all 50 US states and in 28
countries
ii. Worlds top fitness centre by number of clubs
iii. Targets the aging Baby Boomers instead of the prized 1834 class
iv. Centres dont have traditional equipment; instead have
hydraulic resistance equipmentv. Aim is to burn about 500 calories in 30 minutes with breaks
for jogging, walking
vi. Low fees - $ 29 / month
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What is a retail strategy?
Case 2: Magazine Luiza
i. Brazils third-largest food retailer
ii. Targets low-income consumers by selling on credit:instalment payments plans at affordable rates
iii. Brazil has some of the worlds highest interest rates andhalf the population do not have a checking account
iv. Customers must return to stores once a month to makepayments; customers tempted to buy new merchandise
on each visitv. Also provides personal loans and insurance policies
vi. Default rates are 50 % lower than other retailers though80 % sales are through instalment payments
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What is a retail strategy?
Case 3: Chicos
i. More than 300 specialty stores
ii. Sells merchandise suitable for 3355 years age group females
iii. High degree of vertical integration and customer service(flattering) provided to mature customers with active lifestyles
iv. 1.2 million members on its loyalty programme that accountfor 80 % of sales with average transaction per member at $130 compared to $ 90 for non-loyalty members
v. Sells only its own brands
vi. Salespersons trained to form personal bonds with customers
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What is a retail strategy?
Case 4: Save-A-Lot (SuperValu subsidiary)
i. Grown to more than 1000 stores
ii. US 13thlargest supermarket chain
iii. Only 1250 SKUs stocked compared to 2030 k
in rival chains
iv. Most SKUs are private label
v. Price is 40 % less than rivals
vi. Buying power enables customisation of private
label merchandise
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Target market and retail format
The retailing concept Management orientation that focuses a retailer on
determining the needs of its target market andsatisfying those needs more effectively and efficiently
than competitors do Retail market
Group of consumers with similar needs (segment) thatis serviced by a group of retailers using a similar retailformat to satisfy them
E.g. retail market for womens apparel seeExhibit 5-1
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Building a sustainable competitive
advantage
Final element in retail strategy
Involves building barriers around its market
position to protect from incursions
Over time, defences will weaken; stronger,
thicker, higher walls/barriers will however
stand; barriers needs to be reinforced and
rebuilt to protect turf
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Building a sustainable competitive
advantage
Seven important opportunities for retailers todevelop sustainable competitive advantages:
1. Customer loyalty
2. Location3. HRM
4. Distribution and information systems
5. Unique merchandise6. Vendor relations
7. Customer service
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Building a sustainable competitive
advantage
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 stores name itself e.g. aroat Metro,Reliance Select
Certain brands available exclusively at certain stores e.g.
Bajaj CFLs stocked at very few stores in Bangalore
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Building a sustainable competitive
advantage Positioning
Involves the design and implementation of a retail mix to createan image of the retailer in the customers mind relative to itscompetitors
Emphasises that the image of the store in the customers mind iscritical
See Exhibit 5-3
Retailers close to an ideal point are evaluated morefavourably
Loyalty Programmes Loyalty cards e.g. Reliance One
Purchase information of loyalty customers stored in a datawarehouse
Customers segmented based on purchase pattern e.g. wine,gourmet, dairy buying preferences, F & V
Case: p 161
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Building a sustainable competitive
advantage
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 andanother city once it has saturated a particular market
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Building a sustainable competitive
advantage
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 andenvironment
Managing diversity
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Building a sustainable competitive
advantage
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
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Building a sustainable competitive
advantage
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?
Case: P 164
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Building a sustainable competitive
advantage
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
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Building a sustainable competitive
advantage
7. Customer service
Coaching and training essential
Considerable time and effort required to build a credible
reputation in retail market8. Multiple sources of advantage
combination of value, service, quality e.g. McDonalds
Retailers may focus on multiple areas to sustain CA
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Building a sustainable competitive
advantage
Growth Strategies (See Exhibit 5-4)
Market penetration Involves realising growth by directing efforts toward existing
customers using the retailers present retailing format
Involves attracting consumers in its segment that don't currentlybuy from it
get current customers to visit stores more often or buy more pervisit
Opening more stores in the area
Keeping stores open for longer Encouraging impulse buys by displaying merchandise near tills
Cross-selling: salesmen from one department attempt to sellcomplementary items from another department
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Building a sustainable competitive
advantage
Market expansion
Involves using the existing retail format in new market
segments
E.g. weekender and weekender kids, Wal-Mart andAsDa (however, George not as big in the US)
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Building a sustainable competitive
advantage
Retail format development
Retailer develops a new formatformat with a
different retail mixfor the same target market
E.g. Barnes & Noble (specialty book store) exploited anew 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
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Building a sustainable competitive
advantage
Diversification
Retailer introduces a new retail format directed toward a market
segment thats 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 tofocus on its multichannel, department store-based market
and Target sold its department stores to focus on its discount
stores
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Building a sustainable competitive
advantage
Strategic Opportunities and CompetitiveAdvantage
Retailers have greatest advantage when they engagein activities similar to their present ones
Retailers are most at risk when pursuingdiversification strategies
Successful retailers build on existing strengths whenexpanding into new markets
A retail-format based success in a new market hasalready built on its brand name / reputation andsuccess in home markets
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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
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International growth opportunities
Who is successful and who isnt?
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/orunique merchandise e.g.
IKEA, McDonalds, The GAP, Starbucks, Home Depot, Toys R
Usoffer broad assortments and competitive prices
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International growth opportunities
Discount and food retailers with low prices such as Wal-
Mart, Carrefour, Royal Ahold, Metro AG
Category specialists and supercentre retailers that may
be particularly suited to succeed 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 buying
3. Unique systems and formats that facilitate control of large
number of stores
4. Self-service model adopted world over now, thus reducing
cost of customer service (ALDI, Carrefour)
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International growth opportunities
Some US retailers enjoy global support because of the
influence of American culture on these countries e.g.
China has KFC, McDonalds, 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
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International growth opportunities
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
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International growth opportunities
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
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International growth opportunities
Adaptability
Successful retailers adapt to local cultural conditions
Colour preferences, cut of apparel and sizes differacross 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: USone level discount stores, EUmulti-storeyed
Social norms may restrict stocking of mens andwomens merchandise next to each other
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International growth opportunities
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 developedgreen tea Frappuccino for Taiwan and Japan,
strawberries-and-cream Frappuccino for the UK
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The strategic retail planning process
1. Define the business mission
2. 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
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The strategic retail planning process
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 i.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?
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The strategic retail planning process
Strengths and weakness analysis
Management capability
Financial resources
Operations
Merchandising capabilities
Store management capabilities
Locations
Customers
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The strategic retail planning process
3. Identify strategic opportunities
Market penetration, expansion, diversification,
format development
4. Evaluate strategic opportunities
5. Establish specific objectives and allocate
resources
6. Develop a retail mix to implement strategy
7. Evaluate performance and make adjustments