Overview

Retail strategy has several components in a

process.
Begins with a mission statement
Markets are selected based on their
attractiveness.
Profits are due to sustainable advantages.

Identifying Market Opportunities
June 25, 2002
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
Steps in the Strategic Retail Planning Process
Elements in Retail Strategy
Target Market
Customer Needs
Retail Format
Method for Satisfying Needs
Bases for Building Sustainable Competitive
Defending Position Against Competitors
Criteria For Selecting
A Target Market
Attractiveness -- Large, Growing,
Little Competition ===>Profitable
Consistent with Your Competitive Advantages
Actionability: Will respond as a segment to your
format.
Mission Statement and the Household
Generic markets for retailers:

Products lie on a goods and services
continuum:

Recognition that households have basic
needs for products on this continuum.
Can You Develop a Sustainable
Competitive Advantage by:
Eliminating a line of merchandise?
Offering the lowest prices?
Eliminating less profitable locations?
Increasing your level of advertising?
Discontinuing services?

Basis for Competitive Advantage
Retail Firm
Low Cost
Large Size
Efficient
Distribution,
Operations
Unique
Knowledge
Loyal Employees
Sources of
Capital
Vendors,
Suppliers
Customers
Michael Porters Five Forces Models
Bargaining Power of Suppliers
Bargaining Power of Customers
Threat of Entry of New Firms
Threat of Substitutes
Rivalry of Competitors
Attractiveness is associated with
profitability, not ease of entry.
Bargaining Power of Suppliers
Few, powerful suppliers


Several, highly competitive suppliers
Threat of Entry
Markets that are difficulthigh barriers to
entryremain less competitive, and remain
attractive.
Geographic markets can become over-
stored due to low barriers to entry, leading
to unattractive price competition.
Competitive Rivalry
Price competition


Nonprice competition
Threat of Substitutes
What is the basic household need?

How do the service output levels affect
substitutability?

How does decreasing services provided
affect competition?
Sources of Competitive Advantage
More Sustainable
Location
Customer Loyalty
Low Cost Supply Chain
Management
Information Systems
Exclusive Merchandise
Buying Power
Customer Service
Committed Employees
Less Sustainable
Better Computers
More Employees
More Merchandise
Greater Assortments
Lower Prices
More Advertising
More Promotions
Cleaner Stores
Sustainability of Retailing Functions:
Managing effective
breadth and depth of
assortment.
Minimizing assortment to
minimize stock-outs.
Information through
experienced sales people.
Economies of the chain.
Extending credit.

Aligning with specific vendors
for exclusive displays.
Using web-pages and point-of-
purchase displays to provide
customer information.
Providing services that cannot
be easily provided without
spatial convenience.
Providing convenience through
large-store, one-stop shopping
experience.
Approaches for Building
Customer Loyalty
Unique Positioning
Customer Service
Information About Customers (Database
Retailing)
Unique Merchandise
Location
Vendor Relationships
Low Cost - Efficiency Through Coordination
Electronic Data Interchange (EDI)
Functions Performed By Most Efficient Party
Exclusivity
Difficult to view this as a long-term sustainable
advantage without guaranteeing vendors
commitment.
Challenges to High Quality
Customer Service
Difficult to achieve
People are not machines -- Inconsistent
Retail sales associates at bottom of labor pool
Organizational culture is difficult to maintain with
system growth.
Shoppers are showing that they are willing to accept
less customer service in the shopping process.
Regulatory Environment
Sales taxes on all retail e-commerce
Regulation of distribution
Maximum resale price maintenance
Enforcement of Robinson-Patman Act
Third-party payers, such as insurance and
government entities.
Restrictions on store size