5th Edition

PPT 5-1
 Chapter 5

Retail Marketing Strategy

cGraw-Hill/Irwin
PPT 5-2
vy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
 Retailing Strategy

Human Resource
Retail Locations Management
Chapters 7,8 Chapter 9

Retail Market Strategy

Chapter 5
Financial Strategy
Chapter 6

Information and Customer

Distribution Relationship
Systems Management
Chapter 10 Chapter 11
PPT 5-3
 “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 5-4
 Strategic vs. Tactical Decisions

Strategic Tactical
Direction 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 5-5
 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 5-6
 Chico’s Strategy

Target Market
Woman 35 to 55 Who Want Comfortable, Casual, But
Stylish Apparel
Retail Format
Specialty Apparel Stores in Malls and Strip Centers
Selling Private Label, Coordinated Outfits
Bases for Building Sustainable Competitive Advantage
Unique Merchandise Sized 0,1,2,3

PPT 5-7
 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 5-8
 Examples of Retail Strategies

• Starbucks

• Kohls

• Restoration Hardware

• Ukrop’s

What is the target market, retail offering, and

source of competitive advantage for each
retailer?
PPT 5-9
 Strategy for Looking for a Job

Determine Your Target

Market
– Area of Country
– Type of Company
– Type of Position
Assess and Exploit Your
Competitive Advantage
– Unique Skills,
Experience, Knowledge
PPT 5-10
 Why Does a Retailer Need to
Focus on a
Specific Target Market?

Why Not Sell to Everyone?

PPT 5-11
 Retail Market Opportunities for
Women’s Apparel

PPT 5-12
 Methods for Segmenting Markets

Buying Situations Geographic

Benefits Sought

Lifestyle, Psychographics

Demographics

PPT 5-13
 Criteria For Selecting
A Target Market

• Attractiveness -- Large,
Growing, Little
Competition More
Profits

• Consistent with Your

Competitive
Advantages

PPT 5-14
 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 5-15
 Internal and External Bases for
Competitive Advantage
Retail Firm
•Low Cost
•Large Size
•Efficient
Distribution,
Operations
Vendors,
• Unique Customers
Suppliers
Knowledge
• Loyal Employees

Sources of
PPT 5-16
Capital
 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
PPT 5-17
Less Sustainable
• Better Computers
• More Employees
• More Merchandise
• Greater Assortments
• Lower Prices
• More Advertising
• More Promotions
• Cleaner Stores
 Loyalty

What does loyalty mean?

Is It the same as liking a store?
…Going to the store frequently?

PPT 5-18
 Approaches for Building
Customer Loyalty

Unique Positioning
Customer Service
Information About Customers (Database Retailing)
Unique Merchandise
Location

PPT 5-19
 Example of Positioning

PPT 5-20
 Basis of Loyalty, Commitment

• Costs
– Location
– Frequent Shopper Programs
– Unique Merchandise
• Mental, Emotional Attachment

PPT 5-21
 Creating Store Loyalty
Mental 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 5-22
 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 5-23
 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 5-24
 Critical Tradeoff In Developing
Strategic Advantage
Focus Leads to Developing
A Competitive Advantage
But
Focus Reduces Flexibility

• Low Cost, Consistent Image, Vendor

Relationships Reduces Flexibility
• Similar to Dating and Marriage – Commitment
to a Relationship (Vendor) Reduces Flexibility

PPT 5-25
 Growth Opportunities

•Market Penetration
•Market Expansion

•Retail Format Development

•Diversification

- Related vs. Unrelated

PPT 5-26
 Growth Opportunities

PPT 5-27
 International Growth Opportunities

Europe
China
Mexico, Latin America
Japan

PPT 5-28
 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 5-29
 International Market
Entry Strategies

Direct Investment
Joint Ventures
Strategic Alliances
Franchising

PPT 5-30
 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

4. Evaluate strategic alternatives

5. Establish specific objectives and allocate resources

6. Develop a retail mix to implement strategy

7. Evaluate performance and make adjustments

PPT 5-31
 Elements in a Market Analysis

100

50

0
1st Q tr 2 nd Q tr 3 r d Q tr 4th Q tr

MARKET COMPETITIVE ENVIRONMENTAL ANALYSIS OF

FACTORS FACTORS FACTORS STRENGTHS &
WEAKNESSES
Size Barriers to entry Technology Management
Bargaining power of Economic capabilities
Growth
vendors Regulatory Financial resources
Seasonality Locations
Business cycles Competitive rivalry Social
Operations
Threat of superior Merchandise
new formats Store Management
Customer loyalty

PPT 5-32
 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 5-33
 Porter’s Five Forces

Barriers to
Entry

Bargaining
Power of Competitiv Large
Vendors e Customers
Rivalry

Threat of
Substitution

PPT 5-34
 Strengths and Weaknesses Analysis

Management Capability:
Capabilities and experience of top management
Depth of Management--capabilities of middle management
Management’s commitment to firm

Financial Resources:
Cash flow from existing business
Ability to raise debt or equity financing
Operations: Store Management Capabilities
Overhead cost structure Management capabilities
Quality of operating systems Quality of sales associates
Distribution capabilities Commitment of sales associates to firm
Management information systems
Loss prevention systems Locations
Inventory control system

Merchandising Capabilities:
Knowledge and skills of buyers Customers
Relationships with vendors Loyalty of customers
Capabilities in developing private
capabilities
PPT 5-35
 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 5-36
 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 5-37
 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 5-38
 Situation Analysis of
Gifts to Go (continued)
• 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

PPT 5-39
 Growth Opportunities for
Gifts to Go

• 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

PPT 5-40
 Growth Opportunities for
Gifts to Go (continued)

• 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 5-41
 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 5-42
 Evaluating Growth Opportunities for
Gifts 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 5-43
 Evaluating Growth Opportunities for
Gifts 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 5-44
 Evaluating Growth Opportunities for
Gifts 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 5-45
 Market Attractiveness/Competitive
Position Matrix
High Medium Low
Maximum Invest to Opportunities
investment challenge leader investment
Aggressive
Market Attractiveness

Consolidate Build strength or investment

position exit
Selective Cautious Harvest
investment investment or
divest
Cautious
Build on strengths investment

Protect Harvest or Harvest

position divest or
divest
Manage for cash Minimal
generation investment

Competitive Position
PPT 5-46
 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 5-47
 Characteristics of
International Markets

U.S.
U.S. Germany
Germany Japan
Japan
Population
Population(Millions)
(Millions) 266
266 82
82 126
126

Business
BusinessClimate
Climate 33 10
10 24
24
Logistical
LogisticalInfrastructure
Infrastructure Exc.
Exc. Good
Good Avg.
Avg.

PPT 5-48
 Attractiveness Ratings for
International Growth Opportunities

PPT 5-49
 Competitive Position in International
Growth Opportunities

PPT 5-50
 Evaluation of International
Growth Opportunities

PPT 5-51
 Risk and Rewards in Latin America:
Country Risk Assessment
Short-Term Risk
Long-Term Risk
400  Brazil 
Market Size (GDP Billions)

 Mexico 
350

300

250
 Argentina 

200

150

100
 Colombia   Venezuela 
50  Chile   Peru 
0
Low Medium High
RISK
Source: Coopers & Lybrand Analysis, “Global Retailing: Assignment Latin
PPT 5-52 America,” Chain Store Age Executive, April 1996, seciton 2, p. 4.
 Evaluation of Retail Market
Opportunities in European Community
High Low
SPAIN
ITALY UNITED KINGDOM
Open

FRANCE NETHERLANDS
MARKETS

GERMANY
Restricted

LUXEMBOURG
BELGIUM
IRELAND
PORTUGAL
GREECE
DENMARK

GROWTH

PPT 5-53
 Market Attractiveness Ratings for
Growth Opportunities in Merchandise Categories

Women’s Junior’s Men’s Children’s Furniture Cons. Elec. Soft Home

Weight (1) (2) (3) (4) (5) (6) (7)
Factors
Market size 20 9 7 5 4 5 6 7
Growth 20 4 3 6 5 4 8 6
Vendor power 15 5 4 10 9 2 1 8
Competitive 20 4 3 10 2 5 2 10
intensity
Social trends 25 5 5 6 6 6 4 9
Score 10 540 445 720 505 485 435 805

PPT 5-54
 Competitive Position Ratings
in Merchandise Categories

Women’s Junior’s Men’s Children’s Furniture Cons. Elec. Soft

Weight (1) (2) (3) (4) (5) (6) Home (7)
Factors
Location 20 9 9 8 6 4 2 4
Vendor 25 8 7 5 7 4 3 7
relationship
Costs 20 8 8 5 6 3 1 7
Skills of 10 6 7 5 9 5 4 8
buyers
Image with 25 8 8 5 6 5 2 8
customer
Score 100 800 785 560 655 415 225 675

PPT 5-55
 Evaluation of Merchandise
Category Opportunities

1,000
High Medium Low

Soft home
High


Market Attractiveness

Men’s clothing
667

Women’s Children’s
Medium

clothing clothing
   Consumer

Junior’s Furniture electronics
clothing 
333
Low

1,000 667 333

PPT 5-56