Chapter 5 - Retail marketing strategy. This chapter describes the development of a retail market strategy. In this chapter, we will address the following questions: What is a retail strategy? How can a retailer build a sustainable competitive advantage? What steps do retailers go through to develop a strategy? What different strategic growth opportunities can retailers pursue? What retailers are best positioned to become global retailers?
Chapter Retail Marketing Strategy McGrawHill/Irwin Retailing Management, 6/e Copyright © 2007 by The McGrawHill Companies, Inc. All rights reserved 52 Retailing Strategy Human Resource Management Chapter Retail Locations Chapters 7,8 Retail Market Strategy Chapter Financial Strategy Chapter Information and Distribution Systems Chapter 10 Customer Relationship Management Chapter 11 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 5- 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 Elements in Retail Strategy 55 • Target Market Customer Needs • Retail Format Method for Satisfying Needs â image100 Ltd ã Bases for Building Sustainable Competitive Advantage Defending Position Against Competitors 5- What Is McDonalds’: -Target market? -Retail offering (format)? -Bases for competitive advantage? The McGraw-Hill Companies, Inc./John Flournoy, photographer Analyzing McDonalds’ Retail Strategy What Threats Might McDonald’s Face in the Future? 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? 57 5- 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 5- 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 Photodisc/Punchstock 510 Why Does a Retailer Need to Focus on a Specific Target Market? Why Not Sell to Everyone? Illustration of the 43 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 5- 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 544 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 (+) 545 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 546 Growth Opportunities for Gifts to Go 547 • 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 Ryan McVay/Getty Images Growth Opportunities for Gifts to Go (continued) 548 • 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 Evaluating Growth Opportunities for49 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) 5- Evaluating Growth Opportunities for50 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) 5- Evaluating Growth Opportunities for51 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) 5- Evaluating Growth Opportunities for52 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) 5- Market Attractiveness/Competitive Position Matrix 553 Steps in Using Market Attractiveness - 54 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 5- Characteristics of International Markets 5-9 555 Attractiveness Ratings for International Growth Opportunities 556 Competitive Position in International Growth Opportunities 557 .. .52 Retailing Strategy Human Resource Management Chapter Retail Locations Chapters 7,8 Retail Market Strategy Chapter Financial Strategy Chapter Information and Distribution Systems Chapter. .. Flexibility 52 6 Growth Opportunities 52 7 •Market Penetration •Market Expansion •Retail Format Development •Diversification Ryan McVay/Getty Images - Related vs Unrelated 5- Growth Opportunities 28 5- Market... retail offering, and source of competitive advantage for each retailer? 57 5- Chico’s Strategy Target Market Woman 35 to 55 Who Want Comfortable, Casual, But Stylish Apparel Retail Format Specialty