Retail marketing strategy
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A retailer's strategy involves selecting a target market, developing a retail format, and building a sustainable competitive advantage. Key elements of a strategy include choosing an attractive target market and developing advantages like customer loyalty through branding, unique merchandise, and excellent customer service. Retailers pursue growth opportunities such as market penetration, expansion, new formats, and diversification. Global retailers need advantages like low costs and adaptability to succeed internationally. Developing a strategy is a multi-step process including assessing opportunities and alternatives.
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Retail marketing strategy
- 2. 5-2
- 3. 5-3 Questions ■ What is a retailing 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?
- 4. 5-4 More attention to long-term strategic planning than ever before Due to the emergence of ■ New competitors ■ New formats ■ New technologies ■ Shifts in customer needs
- 5. 5-5 Elements in Retail Strategy © image100 Ltd ■ Target Market the market segment(s) toward which the retailer plans to focus its resources and retail mix ■ Retail Format the nature of the retailer’s operations—its retail mix ■ Sustainable Competitive Advantage an advantage over the competition
- 6. 5-6 Why Does a Retailer Need to Focus on a Specific Target Market? Why Not Sell to Everyone? Target Market
- 7. 5-7 Criteria For Selecting A Target Market ■ Attractiveness -- Large, Growing, ■ Little Competition More Profits ■ Consistent with Your Competitive Advantages
- 8. 5-8 Opportunities for retailers to develop sustainable competitive advantages ■ Customer Loyalty ■ Location ■ Human Resource Management ■ Distribution and Information Systems ■ Unique Merchandise ■ Vendor Relations ■ Customer Service
- 9. 5-9 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?
- 10. 5-10 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
- 11. 5-11 What does loyalty mean? Is It the same as liking a store? …Going to the store frequently? Loyalty
- 12. 5-12 Customer Loyalty ■ More than simply liking one retailer over another ■ Customers will be reluctant to patronize competitive retailers ■ Retailers build loyalty by: Developing a strong brand for the store or store brands Developing clear and precise positioning strategies Creating an emotional attachment with customers through loyalty programs
- 13. 5-13 Retail Branding Retail brand ■ Can create an emotional tie with customers that build their trust and loyalty ■ Facilitates store loyalty because it stands for a predictable level of quality Stores use brand (store’s name and store brands – private label brands) to build customer loyalty
- 14. 5-14 Loyalty Programs ■ Part of an overall Customer Relationship Management (CRM) program ■ Purchase behaviors of members of loyalty programs Are identified when they buy because they use some type of loyalty card Saved in Data Warehouse • What they buy • When they buy • How much they buy • How often they buy • How much they spend • What channel they use ■ Develop personalized marketing effort to them
- 15. 5-15 Approaches for Building Customer Loyalty ■ Unique Positioning ■ Location ■ Customer Service ■ Information About Customers (Database) ■ Unique Merchandise
- 16. 5-16 Location ■ What are the three most important things in retailing? “location, location, location” ■ Location is a competitive advantage A high density of Starbucks stores • Creates a top-of-mind awareness • makes it very difficult for a competitor to enter a market and find a good locations
- 17. 5-17 Human Resources ■ “Employees are key to build a sustainable competitive advantage” ■ Strategies for Recruiting and Retaining Talented Employees ■ Employee Branding ■ Develop positive organizational culture
- 18. 5-18 Distribution and Info Systems Flow of Information Vendor Distribution Center Store -Better services -Increase in breadth and depth -Decrease in prices By decreasing costs here, the is more money available to invest in:
- 19. 5-19 Unique Merchandise: Private Labels Sears’ Kenmore -- appliances Federated’s Inc. – fine apparel Kmart’s Martha Stewart -- home JCPenney’s Arizona -- jeans Jules Frazier/Getty Images RobMelnychuk/GettyImages Jacobs Stock Photography/Getty Images
- 20. 5-20 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
- 21. 5-21 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
- 22. 5-22 Growth Strategies Ryan McVay/Getty Images ■ Market Penetration ■ Market Expansion ■ Retail Format Development ■ Diversification Related vs. Unrelated
- 24. 5-24 Market Penetration ■ Attract customers from target market – Walgreens “on every corner” ■ Get current customer to visit store more often or buy on each visit Cross Selling – sales associates in one department sell complimentary merchandise from other departments Example: Manicurist sells services plus hand lotion or nail polish Example: Salesperson sells leaf blower directs customer to electrical department to purchase a 100 foot extension cord.
- 25. 5-25 Market Expansion ■ Market expansion growth opportunity involves using the existing retail format in new market segments Dunkin’ Donuts – new stores (and at gas stations) outside northeastern
- 26. 5-26 Retail Format Development ■ Develops a new retail format with a different retail mix for the same target market ■ Multi-channel retailing ■ UK based TESCO: Tesco Express: small stores located close to where customers live and work Tesco Metro: bring convenience to city center location by specializing in ready-to-eat meals Tesco Superstores: traditional stores Tesco Extra: one-stop destination with the widest range of food and non-food products
- 27. 5-27 Diversification ■ Introduces a new retail format toward a market segment that is not currently served by the retailer ■ Related diversification ■ Unrelated diversification ■ Vertical integration into wholesaling or manufacturing
- 28. 5-28 Key to Success in Global Retailing ■ Globally sustainable competitive advantage Low cost, efficient operations - Wal- Mart, Carrefour Strong private label brands: Starbucks, KFC Fashion Reputation - The Gap, Zara, H&M Category dominance – Best Buy, IKEA, Toys R Us ■ Adaptability ■ Global Culture ■ Financial Resources
- 29. 5-29 International Market Entry Strategies Direct Investment Joint Ventures Strategic Alliances Franchising Profit and Risk
- 30. 5-30 Stages 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
- 31. 5-31 Elements in a Situation Audit