FASHION RETAIL INDUSTRY Retailing Management 8th Edition Levy Weitz Chapter 5 Retail Strategy RETAIL STRATEGY statement identifying 1 Target market 2 Format used to satisfy target market needs 3 Basis to build competitive advantage TARGET MARKET market segments retailer plans to focus resources and retail mix RETAIL FORMAT nature of retailer s operations retail mix SUSTAINABLE COMPETITIVE ADVANTAGE advantage retailer has over its competitors not easily copied than can be maintained for a long period of time RETAILING CONCEPT retailer management orientation focuses on determining needs of target market and satisfying them more effectively and efficiently than competitors RETAIL MARKET group of consumers with similar needs and group of retailers that satisfy them in similar formats Approaches to Developing Sustainable Competitive Advantage 1 Build strong relationships with customers 2 Building strong relationships with suppliers 3 Achieving efficient internal operations RELATIONSHIPS WITH CUSTOMERS CUSTOMER LOYALTY particular retailer reluctant to patronize competitors customer committed to buying merchandise and services from a Activities to Build Loyalty Developing a strong brand image Clear consistent positioning Providing outstanding customer services Undertaking customer relationship management systems CRMs Providing convenient locations BRAND IMAGE facilitates brand loyalty because reduces risks of purchase ensures consistent level of quality and satisfaction emotional tie with customer that leads to trust POSITIONING the design and implementation of a retail mix to create an image for the retailer in customers mind relative to competitors PRIVATE LABEL STORE OWNED BRANDS products developed and marketed by the retailer and available only from that retailer LOYALTY FREQUENT SHOPPER PROGRAMS activities focus on identifying and building loyalty with most valued customers typically involves customer rewards discounts RELATIONSHIPS WITH SUPPLIERS VENDORS strengthening retailer vendor relations can develop mutually beneficial assets and programs that will give the pair competitive advantage over competitors EFFICIENCY OF INTERNAL OPERATIONS enable cost advantage to retailers larger company size typically produces more efficient internal operations more bargaining power can buy more merchandise at lower costs and invest in sophisticated systems 1 Human resource management Employees play major role in providing services Recruiting training and retaining great employee challenge Source of competitive advantage 2 Distribution information systems All retailers strive to REDUCE COSTS Sophisticated distribution systems help achieve efficiencies Data collection systems opportunity to tailor merchandise assortments and tailor promotions to specific needs markets 3 Location Most important factor determining which store consumer will patronize Sustainable competitive advantage because location not easily duplicated MULTIPLE SOURCES OF ADVANTAGE Retailers don t focus on a single approach focus on multiple to build the best possible advantage GROWTH STRATEGIES 4 Types 1 MARKET PENETRATION retail format greatest chance of success growth opportunity directed towards existing customers using present CROSS SELLING sales associates in one department attempt to sell complementary merchandise from other departments 2 MARKET EXPANSION market segments growth opportunity involves using retailer s existing format in new 3 RETAIL FORMAT DEVELOPMENT for the existing markets retailer develops a new retail format with different retail mix 4 DIVERSIFICATION retailer introduces new retail format directed toward a market segment not currently being served Related retailers present target market retail format shares something in common with new opportunity Unrelated little commonality between retailers present business format and new opportunity VERTICAL INTEGRATION diversification by retailers into wholesaling or manufacturing GLOBAL GROWTH OPPORTUNITIES International expansion RISKY By expanding internationally retailers can increase sales leverage knowledge systems across a greater sales base and gain more bargaining power with vendors Dealing with different government regulations consumer preferences supply chains cultural traditions and languages Attractiveness of International Markets 1 Potential size of retail market in a country 2 Degree to which a country does can support entry of foreign retailers most attractive countries have the largest and growing potential sales indicated by level and growth of retail sales and amount of money people have indicated by GDP GDP per capita and growth rate China and India have the LARGEST retail market in emerging economies INDIA CHINA Indian retail market devised of organized unorganized sectors Organized small independent retailers local kirana shops general store paan beedi shops convenience stores handcart street vendors Entry is challenging Most shop in open markets and independent grocery stores kirana World s largest pluralistic democracy Conglomeration of discrete markets Government regulation impedes retail investment non Indian firms cannot have controlling investments and must partner with local Indian firms Direct foreign investment is encouraged Lifting of operational restrictions on international retailers Recent entry of 6 global retailers Rapidly developing infrastructure to support modern retailing Business in china is challenging increasing operational costs management talent hard to find retain underdeveloped inefficient supply chains 4 Keys to International Success 1 Global sustainable competitive advantage 2 Adaptability 3 Global culture 4 Financial resources Expansion Is successful when build upon core bases of competitive advantage Important to be able to adapt to recognize cultural differences different peak selling seasons store designs layouts government regulations values and traditions Expansion into international markets requires LONG TERM commitment and considerable up front planning difficult to generate short term profits ENTRY STRATEGIES retail firm invests in and owns a retail operation in a foreign country and an entering retailer pools its resources with local retailer to form a new 2 1 DIRECT INVESTMENT have control over all operations greatest risk but higher potential profit returns JOINT VENTURE company in which ownership control profits are shared reduce entrant s risks county and reduced potential profits collaborative