5-RETAIL MANAGEMENT.

RETAIL STRATEGY.

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Retail Strategy.
• A Strategy in Commercial Parlance would mean the Plan or Method by
which an Organization wishes to achieve its Objectives.
• Thus, a Retail Strategy can be defined as “a Clear and Definite Plan that
the Retailer Outlines to Tap the Market and Build a Long-Term
Relationship with Customers”.
• A Retail Strategy is fundamental to the existence of the Retail
Organization. It helps define the Organization, its Purpose, and how the
Retailer will face the various Challenges in the Environment and
Marketplace.
• The Retailer then determines his Tactics. Tactics, in the Military Sense,
will determine how the Retailer will actually fight.
• Each aspect of the Retail Business, such as Merchandising, Sales,
Operations, Service and Finance will draw their individual Operational
Strategies to support the main Business Strategy.
• The definition of a Retail Strategy enables other areas within the
Organization to determine their Strategies. Primary among these are:
1) Store Location.
2) Merchandising.
3) Pricing; and
4) Marketing.

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Retail Strategy (Cont’d)
• Store Location: The Primary area which is influenced by the Business Strategy to be
adopted by the Retailer, is the decision on Store Location.
• For years, Experts have argued that the Three Important Aspects of any Retail Business
are Location, Location and Location. Depending on the Business Model that is to be
adopted by a Retailer, the Store Location has to be chosen.
• A Strategy for Tapping the Up-Market Consumer requires that the Store be Located
where such a Consumer will Shop. Similarly for building a Model based on Discounting,
one may not require Prime Locations, though in this case, a larger space may be needed.
• Merchandising: The second factor which is influenced by the Strategy is the type of
Merchandise to be stocked. If the Retailer chooses to dominate the Marketplace on the
basis of Product Selection, he needs to ensure that he has the Largest and Widest
Selection of Product Category imaginable, or Merchandise that is so unique that people
seek out the Store.
• The Merchandising Strategy has to draw from the overall Business Strategy, so as to
understand and determine the types of Products that will be needed in the Store and the
kind of Prices that will have to be determined.
• The Merchandising Strategy has to match the Selling Strategy. Very often the
Merchandising Strategy is based more on Long-Term Vendor Relationships or
Competitive Distribution Issues, than on a well thought out Business Strategy that is
written down and communicated throughout the Organization.
• Merchandise Strategies should be based on Consumer Research. Selling Strategies
should also be based on Research, not just Merchandise based Research that indicates
to the Retailer what Consumers want to buy, but Relationship-Based Research which
indicates to the Retailer how they want to be treated when they Buy.

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Retail Strategy (Cont’d).
• Pricing: Related to the concept of Merchandising is the Concept of
Pricing, which again is influenced by the Business Model that the
Retailer has chosen to adopt.
• Very often, being the Price Leader is still a valid strategy. However, it
is not necessary to be a Low-Price Leader. The other end of the
Pricing Spectrum also presents an opportunity.
• Marketing: The Complete Marketing Strategy adopted by the Retailer
is a reflection of the Overall Business Strategy. It is a combination of
the Advertising, Promotions, Communications, Sales Staff, the Level
of Customer Service and the Complete Shopping Experience offered
to the end Customer.
• The Process of Strategy Formulation in Retail is the same as that for
any other Industry. It starts with the Retailer defining or stating the
Mission for the Organization The Mission is at the Core of the
Existence of the Retailer. The other aspects of the Strategy may
change over a period of time or may vary for different Markets.

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Steps involved in Developing a Retail
Strategy.
• The Steps involved in Strategic Planning for Retailing are given below.
After defining the Mission of the Organization, an Analysis of the
Internal Strengths and Weaknesses and External Threats and
Opportunities (SWOT Analysis) is then undertaken to help the
Management decide on the best way to carry out the Organization’s
Mission. The Options which can be pursued, are then examined and the
Objectives set.
• Steps in Strategic Planning for Retailing:
1) Establish Mission.
2) Analyze Situation.
3) Identify Options.
4) Set Objectives.
5) Obtain and Allocate Resources.
6) Develop Implementation Plan.
7) Monitor Progress & Control. Give Continuous Feedback and make
changes in the Strategy if and when required.

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Define the Mission or the Purpose of
the Organization.
• The Mission Statement describes what the Retailer wishes to
accomplish in the Markets in which it chooses to compete. A
Retailer’s Mission Statement normally highlights the following
elements:
1) The Products and Services that will be offered.
2) The Customers who will be served.
3) The Geographic Areas that the Organization Choose to Operate
in.
4) The Manner in which the Firm intends to compete in its chosen
Markets.
• Mission Statement need to provide a clear sense of Direction for
the Organization and often reflect an Organizations Culture.
• Retail Snapshot in the next slide illustrates the Mission
Statements of some Retail Organizations.

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Retail Snapshot: Some Retail Vision/Mission
Statements.
• Wall-Mart: “ To give ordinary folk the chance to Buy the Same Thing as Rich
People”.
• McDonalds:( QSCV) “ Quality, Service, Convenience and Value.”
• Marks & Spencer: Vision-To be the standard against which others are measured.
: Mission- To make Aspirational Quality Accessible to all.
: Values- Quality Value, Service, Innovation & Trust.
• Café Coffee Day: To be the Best Café Chain in the country by offering World Class
Coffee Experience at affordable Prices.
• Shoppers Stop: “To be Global Retailer in India and to maintain the No.1 position in
the Indian Market in the Department Store Category.
• Pantaloon: “ We share the Vision and belief that by improving our performance
through Innovative Spirit and Dedication, we shall serve our Customers and
Shareholders satisfactorily.”
• Globus: Achieve Customer Delight by offering Quality Products and Services
through a process of Innovation and Adaptation.
• Build a Dynamic Team of Committed & Passionate Employees through sustained
learning and grooming.
• Develop mutually beneficial relationships with our Business Partners.
• Employ Cost Effective Processes and thereby create a Strong Organization.

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Step II. Conduct a Situation Analysis-PEST,SWOT &
Michael Porter’s 5 Forces Analysis

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Step III. Identifying Options/Strategic
Alternatives.
• After determining the Strengths & Weaknesses of the
Organization vis-à-vis the Environment, the Retailer needs to
consider the various Alternatives available to him for Tapping
a particular Market.
• Igor Ansoff prescribed a Matrix which looked at Growth
Opportunities by focusing on the Firm’s Present and Potential
Products in the Existing and New Markets.
• This Matrix, popularly known as Ansoff’s Matrix helps us
understand the Options available to a Retailer.
• The Alternatives available to the Retailer are:
1) Market Penetration.
2) Market Development.
3) Retail Format Development.
4) Diversification.
• They are illustrated in the next slide.

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Growth Opportunities for a Retailer-
Ansoff’s Growth Matrix.

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Growth Opportunities for a Retailer (Cont’d).
• 1) Market Penetration: This is a Strategy adopted by the Firm when
it seeks to achieve Growth with Existing Products, in the Market Segments
it operates in. Thus a Retailer who Targets an Existing Market in the
Existing Retail Formats, he is said to follow a Strategy of Market
Penetration. This Strategy may focus either on:
• Increasing the number of Customers or,
• Increasing the Quantity purchased by the Customers, i.e. the Basket Size,
or on increasing the Frequency of Purchase.
• Increasing the number of Customers can be achieved by adding New
Stores and by Modifying the Product Mix, to bring in New Customers.
• Another approach is to encourage sales People to Cross Sell. Cross
Selling involves Sales People from one Department to sell Complimentary
Merchandise from other Departments to their Customers.
• Example: A Sales Person has just sold a pair of Trousers to a Customer,
may take the Customer to the Shirt and Tie area and try to sell to the same
Customer a Matching Shirt and a Tie.
• Increasing the Frequency with which Customers purchase a particular
Products may not be really easy. A lot of Companies resort to Freebies to
attract Customers e.g. Pizza Parlors offering Discount on the purchase of a
Second Pizza ordered within a specified time.

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Growth Opportunities for a Retailer (Cont’d).
2) Market Expansion/Development: A Retailer is said to
follow a Strategy of Market Development if he reaches out to
New Market Segments or completely changes the Customer
Base. Thus this Strategy involves:
• Tapping New Geographical Markets or,
• Introducing Products to the existing range that appeal to a
Wider Audience.
• Expansion by adding New Retail Stores to the Existing network
is an example of Geographical Expansion. Introducing a
Pharmacy in a Supermarket (The Medicine Shoppe at Haiko
Supermarket in Mumbai) is an example of a Retailer introducing
New Products, which appeal to a different audience.
• Another example of the same is McDonald’s who introduced
Ice Cream at Rs.7. This not only created add-on sales but also
brought in Customers who had the perception that McDonalds
was an expensive Fast Food Restaurant.

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Growth Opportunities for a Retailer (Cont’d).
3) Retail Format Development: Developing a Retail Format is
introducing a New Retail Format to Customers. Good
Examples are Fast-Food Retailers like McDonald’s and
Subway, who offer limited Menus in smaller locations many a
times inside large Department Stores.
• Another Example is of the Bookshop Chain Crosswords,
opening smaller Format Stores by the name of Crossword
Corners at Shopper’s Stop.
4) Diversification: The Retailer grows by Diversifying into New
Businesses by Developing New Products for New Markets.
• A good example of Diversification in India is that of Tobacco
Giant ITC, who has entered the Business of Apparel Retail
through its Wills Lifestyle Stores and now plans to enter
Greeting Cards Business.
• International Expansion is also a Growth Alternative, which we
will discuss slightly later.

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Step IV. Set Objectives.
• The Objectives are a Translation of the Mission Statement into operational
terms. They indicate the results to be achieved. The Purpose setting
Objectives is to give Direction and set standards for the measurement of
Performance.
• Management normally sets both long Term and Short Term Objectives. One
or Two Year frames for achieving specific Targets are Short-Term. Long-
Term Objectives are less specific than Short-Term Targets and reflect the
Strategic Dimensions of the Firm
• Good Objectives are Measurable, are specific to Time, and indicate the
Priorities for the Organization. Two Areas which are important for Retailers,
are Market Performance and Financial Performance. Objectives may be set
keeping these two areas in mind. Examples include:
• Sales Volume Targets.
• Market Share Targets.
• Retail Expansion Targets.
• Profitability to be Achieved.
• Liquidity.
• Returns on Investment.

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Step-V. Obtain and Allocate Resources Needed
to Compete.
• The Resources that a Retailer needs are Humans as well as Financial. Financial
Resources take care of Monetary Aspects of the Business, like Shop Rent,
Salaries, and Payments for Merchandise.
• Human Resources are just as Vital to the Success of a Retail Operation as are
Financial Resources and Physical Facilities.
• The Human Resources Plan must be consistent with the Overall Strategy of the
Retail Organization. Human Resources Management also involves a variety of
issues such as Recruiting, Selecting, Training, Compensating, and Motivating
Personnel, as well as organizing, and it is essential that these activities be
managed effectively and efficiently.
• Step VI. Develop the Strategic Plan: At this stage, the Retailer
determines the Strategy by which he will achieve the Objectives set forth. The
Target Market is defined and the Retail Mix that will serve this audience is
finalized.
• The Retailer studies the various Target Markets in Terms of Size and Growth,
Profitability, Competition, and the Company’s Resources and Company’s Long
Term Objectives and then Selects the Target Market Segments.
• In order to be successful in Segmenting the Market, the Retailer must ensure that
it is:
• Measurable, Accessible and Substantial.

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Step VII. Implement the Strategy,
Evaluate and Control.
• The Key to the Success of any Strategy lies in its Implementation. To
Implement a Firm’s desired Positioning effectively, every aspect of the
Store must be Focused on the Target Market.
• Merchandising must be single-minded; displays must appeal to the
Target Market; Advertising must talk to it; Personnel must have
Empathy for it; and Customer Service must be designed with the
Target Customer in mind.
• Once a Strategy is implemented, the Managers need Feedback on the
Performance of the New Strategy. The effectiveness of the Long Term
Competitive Strategy of the Firm must be Evaluated Periodically. Such
an Evaluation covers all elements of the Plan.
• This type of Evaluation guarantees that the Firm’s Plan does not
degenerate into fragmented, ad hoc efforts that are not in harmony
with the overall competitive Strategy of the Business.
• Management can also use the Process to decide what changes, if any,
should be made in the future to ensure that the combination of
Retailing Mix variables supports the Firm’s Strategy.

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International Expansion- A Growth Strategy.
• International Retailing is more than just Replicating the Retail Store in other
Markets. Retail Internationalization has been defined as “ the Management
of Retail Operations in Markets which are different from each other in their
Regulation, Economic Development, Social Conditions, Cultural
Environment and Retail Structures”.
• A Retailer can enter New Markets by adopting any of the Methods given
below:
1) Export: Export is selling of domestically manufactured Products, in a
different country.
2) Franchising/Licensing :This arrangement permits a company in the
Target Country to use the Property of the Licensor. Such Property usually is
Intangible, such as Trade Marks, Patents, and Production Techniques etc.
Example: McDonalds in India.
3) Acquisitions and Mergers: A Example of a Retail Acquisition is that of
Asda by Wal-Mart. In the UK, Wal-Mart operates under the name of Asda. In
India, Shopper’s Stop has Acquired the Book Store Chain Crossword.
4) Joint Venture: A Joint Venture is a Strategic Partnership between a Local
Retailer and an International/Foreign Player. Example: US Toy Retailer
having JV with McDonald’s in Japan.
5) Organic Growth: It refers to Replicating the Retail Format in the non-
domestic Market, within the Regulatory Framework of the New Market

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