dc lecture three : retail strategic planning and evaluating the competition

MKTG 1058: DISTRIBUTION

CHANNELS

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Distribution Channels MKTG 1058LECTURE THREE

Part A: Retail Strategic Planning and Operations Management (Chapter 2)

Part B: Evaluating the Competition in Retailing (Chapter 4)

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Retail Strategic Planning and Operations

Management (Chapter 2)

Lecture 3: Part A

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Learning Objectives of Chapter 2:

Explain why strategic planning is so important and be able to describe the components of strategic planning: statement of mission; goals and objectives; an analysis of strengths, weaknesses, opportunities, and threats; and strategy.

Describe the text’s retail strategic planning and operation management model, which explains the two tasks that a retailer must perform and how they lead to high profit.

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Components of Strategic Planning

PlanningIs the anticipation and organization of what needs to be done to reach on objective.

Strategic PlanningInvolves adapting the resources of the firm to the opportunities and threats of an ever changing retail environment.

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Retail Strategy

An overall plan for guiding a retail firmInfluences the firm’s business activitiesInfluences the firm’s response to market forcesStrategy is more critical than just developing a marketing or retail plan. (strategy = planning; why?)

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Benefits of Strategic Retail Planning

Provides thorough analysis of the requirements for doing business for different types of retailers

Outlines retailer goals Allows retailer to determine how to differentiate itself

from competitors Allows retailer to develop an offering that appeals to a

group of customers Offers an analysis of the legal, economic, and

competitive environment Provides for the coordination of the firm’s total efforts Encourages anticipation and avoidance of crises

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There are many models of Strategic Planning: 1. Dunne and Lusch Model (our

prescribed text)

2. Berman and Levy Model

3. Levy and Weitz Model

Elements of a Retail Strategy (Berman &

Evans Model)

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The Levy & Weitz Model

Why the differences?

The Berman & Evans model is a ‘process’ model; that is it looks at retailing strategy as a series of steps. It is more process or step based approach (where are we now→ where are going→ how do we get there)

The Levy & Weitz model is more ‘issue-based’; it is not concerned about steps but rather focuses on the KEY issues of retail strategy

The Dunne and Lusch Model of Strategic Planning in Retailing

Dunn & Lusch Model

Looks nearly the same as the Berman & Evans model

But:

Shows the impact of the external environmental, social and competitive forces on strategic planning

Elaborates the areas of:

Retail Marketing Strategy

Operations Management

This makes this model more contextually aligned to retailing strategy

Dunne & Lusch model focuses on these areas

Think about how each of these aspects must be assessed in order to determine the effectiveness of the retail organization

“are we using the right approaches?

Mission Statement Statement of Goals and Objectives Strategies SWOT Analysis

Components of Strategic Planning (Dunne)

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Mission Statementis a basic description of the fundamental nature, rationale, and direction of the firm.

Visit the website of a famous international retailing organization. View their mission

statement. What does it say?

http://www.ikea.com.sg/about_ikea/about_ikea.asp

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Cold Storage:

Our VisionTo be the leading Fresh Food

People.

Our MissionWe always care for our

customers

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Elements of a Mission Statement

how the retaileruses or intends to use its resources

how it expects torelate to theever-changing

environment

the kinds of valuesit intends to offer to serve

the needs and wants ofthe consumers

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Goals and ObjectivesAre the performance resultsintended to be brought about through the execution of a strategy.

Some objectives are financially based but others might be related to market performance indicators

Some objectives are quantitative, others are qualitative

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Goals and Objectives

MarketPerformance

Objectives

FinancialPerformanceObjectives

SocietalObjectives

PersonalObjectives

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Statement of Goals and Objectives

Market Performance Objectivesrepresents how a retailer desires to be compared to its competitors.

Sales Volume Market Share

Is the retailer’s total sales divided by total market sales.

Financial Performance ObjectivesRepresent the profit and economic performance a retailer desires.

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Financial Performance Objectives: Profitability

Net Profit Margin Asset Turnover Return on Assets Financial Leverage Return on Net Worth

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Net Profit MarginIs the ratio of net profit (after taxes) to total sales and shows how much profit a retailer makes on each dollar of sales after all expenses and taxes have been met.

Asset TurnoverIs the total assets and shows how many dollars of sales a retailer can generate on an annual basis with each dollar invested in assets.

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Return on Assets (ROA)Is net profit (after taxes) divided by total assets.

Financial LeverageIs total assets divided by net worth or owners’ equity and shows how aggressive the retailer is in its use of debt.

Return on Net Worth (RONW)Is net profit (after taxes) divided by owners’ equity.

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Strategic Profit Model

Exhibit 2.1

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The importance of understanding this model: Past year exam questions have come out on this

topic- REFER to Specimen Questions at the end of this lecture note

You need to remember the formulae- not given in the exam

The next few slides (taken from another text Levy and Weitz) show more examples of how the ratios are worked out

Components of the Strategic Profit Model

Profit Management

Asset Management

The Strategic Profit Model: An Overview

Profit Margin x Asset turnover = Return on assets

Net profit x Net sales (crossed out) = Net profitNet sales (crossed out) Total assets Total assets

Net Profit Margin: reflects the profits generated from each dollar of salesAsset Turnover: assesses the productivity of a firm’s investment in its assets

The Strategic Profit Model: Evaluating the Area of ‘Profit Management’

Net Profit Margin

Sales

Net Profit

Gross Margin

Total Expenses

Sales

Cost of Goods Sold

15%

15

40

100

60

100 25

-

-

A

The Strategic Profit Model: Examining the Area of ‘Asset Management’

Asset Turnover

Total Assets

Sales

Current Assets

Fixed Assets

Inventory

Accounts Receivable

2.5

100

10

5

4

40

30

+ +

+

Other Current Assets

1

B

Net Profit Margin

Sales

Net Profit Gross Mar

Total Exp.

Sales

Cost Goods Sold

15%

15 40100

60100 25

--

Asset Turnover

Total Assets

Sales

Current Assets

Fixed Assets

Inventory

A/R

2.5

100

10

5

440

30

+ +

+

Other Current Assets

1

Return onAssets

37.5%Times

Net Profit Net Profit Net SalesTotal Assets

=Net Sales

xTotal Assets

Net SalesTotal Assets( )

Net ProfitNet Sales( )

Net ProfitTotal Assets( )

÷

÷

The Strategic Profit Model: Return on Assets

Profit M

anagement

Asset M

anagement

A

B

Financial Implications of Strategies Used By Two Different Kinds of Retailers: Bakery and Jewelry Store

So what implications can you derive from the figures shown above? What does it tell you about the NATURE of retailing operations as compared between the two types of businesses? Discuss.

Financial Performance Objectives: Productivity

Productivity Objectives:State the sales objective that the retailer desires for each unit of resource input: floor space, labor, and inventory investment.

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a) Space Productivity

Space productivity - net sales divided by the total square feet of retail floor space. A space productivity objective states how many dollars in sales the retailer wants to generate for each square foot of store space.

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b) Labor Productivity

Labor productivity - net sales divided by the number of full-time-equivalentemployees. A labor productivity objective reflects how many dollars in sales the retailer desires to generate for each full-time-equivalentemployee.

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c) Merchandise Productivity

Merchandise productivity - net sales divided by the average dollar investment in inventory. This objective (also known as sales-to-stock ratio) states the dollar sales the retailer desires to generate for each dollar invested in inventory.

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Societal ObjectivesReflects the retailer’s desire to help society fulfill some of its needs.Employment objectivesPayment of taxesConsumer choiceEquityBenefactor

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Personal ObjectivesReflects the retailer’s desire to help individuals employed in retails fulfill some of their needs.Self-gratificationStatus and respectPower and authority

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Retail Objectives

Exhibit 2.2

Personal Objectives

Societal Objectives

Profitability

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Key issues in SWOT

Strengths -(a) What major competitive advantage(s) do we have?(b) What are we good at?(c) What do customers perceive as our strong points?

Weaknesses -(a) What major competitive advantage(s) do

competitors have over us?(b) What are competitors better at than we are?(c) What are our major internal weaknesses?

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Key issues in SWOT (cont’d)

Opportunities -(a) What favorable environmental trends may benefit

our firm?(b) What is the competition doing in our market?(c) What areas of business that are closely related to

ours are undeveloped?

Threats -(a) What unfortunate environmental trends exist that

may hurt our future performance?(b) What technology is on the horizon that may soon

have an impact on our firm?

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Some examples of SWOT summaries for major retailing organizations: Tesco

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Some examples of SWOT summaries for major retailing organizations: Carrefour

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Some examples of SWOT summaries for major retailing organizations: Wal-Mart

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StrategyIs a carefully designed plan for achieving the retailer’s goals and objectives.

Strategies

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Minimal Retail Strategies

Get shoppers into your store. Convert these consumers into

customersby having them purchase merchandise.

Do this at the lowest operating costpossible that is consistent with thelevel of service that your customers expect.

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Retail Strategies: Differentiation

Many retailers go further and use strategies that enable them to differentiate themselves from the competition in order to accomplish these three tasks. They do this by means of differentiation -- that is, what sets them apart from their competition

How do you think retailers can set themselves apart from rival retailers? What strategies could be used?

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Differentiation in Retailing1. price, which is a very dangerous strategy to use,

unless a retailer has substantially lower operating costs, since it can easily be copied by the competition and will result in reducing profits or causing losses.

2. physical differentiation of the product3. the selling process by offering outstanding service4. after-purchase satisfaction by taking care of the

customer after the sale has been made5. location or the ease with which the customer can

get to the retailer6. never being out-of-stock on sizes, colors, and

styles that the retailer's target market expects the retailer to carry

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Retailing Strategies

Target MarketIs the group or groups of customers that the retailer is seeking to serve.

LocationIs the geographic space or cyberspace where the retailer conducts business.

Retail mixIs the combination of merchandise, assortment, price, promotion, customer service, and store layout that best serves the segments targeted by the retailer.

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Strategies

Retail mix:Is the combination of merchandise, assortment, price, promotion, customer service, and store layout that best serves the segments targeted by the retailer.

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The Retail Mix

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Retail Mix Strategies

1. Merchandise strategy:• What is the optimum range of product

lines to carry? The VARIETY, BREADTH and the DEPTH of the range (covered in chapter; see page 293)

• Which lines will optimize profits?• Which lines provide best inventory

turnover?• How would the merchandise selection

help to differentiate the retail store?

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2. Location strategy:• Where is the best location of the store

(site selection)• How does the location of the store

impact on the pulling power of customers within the trading area?

• What about competition around the location? Is it under or over stored?

• What is the best location within a mall or shopping centre?

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3. Price strategy:• How does the retailer use pricing as a

means of competition and defending market share

• Price is often used as a short-term promotional incentive in order to draw traffic into the store

• And achieve sales volume and market share gains

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4. Customer service strategy:• How does the retailer use staff to

differentiate from other competitors?• The staff needs to be highly motivated

(financial and non-financial) in order to provide consistently high quality of customer service

• The staff needs to be both customer oriented as well as having high degree of product knowledge

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5. Promotions strategy:• How does the retailer use the different

tools of promotions (promotions mix) in order to generate attention and store visits?

• Key aspects of retail promotions strategy• Often short term focus• Covering a specific trading area• Usually focused on building store image and

loyalty

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Analyze the retailing (marketing mix) of different types of retailers

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Example: Retail mix for an up-market watch store (Hour Glass)

High profile malls

Professional, excellent product knowledge

Project class and status in store design

and layout

Selective media and events promotions

Fine watches and accessories, only top brands

Skim pricing

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Types of Retail Strategies (Berman)

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Understanding the “Retail Concept”

This is a critical topic for your course Make sure in your field work on the project,

you thoroughly understand the true retail concept of the store in question

The retail concept is similar to the “marketing concept”

What does the store stand for? What do its customers think about it?

What attributes make up the store image and its experiences it offers to its customers?

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Strategies

Value Proposition:A clear statement of the tangible and/or intangible results a customer receives from shopping at and using the retailer’s products or services.

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Applying the Retailing Concept

Customer Orientation

Coordinated Effort

Value Driven

Goal Orientation

RetailingConcept

RetailStrategy

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Examples of Retail Strategies

•Starbucks

•Courts

•Bread Talk

•Hour Glass

What is the target

market, retail

offering, and source

of competitive

advantage for each

retailer?

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Read up about the retailing strategies of TESCO Good weblink: http://www.tescoplc.com/plc/about_us/strategy/

Service Retailing

Even though many flyers tried Jetstar Asia for the first time because of its low fares, the airline’s customer service won them over.

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Retail Planning and Management

Strategic PlanningIs a plan of action detailing how the retailer will respond to the environment in an effort to establish a long-term course of action to follow.

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After Strategic Planning we need to think of “operations management”

In the lectures to come ahead All aspects of store managementMerchandise planningMarketing and Promotions Finance HR Customer Service Logistics

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Retail Planning and Management AdministrationInvolves the acquisition, maintenance, and control of resources that are necessary to carry out the retailer’s strategy.

Operations ManagementDeals with activities directed at maximizing the efficiency of the retailer’s use of resources. It is frequently referred to as day-to-day planning

High-Profit RetailingTo be a high profit retailer, the retailer needs good strategic planning coupled with strong operations management.

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Retail Strategic Planning and Operations Management Model

Exhibit 2.4 3-69

Understanding the Environment Consumer Behavior - Understand the determinants

of consumers' shopping behavior. Competitor Behavior - Develop a competitive

strategy that is not easily imitated. Supply Chain Behavior - Keep abreast of supply

chain members' behavior and the possible effects it may have on one's strategy.

Socioeconomic Environment - Understand how economic and demographic trends will influence future sales.

Technological Environment - Gather knowledge in regard to opportunities for improving operating efficiency.

Legal and Ethical Environment - Be familiar with local, state and federal regulations; stay current with evolving legal patterns that may effect the industry while operating at the highest ethical standards. 3-70

Operations management

Operations Management – deals with activities directed at maximizing the efficiency of the retailer’s use of resources. It is frequently referred to as day-to-day management.

High Performance Results - Achieved through the development and implementation of well-designed strategic, operational, and administrative plans. High performance results are indicative of industry leaders. Retailers must set high financial performance objectives so that they can at least maintain average operating results if planned results are not achieved.

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In an earlier model used for discussion in Module One (Dunne & Lusch)

We looked at these aspects of retailing:

Think about how each of these aspects must be assessed in order to determine the effectiveness of the retail organization

“are we using the right approaches?

Evaluating the Competition in Retailing

(Chapter 4)

Lecture 3: Part B

73

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Learning Objectives for Chapter 4 (Dunne):

Explain the various models of retail competition Distinguish between various types of

retail competition Describe the four theories used to

explain the evolution of retail competition Describe the changes that could affect

retail competition

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Models of Retail Competition

The Competitive Marketplace Market Structure The Demand Side of Retailing The Supply Side of Retailing The Profit-Maximizing Price Non-price Decisions Competitive Actions

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The Competitive Marketplace

While retailers typically compete for customers on a local level, catalog and electronic retailers compete at national and international levels.

Competition in retailing can come from different stores, different formats and from non-store alternatives

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Retailers compete for target customers on five major fronts:

The price for the value offered Service level Product selection (merchandise line

width and depth) Location or access (the overall

convenience of shopping for the retailer)

Customer experience (the customers’ positive feelings and behaviors in the purchase process)

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Market Structure

Pure Competition Pure Monopoly Monopolistic Competition Oligopolistic Competition

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Market Structure

Pure CompetitionOccurs when a market has homogenous products and many buyers and sellers, all having perfect knowledge of the market, and ease of entry for both buyers and sellers.

Pure MonopolyOccurs when there is only one seller for a product or service.

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Market Structure

Monopolistic CompetitionOccurs when the products offered are different, yet viewed as substitutable for each other and the sellers recognize that they compete with sellers of these different products.

Oligopolistic CompetitionOccurs when relatively few sellers, or many small firms who follow the lead of a few larger firms, offer essentially homogeneous products and any action by one seller is expected to be noticed and reacted to by the other sellers.

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Understanding competition using the Five Forces Model (Porter)

This model helps to explain the intensity of competition in a given industry or market. The five forces are essentially sources of competition that directly affect the profitability of the retail business 3-81

Application Example: Using the Five Forces Model to analyze the Asian Airline Market

Marketing : An IntroductionAn Asian Perspective© Armstrong, Kotler & da Silva

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Applying the Porter’s model to a retailing industry situation:

The threat of new retailers coming into the market and setting up

shops or opening of new malls

The manufacturers or distributors who sell to the retailer- how

big are they and how powerful are their

brands?

The retail firm versus other existing rival retailers- how fierce is the competition?

The choices that the buyer has-

can he buy from many different

retailers or just a few?

Consumers can buy online off the Internet or shop in other countries such as Thailand

or Malaysia

Threat of new entrants

Buyer powerSupplier power

Substitutes

© Strategy in Marketing (Pearson Asia 2010)3-83

Competitive Factors (Five Forces)

■ The nature of the competition in retail markets is affected by barriers to entry, the bargaining power of vendors, and competitive rivalry. Retail markets are more attractive when competitive entry is costly.

■ Barriers to entry are conditions in a retail market that make it difficult for firms to enter the market. These conditions include scale economies, customer loyalty, and availability of locations.

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Competitive Factors- Five Forces (cont’d)

■ Scale economies are cost advantages due to a retailer's size. Markets dominated by large competitors with scale economies are typically unattractive.

■ Retail markets dominated by a well-established retailer that has developed a loyal group of customers offer limited profit potential.

■ The availability of locations may impede competitive entry.

■ A retail market with high entry barriers is very attractive for retailers presently competing in that market, but unattractive for retailers not already in that market.

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Competitive Factors- Five Forces (cont’d)

■ Another competitive factor is the bargaining power of vendors. Markets are unattractive when a few vendors control the merchandise sold in it. In these situations, the vendors have an opportunity to dictate prices and other terms, such as delivery dates, and thus reduce the retailer's profits.

■ The final industry factor is the level of competitive rivalry in the retail market, which is the frequency and intensity of reactions to actions undertaken by competitors. Conditions that may lead to intense rivalry include: (1) a large number of competitors that are all about the same size, (2) slow growth, (3) high fixed costs, and (4) the lack of perceived differences between competing retailers.

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So which of the four kinds of market structures best typifies retailing in our local market?

All depends Retailing can be characterized as monopolistic or, in

rare cases, oligopolistic competition. The distinction between monopolistic competition and oligopolistic competition lies in the number of sellers.

Conventional economic thought suggests that for oligopoly to occur, the top four firms have to account for over 60 to 80 percent of the market. While some national retailers do have large market shares; oligopolistic competition does not actually occur on a national level. However, it is not uncommon at a local level.

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Market Structure

OutshoppingOccurs when individuals in one community travel usually to a larger community to shop. This happens when local prices become too high, merchandise selection too limited, or services too poor, then residents of these communities will travel to larger communities to shop.

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The Demand Side of RetailingExhibit 4.1

Pric

e

Quantity Demanded

Demand as a Function of Price

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The Supply Side of Retailing

Dol

lars

Unit Sales Quantity or Sales Volume

Total Costs

TC= FC+VC

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The Profit-Maximizing Price

A profit-maximizing price seeks to get as much profit as possible from the sale of each unit.

In the real world of marketing and retailing, is it possible to achieve profit maximizing positions in business? Why or why not?

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The Relationship of Price Versus Nonprice Actions and Demand CurvePrice

Quantity

Price

Quantity

Pricing Actions move the consumer up and down the current demand curve

Non-price Actions seek to shift the demand curve to the right and make it more inelastic

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Non-Price Decisions

Retailers that are able to remove themselves from price competition by differentiating themselves in some other way will achieve higher profits than those that fail to do this.

The retailer can offer private label merchandise that has unique features or offers better value than competitors.

The retailer could provide other benefits to the customer.

The retailer could master stock-keeping with its basic merchandise assortment.

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Non-price competition strategies: Position itself as different from the

competition by altering its merchandise mix to offer higher quality goods, great personal service, etc.

Offering private label merchandise. Provide free services or products, such

as free gas to out of town customers. Strive to always have basic

merchandise in stock.

Non-price Decisions

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Non-price Decisions

Store PositioningIs when a retailer identifies a well-defined market segment using demographic or lifestyle variables and appeals to this segment with a clearly differentiated approach.

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Competitive Actions

With so many retail establishments competing against each other, the profitability of all the retailers suffers.

Market Equilibrium - When the return on investment is high enough to justify keeping capital invested in retailing, but not so high to invite more competition

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Competitive Actions

Competitive activity can be examined by the number of retail establishments of a given type per thousand households.

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Competitive Actions

OverstoredIs a condition in a community where the number of stores in relation to households is so large that to engage in retailing is usually unprofitable or marginally profitable.

UnderstoredIs a condition in a community where the number of stores in relation to households is relatively low so that engaging in retailing is an attractive economic endeavor.

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Suppliers as Partners and Competitors

While suppliers operate as partners to retailers in the channel, they also double up as competitors

Competitors in what sense?Retailers need to compete to gain support

of product supply, promotions and margins The manufacturer could sell directly and

compete as a retailer

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Case Study: Lim Chee Guan and Kim Joo Guan

Suppliers as Competitors and Partners

Suppliers compete for gross margins throughout the supply chain. The retailer must develop a loyal group of patrons that encourages the supplier to accommodate the needs of its retail partner.

Suppliers as partners – Suppliers can be a critical competitive advantage to retailers when they provide a unique product or promotion

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Types of Competition

Intra-type and Inter-typeCompetition

Divertive Competition

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Types of Competition Intra-type Competition

Occurs when two or more retailers of the same type as defined by NAICS codes in the Census of Retail Trade, compete directly with each other for the same households.

Inter-type CompetitionOccurs when two or more retailers of a different type, as defined by NAICS codes in the Census of Retail Trade, compete directly by attempting to sell the same merchandise lines to the same households.

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Intra-type and Inter-type Competition

Intra-type competition for books.

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Intra-type and Intertype Competition

Inter-type competition for video rentals.

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Intra-type and Intertype Competition

Intratype Competition

Intertype Competition

Supermarket Food GiantSupermarket

McDonald’s

Supermarkets offeringHome Meal

Replacements (HMR)compete with fast-food

restaurants

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Types of Competition

Divertive CompetitionOccurs when retailers intercept or divert customers from competing retailers.

It is significant because many retailers operate close to their break-even point, thus making them susceptible to any downturn in sales

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Evolution of Retail Competition

The Wheel of Retailing The Retail Accordion Retail Life Cycle

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The Wheel of Retailing TheoryDescribes how new types of retailers enter the market as low-status, low-margin, low-price operators; however, as they meet with success, these new retailers gradually acquire more sophisticated and elaborate facilities, and thus become vulnerable to new types of low-margin retail competitors who progress through the same patter.

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Wheel of retailing

Wheel of Retailing Hypothesis - New retailers enter the market as low-status, low-margin, low-price operators. However, as they meet with success, these new retailers gradually acquire more sophisticated and elaborate facilities making them vulnerable to new types of low-margin retail competitors who progress through the same pattern.

The three stages are

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Wheel of retailing stages:1. Entry Phase - New retailers enter the

market as low-status, low-margin, low-profit operators.

2. Trading-Up Phase - The new retailers experience success and acquire more sophisticated and elaborate facilities.

3. Vulnerability Phase - Retailers find it necessary to raise prices and margins and therefore become susceptible to new types of low-margin competition.

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The Wheel of Retailing TheoryExhibit 4.3

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Retail AccordionDescribes how retail institutions evolve from outlets that offer wide assortments to specialized stores and continue repeatedly through the pattern.

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The Retail Accordion

Wide Assortment

Wide Assortment

NarrowAssortment

Time

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Retail Life CycleDescribes four distinct stages that a retail institution progresses through:

IntroductionGrowthMaturityDecline


Note: this is not the same as the Product

Life Cycle

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Evolution of Retail Competition:

IntroductionBegins with an aggressive, bold entrepreneur who is willing and able to develop a different approach to retailing of certain products. During this stage profits are low, despite increasing sales levels.

GrowthSales and profits explode, validating the entrepreneur’s good idea. New retailers enter the market and begin to copy the retailers idea. Late in this stage both market share and profitability approach their maximum levels.

The Retail Life Cycle

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Evolution of Retail Competition:

MaturityMarket share stabilizes and profits decline because:

managers use to managing simple small retail outlets must now manage large complex firms,

industry has over-expanded, and competitive assaults by new retail formats.

DeclineThe once promising idea is no longer needed in the marketplace. As a result, market share and profits fall

The Retail Life Cycle

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Retail Institutions in the Four Stages of

Exhibit 4.4The Retail Life Cycle

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Retail Life Cycle in Asia

Do you see changing patterns of retailing in cities in Asia?

What changes are taking place in terms of new malls and retailing formats?

What are the more mature and declining forms of retailing?

What are the newly emerging ones? Do you think customers accept new types of

retailing concepts easily?

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Resource-Advantage Theory

Resource-advantage theoryIs based on the idea that all firms seek superior performance in an ever-changing environment.

Illustrates two important lessons for retailers: Superior performance at any point in time is a result

of achieving a competitive advantage in the market place as a result of some tangible or intangible entity (“resource”).

All retailers cannot achieve superior results at the same time.

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Future Changes in Retail Competition

Nonstore Retailing

New Retailing Formats

Integration of Technology

Private Label Use

Heightened Global Competition

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Non-store RetailingDirect sellingCatalog salesE-tailing

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Non store retailing Nonstore Retailing - Analysts contend that nonstore

retailing (especially those that utilize the Internet) will experience significant growth during the next decade.

Some of the forces contributing to this growth are:

a.Consumers’ need to save time.b.Consumers’ desire to “time-shift.”c.The erosion of enjoyment in the shopping experience.d.The lack of qualified sales help in stores to provide

information.e.The explosive development of the telephone, computer,

and telecommunications equipment that facilitates nonstore shopping.

f. The consumers' preference for lower prices, which often eliminates the middleman's profit

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Non-store Retailing

Direct Selling:Engaging in the sale of a consumer product or service on a person-to-person basis away from a fixed retail location.

Direct Marketers:Those who sell products by catalog, mail order, and the internet.

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Non-store Retailing

E-Tailing:

The general belief that electronic, interactive, at-home shopping is definitely the place to be.Gen Xers and Baby Boomers tend to view the

internet as a supplement to their daily lives.

Gen Y customers are able to exist in both electronic and traditional worlds at once.

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Non-store Retailing

Bricks & Click Approach:An approach that involves a tangible retail store that also offers its merchandise on the internet.

Online Only Approach:An online only approach is when the retailer only offers merchandise or services via the internet and not through a tangible store.

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New Retail Formats Super centers Recycled Merchandise Retailers Liquidators

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Future Changes in Retail Competition:

Off-price RetailersSell products at a discount but do not carry certain brands on a continuous basis. They carry those brands they can buy from manufacturers at closeout or deep one-time discount prices.

SupercentersCombine a discount store and grocery store to carry 80,000 to 100,000 products in order to offer one-stop shopping.

New Retail Formats

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Recycled Merchandise RetailersAre establishments that sell used and reconditioned products.

LiquidatorsLiquidates leftover merchandise when an established retailer shuts down or downsizes

New Retail Formats

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Creation ofNew Retail

Formats

GreaterDiversity

Increased Rate of Change

Heightened Global Competition

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Global competitionHeightened Global Competition - The rate of change in retailing appears to be directly related to the stage and speed of economic development in the countries concerned.

1. Even the least-developed countries are experiencing dramatic changes in retailing activities as newer formats are introduced.

2. Retailing in other countries exhibits even greater diversity in its structure than retailing in the United States.

3. The introduction of new retailing formats in one part of the country will impact retailers in other parts of the country. This is true regardless of whether the change occurs domestically or internationally.

4. Still, it is amazing that retailers from larger countries often do not have the level of success when entering a new country as compared to retailers from smaller countries. Retail experts attribute this failure by large country retailers to two factors.a. a lack of understanding of the new country's culture.b. retailers from smaller countries have always had to deal with international issues if they were to expand.

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International Aspects of Retailing (additional notes)

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Retailing formats vary by country markets

Factors include: stage of economic development, consumer income levels, shopping preferences, product categories, etc 3-133

Top 25 Retail Brands

Download the brand report:

http://www.brandz.com/output/retail.aspx 3-134

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Some of the largest global retailers:

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Global Retailers in Asia

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The Retail Format

Decisions: should the international retailer Use the same format that operates in the home

country and replicate it in the foreign country market: example hypermarket

Use more than one form of retail trading format? Tesco uses a few in the UK

Or use a completely adapted retail format that is common in the local market?

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Changing the retail format

A retailer can offer different types of retailing formats to suit different market segments

Even within a local country market, there could be different formats: Tops in Thailand

http://www.tops.co.th/main.html

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The retail format: Local market conditions

Population concentrations Transportation infrastructures Customer buying patterns and preferences Stage of retail life cycle in the local market

Not all country markets are at the same stage of economic and retail development

The international retailer must study local market conditions to see if the retail format fits the stage of economic development

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The rapidly changing Indian Retail landscape

Kiranas (Mom-&-Pop shops) General small-scale malls

Mega malls 3-140

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Retail Life Cycles: perhaps we could envisage Asian countries as follows?

ECO

NO

MIC

VIA

BIL

ITY

OF

THE

RET

AIL

FO

RM

AT

Superstore concepts

Integrated Malls

Malaysia

Singapore

Vietnam

Philippines

Thailand

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Adapting the product (merchandise) for different country markets

TESCO - Thailand

TESCO- Malaysia 3-142

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The M&S product ranges

Compare the product range between the UK stores and that in Singapore

http://www.marksandspencer.com/

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Store presentations of global retailers

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CustomerSatisfaction

CustomerManagement

Supply ChainManagement

Integration of Technology

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Use of technology in retailing

Retailers on the forefront of technology who seek to understand their consumers will achieve higher levels of effectiveness in their efforts.

ExamplesCRMOnline marketing Supply chain managementRFID

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Increasing Use of Private Labels Helps in protecting retailer niche Sets retailer apart from competition Get customers in the store

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Private Label Branding Strategies Developing a partnership with well-known

celebrities, noted experts, and institutional authorities.

Developing a partnership with traditionally higher-end suppliers to bring an exclusive variation on their highly regarded brand name to the market.

Reintroducing products with strong name recognition that have fallen from the retail scene.

Branding an entire department or business; not just a product line.

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Past Year Exam Questions

Retail Strategic Planning and Operations Management

(Chapter 2)

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May 2008

Nov 2007

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Nov 2007

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Nov 2007

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April 2007

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October 2006

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Past Year Exam Questions

Evaluating the Competition in Retailing (Chapter 4)

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May 2008

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dc lecture three : retail strategic planning and evaluating the competition

Business