Module 2 : Retailing

Strategy & Planning

– Introduction
 What is a Retail Strategy?

A structured plan to serve customers better than competitors.

Aligns business goals with customer needs and competitive
environment.
Covers target market, retail format, and value proposition.
Helps guide long-term decisions and responses to market trends.
Core Components of Retail Strategy
Target Market
Product Selection
Pricing Strategy
Customer Experience
Marketing Promotion
Location and Distribution Channels
Inventory Management
Sustainable Competitive Advantages
Synergy
Importance of Retail
Strategy
Defines brand direction and
positioning.
Ensures consistent customer
experience across touchpoints.
Builds customer loyalty and
profitability.
Essential in adapting to changing
consumer behavior and
competition.
Customer Focus and
Satisfaction
Enhanced effeciency and
profitability
Competitive Advantage
Adaptability and growth
Effective marketing and sales
Building brand loyalty
Adapting to the digital age
 Examples of Strategic Retailers
Zara – Fast fashion with real-time production and trend
adaptation.
DMart – Low-cost operations and discount pricing.
FabIndia – Community-based, ethical, sustainable sourcing.
 Examples of Strategic Retailers
Amazon's success stems from its focus on user-
friendly interfaces, efficient navigation, reliable
purchasing processes, and effective supply chain
management. This creates a seamless online shopping
experience that fosters customer loyalty. They also
leverage technology to expand into various retail
segments, addressing both internal strengths and
external threats like cybersecurity.
Strategic Triangle: Customer–
Company–Competitor
 Strategic Triangle: Customer–
Company–Competitor

The Strategic Triangle, also known as Ohmae's 3Cs

Model, is a strategic framework that emphasizes
the interconnectedness of a company, its
customers, and its competitors. In retail, this
means understanding how your company's
strengths, your customer's needs and preferences,
and your competitors' offerings all interact to
create a competitive advantage.
 Strategic Triangle: Customer–
Company–Competitor

Retail strategy lies at the intersection of:

Customer: Needs, behavior, expectations.
Company: Resources, values, mission.
Competitor: Positioning, pricing, market
share.
 Approaches for developing a
Sustainable Competitive Advantage
Sources of Advantage Less Sustainable More Sustainable

Habitual repeat purchasing because of Building a brand image with an

Customer Loyalty
limited competition in the local area emotional connection with customers

Location Convenient Location

Human Resource management More employees Committed, knowledgeable employees

Distribution and information systems Bigger & Automated warehouses Shared systems with vendors

More merchandise; lower price; higher

Unique merchandise Exclusive merchandise
ad budgets; more sales promotions

Repeat purchases from vendor due to Coordinated procurement efforts;

Vendor relations
limited alternatives ability to get scarce merchandise

Customer service Hours of operation Knowledgeable / Helpful staff

Approaches for developing Customer Loyalty
1.Building a strong brand image
2.Creating a unique positioning in the target market
3.Offering unique merchandise
4.Providing excellent customer service
5.Implementing a customer relationship management
program
6.Building a retail community
Classroom Activity:
Strategic Comparison
Choose any two brands from the
same sector (e.g., Reliance Trends
vs Zudio).
Compare their retail strategy
based on target audience, pricing,
and value.
What makes each brand’s strategy
unique?
Discussion

Think of your favorite retail brand.

Why do you keep going back to it?
Is it price, convenience, brand image, product
variety, or something else?
What strategy do you think they are using?
Growth Strategies
Growth Opportunities
Ansoff suggested that there were effectively only two approaches to
developing a growth strategy; through varying what is sold (product
growth) and who it is sold to (market growth).
When combined with the Ansoff Matrix detailed above, it delivers four
strategic options, each with a differing level of risk.
Growth opportunities refer to situations or circumstances that enable
an individual or organization to advance, develop, and improve.
These opportunities can be professional, personal, or business-related
and often involve acquiring new skills, expanding knowledge, or
increasing reach and impact.
1. Market Penetration Directed towards existing customers

Attract new customers from current target market

Get current customers to visit store more often or buy on each visit

Opening more stores or extending store hours

Sell more impulse goods

Cross Selling: Sales associates in one department sell

complementary merchandise from other departments
sell more to your current customers in existing markets.
Methods: increase store hours, promotions, loyalty programs,
cross-selling.
Example: A supermarket offering discounts or loyalty cards to
make existing shoppers buy more.
2. Market Expansion Use retail format in new market segments
Take your existing retail format to new geographic markets.
Enter new cities, states, or countries with the same
products.
Example: Dunkin’ Donuts expanding from U.S. to India and
other countries.

3. Retail Format Development

Develops a new retail format with a different retail mix for the same target market.
Introduce new retail formats for the same target market.
Same customers, but different store types.
Example: Tesco operates Tesco Express (small convenience), Tesco Metro
(medium city stores), and Tesco Superstores (large hypermarkets).
4. Diversification
Introduces a new retail format directed toward market segment not currently
served by reatiler.
Enter into new businesses or markets outside your current scope.
Related diversification: Similar or complementary business line.
Example: A fashion retailer adding footwear or accessories.
Unrelated diversification: Completely different business.
Example: A retailer moving into financial services or hospitality.

Easy way to remember:

Penetration = more sales from same customers
Expansion = same format, new markets
Format Development = new format, same market
Diversification = new format, new market
Global Growth in Retail
🔹 Benefits
Higher Sales – Access to new customers in new countries.
Example: Zara increases sales by opening stores across Asia &
Middle East.
Stronger Bargaining Power – With global presence, retailers can
negotiate better with suppliers.
Example: Walmart gets bulk purchasing discounts worldwide.
Brand Reach & Recognition – Expanding internationally builds brand
image and loyalty.
Example: Starbucks is seen as a global lifestyle brand, not just a
coffee shop.
🔹 Challenges:
Cultural Differences – Products and formats may not match local
tastes.
Example: Walmart failed in Germany due to culture mismatch in
shopping habits.
Legal & Regulatory Issues – Each country has its own rules on FDI,
labor, sourcing, etc.
Example: India restricts foreign direct investment in multi-brand
retail.
Operational Risks – Logistics, supply chain, and local competition can
make expansion costly.
Example: Carrefour struggled in South Korea and had to exit
🔹 Entry Modes
Direct Investment – Retailer fully owns and controls operations in foreign
market.
Example: McDonald’s directly operates in the UK.
Joint Venture – Partnering with a local firm to share ownership, risks, and
knowledge.
Example: Starbucks initially entered India with Tata Group.
Strategic Alliance – Collaboration without ownership, usually for sourcing or
marketing.
Example: Global luxury brands tie up with Indian designers for collections.
Franchising – Local entrepreneurs operate stores under the global brand’s
system.
Example: Marks & Spencer uses franchise partners in regions like the Middle East
 Investment
Mode Ownership Control Risk Level Example
Cost

Direct 100% foreign

Full control Very High High McDonald’s UK
Investment ownership

Shared (foreign Starbucks +

Joint Venture Shared control Medium Medium
+ local) Tata (India)

No ownership
Strategic Luxury brand
(collaboration Limited control Low Low
Alliance collabs
only)

Moderate Marks &

Local partner
Franchising control via Low Low–Medium Spencer Middle
owns stores
contracts East
🛒 Strategic Retail Planning Process
1. Mission – Why do we exist?
Defines the purpose and direction of the retailer.
Should be customer-focused and inspiring.
Example: IKEA – “To create a better everyday life for the many people” by
offering affordable design.

2. SWOT Analysis – Understand where we stand

Internal: Strengths (brand, supply chain), Weaknesses (limited presence).
External: Opportunities (new markets, new trends), Threats (competition,
regulations).
Helps retailers know what they can leverage or must improve.
3. Identify Opportunities – Where can we grow?
Based on trends, customer demand, competitor gaps.
Example: Demand for online grocery delivery → opportunity for supermarkets to
enter e-commerce.

4. Evaluate Opportunities – Do they fit us?

Retailer checks whether the opportunity aligns with their strengths, brand, and
resources.
Example: A luxury brand will not enter discount retail even if the market is
growing.

5. Set Objectives – What do we want to achieve?

Goals must be SMART (Specific, Measurable, Achievable, Realistic, Time-bound).
Example: “Increase online sales by 20% within 1 year.”
6. Develop Retail Mix – How will we achieve it?
Retail mix = 6Ps: Product, Price, Place, Promotion, People, Presentation.
Example: Zara’s mix = fast-changing fashion (product), affordable prices,
prime store locations, trendy store layouts.

7. Evaluate & Adjust – Keep improving

Regularly review results and make changes if goals are not being met.
Example: A retailer may adjust pricing strategy if sales are not meeting
targets.

Quick Flow :
Mission → SWOT → Identify → Evaluate → Objectives → Retail Mix → Adjust
Retail Location Strategy
“Location is everything in retail.”
Why it matters:
Convenience for customers.
Creates a long-term competitive advantage (hard for
competitors to copy).
Wrong location = big financial risk (leases are long-term).
Types of Locations:
Unplanned Locations – independent, not part of a shopping
center.
Examples: Freestanding stores (McDonald’s highway outlet),
Central Business District (CBD), Main Street.

Planned Locations – part of a planned shopping area with

shared facilities.
Examples: Strip malls, power centers, shopping malls, lifestyle
centers.

Non-Traditional Locations – creative retail spaces.

Examples: Pop-up stores, airports, kiosks, store-in-store.
Customer Shopping Behavior:

Convenience Shopping→ quick, close to home/work (7-Eleven).

Comparison Shopping → customers compare price/quality
(electronics, clothing).

Specialty Shopping → destination stores, unique products (Apple

Store, luxury brands).
Trade Area & Site Selection
“Know your catchment area.”
 Trade Area = Geographic area from which a store draws its
customers.
Primary Zone: 50–70% of sales, closest customers.
Secondary Zone: 20–30% of sales, medium distance.
Tertiary Zone: Remaining customers, farthest away.

Site Evaluation Factors:

Traffic flow & accessibility
Parking availability
Visibility
Adjacent tenants (complimentary vs competitors)
Restrictions (zoning laws, signage)
Rent/lease cost
Tools for Analysis:
Customer spotting (track where customers live).
GIS mapping (Geographic Information Systems).
Surveys or loyalty card data.
 Forecasting Sales
“How do we estimate future sales
before opening?”
Regression Analysis
Uses historical sales data + independent variables
(population, income, store size).
Best when good data is available.

Analog Method
Compare with performance of similar existing stores in
comparable locations.
Useful for new store formats.
Huff’s Gravity Model
Calculates the probability a customer will shop at a store
based on store size & distance.
Formula: P=∑(S/Tλ)(S/Tλ)​
Students can practice numericals here (like we solved
earlier).
Supply Chain & Information Systems
“Behind-the-scenes efficiency drives customer
experience.”
Why it matters:
Lower costs
Higher product availability
Faster replenishment
Key Practices:
Forecasting – predict demand.
Inventory Management – right stock, right time.
Logistics – efficient transportation & warehousing.

Information Flow – data moves from store → buyer → vendor →

distribution center.
Tools & Systems:
Data Warehouse – centralized data storage for analysis.
EDI (Electronic Data Interchange) – share real-time data with
suppliers.
Vendor Managed Inventory (VMI) – suppliers manage stock levels.
CPFR (Collaborative Planning, Forecasting & Replenishment) –
retailer + supplier jointly plan.

Examples:
Walmart → World’s most efficient SCM with real-time data sharing.
Zara → Fast fashion, 2-week cycle from design to store using agile
supply chain.
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