Retail Strategy Mix and Wheel of Retailing

Retailer Strategy Mix A strategy mix is the retailer’s specific combination of: store location, operating procedures, goods/services offered, pricing tactics, store atmosphere, customer services, and promotional methods

THE WHEEL OF RETAILING A cyclical theory of retail evolution that assumes evolving retail institutions from low price – low service concept to higher level of service and higher prices offering. „ The wheel always revolves, sometimes slowly, sometimes more rapidly, but it does not stand still. The cycle frequently begins with the bold new concept, the innovation. Somebody gets a bright new idea … At the outset he is in bad odour, ridiculed, scorned and condemned as illegitimate.” MacNair, (1931)

The Wheel of Retailing

Three Basic Strategic Positions Low end Medium High end

Retail Strategy Alternatives

Retailing Strategy A retailer develops a marketing strategy based on the firm’s goals and strategic plans Two fundamental steps: Selecting a target market Developing a retailing mix to satisfy the chosen target market Retail image: Consumers’ perceptions of a store and the shopping experience it provides

Selecting a Target Market Retailers analyze demographic, geographic, and psychographic profiles to segment and select potential markets

Merchandising Strategy Planograms: Diagrams of how to exhibit selections of merchandise within a store Category management: Retailing strategy which views each product category as an individual profit center, and the retailer manages the performance and growth of the entire category

The Battle for Shelf Space Stockkeeping unit (SKU): specific product offering within a product line that is used to identify items within the line Slotting allowances: fees paid by manufacturers to secure shelf space from retailers for their products

Customer Service Strategy Retailers must decide on the variety of services they make available for shoppers Examples include gift wrapping, bridal registry, return privileges, electronic shopping, and delivery and installation Objectives are to enhance shopper comfort and attract and retain customers

Pricing Strategy Markup: The amount a retailer adds to a product’s cost to determine its selling price Determined by the services the retailer performs and the inventory turnover rate Markdown: The amount by which a retailer reduces a product’s original selling price

Location/Distribution Strategy Planned shopping center: A group of retail stores planned, coordinated, and marketed as a single unit Four types of planned shopping centers: Neighborhood Community Regional Power

Promotional Strategy Retailers use a variety of promotional techniques to establish store images and communicate information about their stores Selling up: retailing selling technique in which salespeople try to persuade customers to buy higher-priced items than originally intended Suggestive selling: involves salespeople attempting to broaden a customer’s original purchase by adding related items, promotional products, and/or holiday or seasonal merchandise

Store Atmospherics Physical characteristics and amenities that attract customers and satisfy their shopping needs

Types of Retailers Retailers can be categorized by: Form of ownership Shopping effort expended by customer Services provided to customers Product lines Location of retail transactions

Retail Life Cycle Retail institutions pass through identifiable life stages introduction growth maturity decline

Store-Based Retail Strategy Mixes Food Oriented Convenience store Conventional supermarket Food-based superstore Combination store Box (limited-line) store Warehouse store General Merchandise Specialty store Traditional department Full-line discount store Variety store Off-price chain Factory outlet Membership club Flea market

Convenience Store Strategy Mix Location: Neighborhood Prices: Average to Above average Atmosphere and Services: Average Merchandise: Medium width and low depth of assortment; average quality Promotion: Moderate

Conventional Supermarket Strategy Mix Location: Neighborhood Prices: Competitive Atmosphere and Services: Average Merchandise: Extensive width and depth of assortment; average quality; manufacturer, private, and generic brands Promotion: Heavy use of newspapers, flyers, and coupons

Food-Based Superstore Strategy Mix Location: Community shopping center or isolated site Prices: Competitive Atmosphere and Services: Average Merchandise: Full assortment plus health and beauty aids and general merchandise Promotion: Heavy use of newspapers, flyers

Specialty Store Strategy Mix Location: Business district or shopping center Prices: Competitive to Above average Atmosphere and Services: Average to excellent Merchandise: Very narrow width and extensive depth of assortment; average to good quality Promotion: Heavy use of displays Extensive sales force

Traditional Department Store Strategy Mix Location: Business district, shopping center or isolated store Prices: Average to Above average Atmosphere and Services: Good to excellent Merchandise: Extensive width and depth of assortment; average to good quality Promotion: Heavy ad and catalog use; direct mail; personal selling

Full-line Discount Store Strategy Mix Location: Business district, shopping center or isolated store Prices: Competitive Atmosphere/ Services: Slightly below average to average Merchandise: Extensive width and depth of assortment; average to good quality Promotion: Heavy on newspapers; price-oriented; selling

Off-Price Chain Strategy Mix Location: Business district, shopping center or isolated store Prices: Low Atmosphere/ Services: Below average Merchandise: Moderate width and poor depth of assortment; average to good quality; low continuity Promotion: Use of newspapers; brands not advertised; limited selling

Factory Outlet Strategy Mix Location: Out of the way site or discount mall Prices: Very Low Atmosphere/ Services: Very low Merchandise: Moderate width and poor depth of assortment; low continuity Promotion: Little

Flea Market Strategy Mix Location: Isolated store Prices: Very Low Merchandise: Extensive width and poor depth of assortment; low continuity; variable quality Atmosphere/ Services: Very low Promotion: Limited

DIALECTIC PROCESS Framework of the theory: New retail institutions result from stores borrowing characteristics from other very different competitors and much like children are a combination of the genes of their parents. Framework of the theory: Thesis: established retail institution Antithesis: innovative retail institution Synthesis: combination of the established and innovative retail concept.

THESIS SYNTHESIS DIALECTIC PROCESS Specialty store High margin Low turnover High prices Full service Narrow variety Deep assortment SYNTHESIS Category specialist: Modest margin Medium turnover Low prices Limited service Narrow variety Deep assortment ANTITHESIS Full-line discount store: Low margin High turnover Low prices No service Broad variety Shallow assortment