Recent Trends in Canadian Retail Increased globalization New store formats and locations Increased use of technology Channel blurring Changing consumer behaviour Increased globalization – 6 of top 10 Cdn retailers is US owned; Wal-Mart New store formats and locations – dollar stores, power centres, lifestyle centres Increased use of technology – back end systems bt also more web presence and e-commerce capabilities especially multi-channel Channel blurring – hard to tell some retailers apart once inside; Gavin example Changing consumer behaviour – increasingly demanding of higher levels of service; more price sensitive (dollar stores; warehouset clubs and dollar stores)

Special Characteristics Small average sales Impulse purchases Popularity of stores Small average sales – w/ razor thin margins ~13% net margin for a successful retailer; grocery ~1-2%; Hbc ~.05% Impulse purchases Good b/c can get ppl to spend more once in store BUT, requires correctly anticipating demands (what and how much) correctly Popularity of stores Ppl want convenience of web, but also want tangibility when shopping Multi-channel growing but pure web players won’t displace trad’l retailers as once thought

Strategic Planning in Retailing Chapter 3 Strategic Planning in Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH,

Class Agenda Discuss retail strategy and apply concepts to a short case

How Retail Institutions are Evolving Mergers, Diversification, Downsizing Cost-Containment and Value-Driven Retailing

Figure 5.1 The Wheel of Retailing

Figure 5.3 Scrambled Merchandising by a Shoe Store

Figure 5.4 Retail Life Cycle

Figure 1.10 Applying the Retail Concept Customer Orientation Retailing Concept Coordinated Effort Retail Strategy Value driven Goal Orientation

Benefits of Strategic Retail Planning Opportunity for analysis Direction Coordination of the firm’s total efforts Identify points of differentiation Appeal to a group of customers Anticipation and avoidance of crises

Figure 3.1 Elements of a Retail Strategy Forzani Conducted a situation analysis and found: Department stores getting out of sporting goods Small regional players making little money because of economic and weather conditions Independent retailers pay much higher prices for merchandise Concluded: A few national retailers would eventually dominate the industry Their strategy: Offer superior front line sales & service personnel Achieve and maintain low cost position Increase segment dominance in specific product categories Develop and maintain a clear differentiated retail offering Today: Canada’s largest sporting goods retailer

Sobey’s Inc. Canada Goals: Sales growth between 6 and 8 percent Operating earnings per share growth between 12 and 16 percent Companywide capital expenditures of approximately $550 million to $600 million National share of requirements of 20 percent Maintenance of first-quarter supplier rating

Positioning Approaches Mass merchandising is a positioning approach whereby retailers offer a discount or value-oriented image, a wide or deep merchandise selection, and large store facilities Niche retailing occurs when retailers identify specific customer segments and deploy unique strategies to address the desires of those segments rather than the mass market An image represents how a given retailer is perceived by consumers and others

Figure 3.7 Selected Retail Positioning Strategies

Target Market Identification Three techniques Mass marketing Concentrated marketing Differentiated marketing See Table 3-3 for a detailed comparison

The Positioning Approach of High-End Jewellery Stores Case #4, p. 74

The Positioning Approach of High-End Jewellery Stores Positioning Chart – Jewellers Blurred positioning? Pros and cons of Tiffany’s low price strategy How would you expect the total retail experience to differ in Wal-Mart, department stores and high-end retailers?

- Kevin Coupe, Morningnewsbeat.com “It is critical … for a retailer to choose his or her spots…to accept the notion that you can’t be everything to everyone.” - Kevin Coupe, Morningnewsbeat.com

Overall Strategy Components The Retailing Strategy Mix is a combination of: Product Price Location Communication Operations Management Need to balance with uncontrollable environmental and marketplace factors Controllable Factors Note: Communication = Promotion, customer service and image Uncontrollable Variables: Consumers Competition Technology Economic conditions Seasonality Legal restrictions A firm’s positioning is the consumer’s perception of the firm that results from who the target market is, the overall positioning strategy and the specific elements of the strategy mix.

Wal-Mart http://www.walmartfacts.com/FactSheets/ Watch the Wal-Mart video and consider the elements of its strategy. What does Wal-Mart do well? Is Wal-Mart the perfect retailer? Some interesting Wal-Mart sources: http://walmart.feedroom.com/ifr_main.jsp?nsid=a-653ba03d:10d9dd55f38:-741f&fr_story=de9a09508999541804d6a74118c1601074156570&st=1157994113989&mp=WMP&cpf=true&fr=060806_015729_wcf39d2dx10bb4c7cfaexw6ebb&rdm=2762.328875758835 http://www.walmartfacts.com/FactSheets/ http://www.pbs.org/itvs/storewars/story.html

Retail Growth Strategies Market Segment Existing New Market Penetration Market Development Existing Retail Format New Retail Format Development Diversification

Consider Home Depot Growth Classify the type of growth strategies employed by Home Depot through: Home Depot Canada Multiple store openings in one market New stores opening in previously unserved markets Smaller version stores for higher-end urban customers Launch of their Canadian website Expo Design Center Market penetration Market development Diversification Retail Format Dev. Diversification

Takeaways Developing a successful retail strategy requires: Careful analysis and planning Balancing controllable and uncontrollable variables Accurately defining target market(s) and satisfying their needs and wants Understanding your position in the market Coordinated effort

Q10 A retailer can become a _____ through low prices, specialized products, a large selection, and superb customer service. a. destination retailer b. relationship retailer c. parasite store d. value-based retailer What is a parasite store?

Earning Destination Retailer Status Be price oriented and cost efficient Be upscale Be convenient Offer a dominant assortment Offer superior customer service Be innovative or exclusive

Figure 3.1 Elements of a Retail Strategy Forzani Conducted a situation analysis and found: Department stores getting out of sporting goods Small regional players making little money because of economic and weather conditions Independent retailers pay much higher prices for merchandise Concluded: A few national retailers would eventually dominate the industry Their strategy: Offer superior front line sales & service personnel Achieve and maintain low cost position Increase segment dominance in specific product categories Develop and maintain a clear differentiated retail offering Today: Canada’s largest sporting goods retailer

Overall Strategy Components The Retailing Strategy Mix is a combination of: Product Price Location Communication Operations Management Need to balance with uncontrollable environmental and marketplace factors Controllable Factors Note: Communication = Promotion, customer service and image Uncontrollable Variables: Consumers Competition Technology Economic conditions Seasonality Legal restrictions A firm’s positioning is the consumer’s perception of the firm that results from who the target market is, the overall positioning strategy and the specific elements of the strategy mix.

Benefits of Strategic Retail Planning Opportunity for analysis Direction Coordination of the firm’s total efforts Identify points of differentiation Appeal to a group of customers Anticipation and avoidance of crises

How does Wal-Mart plan to grow?

Retail Growth Strategies Market Segment Existing New Market Penetration Market Development Existing Retail Format New Retail Format Development Diversification

Takeaways Developing a successful retail strategy requires: Careful analysis and planning Balancing controllable and uncontrollable variables Accurately defining target market(s) and satisfying their needs and wants Understanding your position in the market Coordinated effort