This document outlines the components of strategic planning for retail distribution channels, including developing a mission statement, goals and objectives, SWOT analysis, and strategies. It discusses evaluating different aspects of the retail mix like merchandise, location, price, customer service, and promotions to best serve target customer segments. The strategic profit model is also examined to understand profit and asset management strategies.

1. MKTG 1058:
DISTRIBUTION
CHANNELS
3-1

2. Distribution Channels MKTG 1058
LECTURE THREE
Part A: Retail Strategic Planning and
Operations Management (Chapter 2)
Part B: Evaluating the Competition in
Retailing (Chapter 4)
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2

3. Lecture 3: Part A
Retail Strategic Planning
and Operations
Management (Chapter 2)
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3

4. 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.
3-4

5. Components of Strategic Planning
 Planning
Is the anticipation and organization of
what needs to be done to reach on
objective.
 Strategic Planning
Involves adapting the resources of the
firm to the opportunities and threats of
an ever changing retail environment.
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6. Retail Strategy
 overall plan for guiding a retail
An
firm
Influences the firm’s business
activities
Influences the firm’s response to
market forces
Strategy is more critical than just
developing a marketing or retail
plan. (strategy = planning; why?)
3-6

7. 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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8. 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

9. Elements of a
Retail Strategy (Berman &
Evans Model)
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10. The Levy & Weitz Model

11. 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

12. The Dunne and Lusch Model of
Strategic Planning in Retailing

13. 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

14. 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?

15. Components of Strategic Planning (Dunne)
 Mission Statement
 Statement of Goals and
Objectives
 Strategies
 SWOT Analysis
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16. Components of Strategic Planning
 Mission Statement
is 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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17. Cold Storage:
Our Vision
To be the leading Fresh Food
People.
Our Mission
We always care for our
customers
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18. Elements of a Mission Statement
the kinds of values
it intends to offer to serve
the needs and wants of
the consumers
how it expects to how the retailer
relate to the uses or intends
ever-changing to use its
environment resources
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19. Components of Strategic Planning
 Goals and Objectives
Are the performance results
intended 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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20. Goals and Objectives
Market Financial
Performance Performance
Objectives Objectives
Societal Personal
Objectives Objectives
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21. Statement of Goals and Objectives
 Market Performance Objectives
represents 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 Objectives
Represent the profit and economic
performance a retailer desires.
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22. Financial Performance Objectives: Profitability
 Net Profit Margin
 Asset Turnover
 Return on Assets
 Financial Leverage
 Return on Net Worth
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23. Financial Performance Objectives: Profitability
 Net Profit Margin
Is 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 Turnover
Is 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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24. Financial Performance Objectives: Profitability
 Return on Assets (ROA)
Is net profit (after taxes) divided by total assets.
 Financial Leverage
Is 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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25. Strategic Profit Model
Exhibit 2.1
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26. 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

27. Components of the Strategic Profit Model
Profit
Management
Asset
Management

28. The Strategic Profit Model:
An Overview
Profit Margin x Asset turnover = Return on assets
Net profit x Net sales (crossed out) = Net profit
Net sales (crossed out) Total assets Total assets
Net Profit Margin: reflects the profits generated from each dollar of sales
Asset Turnover: assesses the productivity of a firm’s investment in its assets

29. The Strategic Profit Model:
Evaluating the Area of ‘Profit Management’
Sales
A
Gross 100
Margin
-
40 Cost of
Net Profit Goods Sold
Net Profit 15 60
Margin -
15%  Total
Sales Expenses
100 25

30. The Strategic Profit Model:
Examining the Area of ‘Asset Management’
Inventory
B 5
Sales
Asset Current
+
Accounts
100
Turnover Assets Receivable

2.5 10 4
Total Assets
40 + +
Other Current
Fixed Assets Assets
30 1

31. The Strategic Profit Model:
Return on Assets
Profit Management
Sales
Net Profit
Gross Mar 100 A
15 40 -
Net Profit Margin Cost Goods Sold
÷ -
15% Sales Total Exp. 60
Return on
( Net Profit
Net Sales ) 100 25
Assets Times
Inventory
Asset Management
37.5% Sales 5
( Net Profit
Total Assets ) Asset Turnover 100
Current Assets
+
A/R
2.5 ÷
Total Assets 10 4 B
( Net Sales
Total Assets ) 40 +
Fixed Assets
+
Other Current Assets
Net Profit
=
Net Profit
x
Net Sales 30 1
Total Assets Net Sales Total Assets

32. 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.

33. 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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34. 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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35. b) Labor Productivity
 Labor productivity - net sales divided
by the number of full-time-equivalent
employees. A labor productivity
objective reflects how many dollars in
sales the retailer desires to generate
for each full-time-equivalent
employee.
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36. 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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37. Statement of Goals and Objectives
 Societal Objectives
Reflects the retailer’s desire to help
society fulfill some of its needs.
 Employment objectives
 Payment of taxes
 Consumer choice
 Equity
 Benefactor
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38. Statement of Goals and Objectives
 Personal Objectives
Reflects the retailer’s desire to
help individuals employed in retails
fulfill some of their needs.
Self-gratification
Status and respect
Power and authority
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39. Retail Objectives
Profitability
Personal Societal
Objectives Objectives
Exhibit 2.2
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40. 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?
3-40

41. 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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42. Some examples of SWOT summaries for major retailing
organizations: Tesco
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43. Some examples of SWOT summaries for major retailing
organizations: Carrefour
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44. Some examples of SWOT summaries for major retailing
organizations: Wal-Mart
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45. Strategies
 Strategy
Is a carefully designed plan for
achieving the retailer’s goals and
objectives.
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46. Minimal Retail Strategies
 Get shoppers into your store.
 Convert these consumers into
customers
by having them purchase merchandise.
 Do this at the lowest operating cost
possible that is consistent with the
level of service that your customers
expect.
3-46

47. 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?
3-47

48. Differentiation in Retailing
1. 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 product
3. the selling process by offering outstanding service
4. after-purchase satisfaction by taking care of the
customer after the sale has been made
5. location or the ease with which the customer can
get to the retailer
6. never being out-of-stock on sizes, colors, and
styles that the retailer's target market expects the
retailer to carry
3-48

49. Retailing Strategies
 Target Market
Is the group or groups of customers that the
retailer is seeking to serve.
 Location
Is the geographic space or cyberspace where
the retailer conducts business.
 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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50. 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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51. The Retail Mix
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52. 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?
3-52

53. Retail Mix Strategies
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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54. Retail Mix Strategies
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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55. Retail Mix Strategies
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
3-55

56. Retail Mix Strategies
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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57. Analyze the retailing (marketing mix) of different
types of retailers
3-57

58. Example: Retail mix for an up-market watch store
(Hour Glass)
Fine watches
and accessories,
only top brands
Skim pricing
Selective media
and events
promotions
High profile Project class and
malls status in store design
and layout
Professional, excellent
product knowledge
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59. Types of Retail Strategies (Berman)
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60. 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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61. 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.
3-61

62. Applying the Retailing Concept
Customer Orientation
Coordinated Effort
Retailing Retail
Concept Strategy
Value Driven
Goal Orientation
3-62

63. Examples of Retail Strategies
•Starbucks What is the target
market, retail
•Courts offering, and source
of competitive
advantage for each
•Bread Talk retailer?
•Hour Glass
3-63

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

65. 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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66. Retail Planning and Management
 Strategic Planning
Is 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.
3-66

67. After Strategic Planning we need to think of
“operations management”
 In the lectures to come ahead
 All aspects of store management
 Merchandise planning
 Marketing and Promotions
 Finance
 HR
 Customer Service
 Logistics
3-67

68. Retail Planning and Management
 Administration
Involves the acquisition, maintenance, and
control of resources that are necessary to carry
out the retailer’s strategy.
 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 planning
 High-Profit Retailing
To be a high profit retailer, the retailer needs
good strategic planning coupled with strong
operations management.
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69. Retail Strategic Planning and Operations
Management Model
Exhibit 2.4 3-69

70. 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

71. 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.
3-71

72. 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?

73. Lecture 3: Part B
Evaluating the
Competition in Retailing
(Chapter 4)
3-73
7
3

74. 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
3-74

75. 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
3-75

76. 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
3-76

77. 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)
3-77

78. Market Structure
 Pure Competition
 Pure Monopoly
 Monopolistic Competition
 Oligopolistic Competition
3-78

79. Market Structure
 Pure Competition
Occurs 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 Monopoly
Occurs when there is only one seller for a product
or service.
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80. Market Structure
 Monopolistic Competition
Occurs 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 Competition
Occurs 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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81. 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
3-81
competition that directly affect the profitability of the retail business

82. Application Example: Using the Five Forces
Model to analyze the Asian Airline Market
3-82
Marketing : An Introduction
© Armstrong, Kotler & da Silva An Asian Perspective

83. Applying the Porter’s model to a retailing
industry situation:
The threat of new
Threat of new
retailers coming entrants
into the market
and setting up
shops or opening
of new malls
The choices that
The manufacturers or The retail firm
the buyer has-
distributors who sell versus other
can he buy from
to the retailer- how existing rival
many different
big are they and how retailers- how
retailers or just a
powerful are their fierce is the
few?
brands? competition?
Supplier power Buyer power
Consumers can
buy online off the
Internet or shop
in other countries
such as Thailand Substitutes
or Malaysia
3-83
© Strategy in Marketing (Pearson Asia 2010)

84. 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.
3-84

85. 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.
3-85

86. 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.
3-86

87. 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.
3-87

88. Market Structure
 Outshopping
Occurs 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.
3-88

89. The Demand Side of Retailing
Exhibit 4.1
Demand as a Function of Price
Price
Quantity Demanded
3-89

90. The Supply Side of Retailing
Total Costs
Dollars
TC= FC+VC
Unit Sales Quantity or Sales Volume
3-90

91. 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?
3-91

92. The Relationship of Price Versus Nonprice
Actions and Demand Curve
Price Price
Quantity Quantity
Pricing Actions move Non-price Actions seek
the consumer up and to shift the demand
down the current curve to the right and
demand curve make it more inelastic
3-92

93. 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.
3-93

94. Non-price Decisions
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.
3-94

95. Non-price Decisions
 Store Positioning
Is when a retailer identifies a
well-defined market segment
using demographic or lifestyle
variables and appeals to this
segment with a clearly
differentiated approach.
3-95

96. 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
3-96

97. Competitive Actions
 Competitive activity can be
examined by the number of
retail establishments of a given
type per thousand households.
3-97

98. Competitive Actions
 Overstored
Is 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.
 Understored
Is 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.
3-98

99. 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
3-99

100. Case Study: Lim Chee Guan and Kim Joo
Guan

101. 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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102. Types of Competition
 Intra-type and Inter-type
Competition
 Divertive Competition
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103. 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 Competition
Occurs 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.
3-103

104. Intra-type and Inter-type Competition
 Intra-type competition for books.
3-104

105. Intra-type and Intertype Competition
 Inter-type competition for video
rentals.
3-105

106. Intra-type and Intertype Competition
Intertype Competition
Supermarkets offering
Home Meal
Replacements (HMR) McDonald’s
compete with fast-food
restaurants
Supermarket Food Giant
Supermarket
Intratype Competition
3-106

107. Types of Competition
 Divertive Competition
Occurs 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
3-107

108. Evolution of Retail Competition
 The Wheel of Retailing
 The Retail Accordion
 Retail Life Cycle
3-108

109. Evolution of Retail Competition
 The Wheel of Retailing Theory
Describes 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.
3-109

110. 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
3-110

111. 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.
3-111

112. The Wheel of Retailing Theory
Exhibit 4.3
3-112

113. Evolution of Retail Competition
 Retail Accordion
Describes how retail
institutions evolve from outlets
that offer wide assortments to
specialized stores and continue
repeatedly through the
pattern.
3-113

114. The Retail Accordion
Wide Assortment
Time Narrow
Assortment
Wide Assortment
3-114

115. Evolution of Retail Competition
 Retail Life Cycle
Describes four distinct stages that a
retail institution progresses through:
Introduction
Growth
Note: this is not the
Maturity same as the Product
Life Cycle
Decline
3-115

116. Evolution of Retail Competition:
The Retail Life Cycle
 Introduction
Begins 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.
 Growth
Sales 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.
3-116

117. Evolution of Retail Competition:
The Retail Life Cycle
 Maturity
Market 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.
 Decline
The once promising idea is no longer needed in the
marketplace. As a result, market share and profits
fall
3-117

118. Retail Institutions in the Four Stages of
The Retail Life Cycle Exhibit 4.4
3-118

119. 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?
3-119

120. Resource-Advantage Theory
 Resource-advantage theory
Is 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.
3-120

121. Future Changes in Retail Competition
Nonstore New Retailing
Retailing Formats
Integration of Heightened Global
Technology Competition
Private Label
Use
3-121

122. Future Changes in Retail Competition
 Non-store Retailing
 Direct selling
 Catalog sales
 E-tailing
3-122

123. 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
3-123

124. 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.
3-124

125. 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.
3-125

126. 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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127. Future Changes in Retail Competition
New Retail Formats
 Super centers
 Recycled Merchandise
Retailers
 Liquidators
3-127

128. Future Changes in Retail Competition:
New Retail Formats
 Off-price Retailers
Sell 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.
 Supercenters
Combine a discount store and grocery store to carry
80,000 to 100,000 products in order to offer one-
stop shopping.
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129. Future Changes in Retail Competition:
New Retail Formats
 Recycled Merchandise Retailers
Are establishments that sell used and
reconditioned products.
 Liquidators
Liquidates leftover merchandise when an
established retailer shuts down or downsizes
3-129

130. Future Changes in Retail Competition:
Heightened Global Competition
Increased
Rate of
Change
Greater Creation of
Diversity New Retail
Formats
3-130

131. Global competition
Heightened 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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132. International Aspects of Retailing
(additional notes)
3-132

133. Retailing formats vary by country
markets
Factors include: stage of economic development, consumer income levels,
shopping preferences, product categories, etc 3-133

134. Top 25 Retail Brands
Download the brand report:
http://www.brandz.com/output/retail.aspx 3-134

135. Some of the largest global retailers:
135
3-135

136. Global Retailers in Asia
3-136

137. The Retail Format
 Decisions: should the international retailer
 Use the same format that operates in the home
137
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?
3-137

138. Changing the retail format
 A retailer can offer different types of retailing formats to
suit different market segments
138
 Even within a local country market, there could be
different formats: Tops in Thailand
3-138
http://www.tops.co.th/main.html

139. The retail format: Local market conditions
 Population concentrations
 Transportation infrastructures
139
 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
3-139

140. The rapidly changing Indian Retail landscape
140
Kiranas (Mom-&-Pop shops) General small-scale malls
Mega malls 3-140

141. Retail Life Cycles: perhaps we could envisage
Asian countries as follows?
Malaysia
ECONOMIC VIABILITY OF THE RETAIL FORMAT
Philippines
141
Singapore
Thailand
Vietnam
Superstore Integrated
3-141
concepts Malls

142. Adapting the product (merchandise) for
different country markets
TESCO - Thailand
3-142
TESCO- Malaysia

143. The M&S product ranges
 Compare the product
range between the UK
stores and that in
143
Singapore
 http://www.marksandspe
ncer.com/
3-143

144. Store presentations of global retailers
3-144

145. Future Changes in Retail Competition:
Integration of Technology
Supply Chain
Management
Customer Customer
Management Satisfaction
3-145

146. 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.
 Examples
 CRM
 Online marketing
 Supply chain management
 RFID
3-146

147. Future Changes in Retail Competition
 Increasing Use of Private Labels
 Helps in protecting retailer
niche
 Sets retailer apart from
competition
 Get customers in the store
3-147

148. Future Changes in Retail Competition
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.
3-148

149. Past Year Exam Questions
Retail Strategic Planning and
Operations Management
(Chapter 2)
3-149

150. May 2008
Nov 2007
3-150

151. Nov 2007
3-151

152. 3-152

153. Nov 2007
3-153

154. April 2007
3-154

155. October 2006
3-155

156. Past Year Exam Questions
Evaluating the Competition in
Retailing (Chapter 4)
3-156

157. May 2008
3-157