Strategic Retail Planning: Retail Planning

Introduction Strategic Retail Planning

The vision and mission of a retail organization can be determined with the help of a retailing strategy. It is an organized plan with the help of which retailers can manage competitive, technological and even international movements. In the context of retailing, the concept of strategic management is not old. Traditionally, retailers only responded to the changes taking place in the business environment. But, these changes are occurring in the technological environment as well as in the tastes and preferences of consumers. 

Capitalizing on the growth opportunities and taking actions at the correct time to overcome the possible threats of the business environment can be ensured with the help of a continuous and strategic SWOT analysis. Through retail strategy, an organization can ensure optimum use of resources leading to gaining sustainable competitive advantage. To win over the competitors, the retailer needs to define its specific mission statement. This mission statement helps in defining the scope of tasks and functions of the retail stores, matching the functions with the present business environment, developing competitive and skilled manpower, allocating tasks to the manpower and defining the budget and timeline for the completion of tasks. The proper implementation of these initial exercises will lead to the long-term survival of the retail stores.

Retail Mix

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/

Defining the Business Philosophy, Mission and Corporate Objectives

Defining the mission of the business is the initial step in the process of strategic retail planning. It is the statement that describes the objectives of the business and the activities to be undertaken by the retailer to meet those objectives. Unlike public organisations, which focus on maximising the wealth of its stockholders by increasing the stock value and dividends, a small, private firm focuses on mitigating risks and obtaining a particular level of income.

A mission statement of the business describes the targeted retail segments and suitable retail formats to be adopted. For example, for an office supply category specialist, the mission statement could be "to create opportunities for associates, serve the customers, and generate value for shareholders.”

After the determination of the mission of the organisation, the next step is to determine its objectives and the desired future positions, i.e., where the organisation wants to reach. The objectives of the stores refer to ends which the stores want to attain through its operations and USP, i.e., unique selling proposition.

Objectives of the stores can be divided into two categories, i.e., internal store objectives and external store objectives:  

Internal Store Objectives:- With the available resources, the level expected to be achieved is defined by the internal store objective. For example, increasing the income of store in the upcoming year by 17%.

External Store Objectives:- Objectives defining the bearing of the store on its environment are referred to as external store objectives. For example, offering quality products at low prices to gain a high degree of customer's confidence.

Situation Analysis

The other name for situation analysis is situation audit. It aids in knowing the current position of the organisation and forecasting as to where the organisation will be if the present strategies are continued. Strategic gap refers to the gap between the current and the anticipated future position of the firm. Bridging this gap is the objective of strategic management. There are two broad categories into which situational analysis can be divided, viz., internal analysis and external (environmental) analysis.

An internal analysis is carried out to identify the organisation's strengths and weaknesses, whereas an external analysis is carried out to identify the opportunity and threats in the business environment

Internal Analysis:- The other name for internal analysis is the internal audit. It aims to determine the quantity and quality of the available resources, the effectiveness of utilisation of these resources and the degree to which these are distinct and difficult to be imitated by the competitors. As such, retailers' strategic capabilities can be assessed. 

There are different categories of resources, viz., intangible resources, financial resources, human resources and physical assets. The image of the retailer and the goodwill personified in the brands of the retailer is the intangible resources, while the tangible resources include physical assets, human resources, and financial resources.

1. Finance:- This involves determining the organisation's ability to raise equity and debt financing and the flow of cash from the present activities. This is dependent on the organisations' financial position and presents the debt-equity ratio.
2. Merchandising:- This involves determining the level of skills and knowledge of the buyers, the relationship between the organisation and the suppliers and the effectiveness with which the organisation develops and manages its brands.
3. Marketing:- This involves determining the organisation's marketing capability, its level of market orientation, its effectiveness in marketing research and mechanism of competitor intelligence, along with determining the effectiveness of marketing in maintaining customer loyalty and developing new customs.
4. Management Capabilities:- This involves determining the management skills of the company, i.e., the adequacy of the company's top management and to know the abilities and commitment of middle level management.
5. Store Management:- This involves determining the skills and qualities of store managers and sale. assistants, the staff turnover ratio and the adequate level of training and motivation amongst the employees of the non-management grade.  
6. Operations:- This involves determining the overhead cost structure, the effectiveness of the informative systems, stock control systems, loss prevention systems and determining the overhead cost structure, capability of the supply chain system to deliver goods to stores.

External Analysis:- Determining the opportunities and threats in the retailing environment of the store is referred to as external analysis. It involves factors that have an effect on the macro environment of the retail industries and their activities. This analysis helps retailers in the study of the following;

1. International retailing environment
2. Legal retailing environment
3. Technological retailing environment
4. Political environment
5. Economic environment
6. Socio-cultural retailing environment

Identification and Evaluation of Strategic Opportunities

Deciding the strategic direction for the company is the next step after the situational analysis. Portant strategies used by the organisations are growth, consolidation and harvesting. For example, monocular mund exit the market or consider productivity improvements when they are in maturing or declining Sligo. muse scenarios, it would be difficult to justify a large amount of infusion of capital in the business.

Strategies for Growth  

➳ Market Penetration:- This strategy leads to an increase in market share by increasing sales in the existing market. Retailers target existing customers with existing products range. Retailers have to ensure that their existing customers visit their stores frequently or purchase more on every visit. Thus, the following activities can result in market penetration

• Reduction in prices
• Increase in impulse purchases through improved visual merchandising
• Increasing convenience
• Increasing customer loyalty
• Store revamps or extensions
• Increasing promotions.

➳ Market Development:- This strategy involves the introduction of an existing product in a completely new market. This can be done either by targeting the new segment of the customers or by the geographical expansion within the native environment. It involves greater risk as compared to market penetration because appealing to a new audience requires some product repositioning strategies. This strategy also involves a greater amount of capital.

➳ Product Development:- This strategy is just a reverse of market development strategy as it involves introducing a new product in the existing market to increase the sales from the existing market. This can be undertaken by introducing a new product line or by replacing the old product with the new one. For example, grocery retailers use this strategy very effectively. They do so by introducing non-food line items (viz., stationery products, electrical goods, CDs etc.) in their stores.

➳ Diversification:- This strategy aims at launching the new product in a completely new market. Generally, diversification can be divided into two categories, i.e., related diversification and unrelated diversification. When an organisation expands its existing product line or makes additions to it, it is known as related diversification. On the other hand, when an organisation adds unrelated or new product lines and attempts to enter new markets, then it is known as unrelated diversification

Evaluating Retailing Strategies

Evaluating retailing strategy assists in the determination of the potential of the retailers to gain long-term profits and maintain a competitive advantage by grasping the opportunities. While evaluating the strategic opportunities, strengths and weaknesses of the retail organization and marketing attractiveness should be kept in mind. Higher reserves should be invested in market opportunities to maintain a strong competitive advantage. The retailer evaluates market opportunities while targeting the new market segments relating to;

• Technological requirements
• Degree of competition
• Environmental issues
• Market size
• Rate of growth of the market
• The requirement of human resources
• The profitability of the segment
• Legal and regulatory issues

The above factors are compared with the strength of the retailer such as:

• Financial resources
• Buying power
• Financial resources
• Salesforce
• Managerial competence
• Current market share
• New product development
• Own-label reputation
• Merchandising skills
• Customer service, quality and reliability, fit with the current image of a retailer concerning the depth and breadth of the product line.

Two-dimensional matrixes are plotted by the combination of the index rating of the strength of the retailer and market attractiveness. Basically, there are three categories in each dimension, viz., low, medium and high. Market attractiveness and a course of action to be undertaken are reflected by the product's position. For example, the retailer should capitalize on the opportunity and invest aggressively in case of strong business position and market attractiveness.

On the other hand, the retailer should consider harvesting or divesting in case of weak business position and market attractiveness. And finally, firms should invest selectively in case of an intermediate situation, i.e., when the opportunities on both aspects are moderately strong or moderately weak on one aspect and moderately strong on another aspect.

Development of Marketing and Positioning Strategies 

Image Source - Google | Image by - https://read-to-lead-0.blogspot.com/