For the purpose of developing retail strategies, retailers are required to follow a step by step procedure or planning process. The planning process discusses/involves the present stage of business, the formulation, list of available strategic options, and the implementation of the selected strategies. Considering the importance of strategic decisions for the future success of the business, a systematic approach is essential.
The strategic planning process, which after considering the HR potential and USP of a particular store takes proper shape, is normally divided into following steps:
- Deciding the store’s philosophy, mission and objectives,
- Situation analysis,
- Formulation of retail strategy
- Strategy implementation and control.
1. Deciding the store’s philosophy, mission and objectives:
The retail strategic planning process starts with the identification of store’s mission for its existence and hence the scope of the retail store. The mission of a store entails identifying the goods and services that will be offered to customers. It also deals with the issue that how the resources and capabilities of a store will be used to provide satisfaction to customers and how the store can compete in the target market vis-a-vis its competitors.
The mission also involves the way of store’s functioning. How a store will work and accomplish its day to day operations? What is the emergency planning? All are answered in the store’s mission statement. For example, Vishal Mega Marts, they have philosophy of customer satisfaction through “manufacturing to retailing”.
This reflects not only the way it tends to treat its customers, but discusses the secret of its competitive advantage, i.e. the profit saved from absence of intermediaries like agents and brokers, commission saved is distributed to customers by way of low priced items.
Once the organization mission has been determined, its objectives, desired future positions that it wishes to reach, should be identified. Stores’ objectives are defined as ends which the store seeks to achieve by its USP (Unique Selling Preposition) and operations.
The store’s objectives may be classified into two parts:
(i) External store objectives, and
(ii) Internal Store Objectives.
External store objectives are those that define the impact of store on its environment, e.g., to develop high degree of customer confidence by providing quality goods at lowers prices. Internal store objectives, on the other hand, are those that define how much is expected to be achieved with the available resources, e.g. to raise the store turnover by 15% in the coming year.
2. Situational Analysis (SWOT Analysis):
The objective of doing store’s situation analysis is to determine where the store is at present and to forecast where it will be if formulated strategies are implemented. The difference between current and future position (forecasted) is known as planning or strategic gap. Under organisational analysis, normally stores study their external (environmental) and internal environments.
The purpose of examining the store’s external environment is to study the opportunities and threats in the retailing environment. The external analysis studies factors that affect the macro-environment of retailing industry and the task environment.
Under external analysis, retailer studies these parameters:
(i) Economic environment of retailing,
(ii) Political environment of retailing,
(iii) Legal environment of retailing,
(iv) Socio-cultural environment of retailing,
(v) Technological environment of retailing, and
(vi) International environment of retailing.
The store’s task environment can be influenced directly by retailer’s own policies and includes competitors, suppliers and customers.
The objective of studying internal environment of its own store is to identify the store’s strengths and weaknesses. The store will try to increase its capabilities, and overcome the weaknesses that deter the business profit. While doing the internal analysis, store examines the quality and quantity of its available resources and critically analyzes how effective these resources are used.
These resources for the purpose of examining are normally grouped into human resources, financial resources, physical resources (assets) and intangible resources (goodwill, image etc).
The types of questions that are enquired under different resources are:
(a) Is present strength of employees at various levels is sufficient for future action?
(b) Are the employees trained and capable to perform the tasks assigned to them?
(c) Are the employees loyal to store?
(d) Are the employees punctual and regular?
(e) Are the employees skilled in their assigned tasks?
(a) What is the total cash flow from store’s present activities?
(b) What is the ability of retail store to collect money at the time of requirement/ emergency?
(c) How much effective and stable financial policies are?
(d) What is the ratio between fixed and current assets?
(e) What are the contingency plans in case of negative cash flow?
(a) What is the contribution of fixed assets?
(b) What is the position of abandoned/unused assets?
(c) How effective and update are the store’s information systems?
(a) What is the present capability of the company’s management?
(b) How effective is the R & D cell?
(c) How good is the competitor’s intelligence system?
(d) How effective store’s loyalty programmes are?
(e) What is the capability of retail store manager?
(f) Are customers loyal towards company’s products?
3. Formulation of Retail Strategy:
In this stage, after analyzing the store’s capabilities in terms of HR, finance, physical and intangible resources, a store manager formulates retail strategy with regard to marketing, retail positioning and retail mix. Marketing is the way to achieve the set objectives. Therefore, marketing strategy should be devised according to store’s primary and secondary objectives. Generally, marketing strategy is developed on the basis of product and/or market segmentation instead of the market as a whole.
Retail Positioning is a plan of store’s action for how the retailer will enter the target market and will compete with its main competitors. Retail positioning from a retail store’s point of view, is a step by step plan to create and maintain a unique and everlasting image of the store in the consumers’ mind.
This process reveals the fact that understanding ‘what customer wants?’ is the success key to retail positioning in the market. Under retail positioning, a retailer conveys the message that its products are totally different and as per customers’ requirement. The reason here is that customers are attracted towards items that are new for them with the perception that if it is new, it will have some extra/added features.
Retail positioning is made possible under these circumstances:
(i) By differentiating the store’s merchandise from its competitors,
(ii) By offering high level of after sales services at nominal/no cost, and
(iii) By adopting low pricing policies.
Retail Mix is the blend of various retail activities which in total present the whole concept of retailing. The retail marketing and retail positioning strategies are put into effect by this retail mix – the set of controllable elements that a retailer can use to satisfy customers’ needs and to influence their buying behavior and compete effectively in the target market. Utmost care is required on the part of retail manager to select the various elements for a perfect retail mix.
The main elements a retail store manager has to face are:
- Store’s location
- Merchandise assortment
- Pricing policy
- Customer service mechanism
- Visual merchandising
- Personal selling efforts
- Advertising efforts and
- Store’s internal and external environments.
4. Strategy Implementation and Control:
It is concerned with the designing and management of retail systems to achieve the best possible combination of human, financial, physical and intangible resources of a retail store to achieve the formulated objectives, without timely and effective implementation also requires scheduling and coordination of various retail activities. For example, the coordination between the marketing and sales promotion department is a must for sales promotion to make success.
Further, the spirit of team work is an essential part for the success of strategy implementation. If the retail store’s strategies are competitive, marketing efforts are as per demand but the sales promotion employees are not taking it seriously or are ineffective, result will not be up to the mark.
The implementation of new retailing strategies sometimes require changes in the way of functioning and duties that can lead to resistance from employees. Therefore, stores should take positive steps to reduce this resistance to change and to convince the employees that it in a long term will be beneficial for both the store and employees.
The positive steps include the following:
(ii) Detection, and
It means after implementing the retail strategies, retailer should assess how effectively strategies are being implemented, how far the strategic objectives are being achieved and what has been left to be achieved in the store’s objectives list. Therefore, retailers inspect the implemented strategies from time to time and detect the fault (if any) in the implementation of various retail elements. If any deficiency is found during inspection process, that has to be corrected with immediate effect without any further loss to store.