Chapter 3

Retail Management: A Strategic
Approach
Thirteenth Edition
Chapter 3
Strategic Planning
In Retailing
Copyright @ 2018, 2014, 2012 Pearson Education, Inc. All Rights Reserved
Learning Objectives
3.1 To show the value of strategic planning for all types of retailers
3.2 To explain the steps in strategic planning for retailers: situation
analysis, objectives, identification of consumers, overall
strategy, specific activities, control, and feedback
3.3 To examine the individual elements of a retail strategy (both
controllable and uncontrollable), and to present strategic
planning as a series of integrated steps
3.4 To demonstrate how a strategic plan can be prepared

Retail Strategy
• The overall plan or framework of action that guides a retailer
– One year in duration
– Outlines mission, goals, consumer market, overall and
specific activities, and control mechanisms

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 firm’s total efforts
• Encourages anticipation and avoidance of crises

Figure 3.1 Elements of a Retail Strategy
Situation Analysis
• Situation analysis is a candid evaluation of the opportunities and threats facing a
prospective or existing retailer. It seeks to answer 2 general questions:
1. What’s the firm’s current status?
2. In which direction should it be heading?
• Opportunities are marketplace openings that exist because the retailers have not yet
capitalised on them.
• Threats are environmental and marketplace factors that can adversely affect retailers if
they do not react to them (and, sometimes, even if they do).
• Situation analysis means being guided by organisational mission, ownership and

management alternatives, and outlining the goods/service category to be sold.

Organizational Mission
• Organizational mission — is a retailer’s commitment to a type of business and to a
distinctive role in the marketplace.
• 3 major decisions:
• Whether to base a business around the goods/services sold or around consumer

needs
• Whether a retailer wants a place in the market as a leader or a follower
• Market scope: large or narrow customer base
• A firm’s mission should be continually reviewed and adjusted to reflect changing

company goals and a dynamic retail environment.
• Eg: Amazon, Shopee, Lazada, Grab
Ownership and Management Alternatives

• Sole proprietorship is an unincorporated retail firm owned by
one person
• A partnership is an unincorporated retail firm owned by two or
more persons, each with a financial interest
• A corporation is a retail firm that is formally incorporated
under state law; it is a legal entity apart from its officers

Checklist to Consider When Starting a

New Business
Checklist for Purchasing an Existing
Retail Business
Selected Kinds of Retail Goods and
Service Establishments (1 of 3)
• Durable Goods Stores:
– Automotive group
– Furniture and appliances group
– Lumber, building, and hardware group
– Jewelry stores
• Nondurable Goods Stores:
– Apparel group
– Food group
– General merchandise group
– Gasoline service stations


• Service Establishments (Personal):
– Laundry and dry cleaning
– Beauty/barber shops
– Funeral services
– Health-care services
• Service Establishments (Amusement):
– Movie theaters
– Bowling alleys
– Dance halls
– Golf courses


• Service Establishments (Repair):
– Automobile repair
– Car washes Consumer electronics repair
– Appliance repairs
• Service Establishments (Hotel):
– Hotels
– Motels
– Trailer parks
– Camps

Objectives
• The long-run and short-run performance targets it hopes to attain.
• A firm can pursue goals related to one or more these areas:
• Sales objectives - related to the volume of goods/services a retailer sells.
• Profit objectives - retailers seek at least a min. profit level during a designated
period, usually a year.
• Satisfaction of publics - stockholders, customers, suppliers, employees, and

government.
• Image - a firm may be seen as innovative/conservative, specialised/broad-based,

discount-oriented/upscale.

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.

Identification of Consumer
Characteristics and Needs
• The customer group sought by a retailer is called the target market.
•In selecting its target market, a firm may use one of three techniques:
– Mass marketing
– Concentrated marketing
– Differentiated marketing

Target Marketing Techniques and Their

Strategic Implications
Target Market Techniques
Strategic Implications Mass Marketing Concentrated Marketing Differentiated Marketing
Retailer’s location Near a large Near a small or medium Near a large population
population base population base base
Goods and service mix Wide selection of Selection geared to market Distinct goods/services
medium-quality segment—high- or low- aimed at each market
items quality items segment
Promotion efforts Mass advertising Direct mail, E-mail, and Different for each segment
subscription segmented social media
Price orientation Popular prices High or low High, medium, and low—
depending on market
segment
Strategy One general One specific strategy Multiple specific strategies,
strategy for a large directed at a specific, each
homogeneous limited group of customers directed at different
(similar) group of (heterogeneous)
consumers groups of consumers
Figure 3.9 Developing an Overall Retail

Strategy
Controllable Variables: Uncontrollable Variables:
• Store location •Consumers
• Managing business •Competition
• Merchandise management •Technology
and pricing
•Economic conditions
• Communicating with
customer •Seasonality
•Legal restrictions

Specific Activities
• Store location. Trading-area analysis gauges the area from which a firm draws its customers.
The level of competition in a trading area is studied regularly. Relationships with nearby
retailers are optimized. A chain carefully decides on the sites of new outlets. Facilities are
actually built or modified.
• Managing the business. There is a clear chain of command from managers to workers. An
organization structure is set into place. Personnel are hired, trained, and supervised. Financial
management tracks assets and liabilities. The budget is spent properly. Operations are
systemized and adjusted as required.
• Merchandise management and pricing. Assortments in departments and the space allotted to
each department require constant decisions. Innovative firms look for new merchandise and
clear out slow-moving items. Purchase terms are negotiated and suppliers sought. Sell- ing
prices reflect the firm’s image and target market. Price ranges offer consumers some choice.
Adaptation is needed to respond to higher supplier prices and react to competitors’ prices.
• Communicating with the customer. The storefront and display windows, store layout, and
merchandise displays need regular attention. These elements help gain consumer
enthusiasm, present a fresh look, introduce new products, and reflect changing seasons. Ads
are placed during the proper time and in the proper media. The deployment of sales personnel
varies by merchandise category and season.

Control
• In the control phase of strategic planning for retailers, a review takes place (Step VI in Figure 3-1), as the strategy and
tactics (Steps IV and V) are assessed against the business mission, objectives, and target market (Steps I, II, and III). This
procedure is called a retail audit, which is a systematic process for analyzing the performance of a retailer. The retail audit
is covered in Chapter 20.
• The strengths and weaknesses of a retailer are revealed as performance is reviewed. The aspects of a strategy that have gone
well are maintained; those that have gone poorly are revised, consistent with the mission, goals, and target market. The
adjustments are reviewed in the rm’s next retail audit.

fi
Feedback
• At each strategic stage, an observant management receives signals or cues, known as feedback, as to the success or failure
of that part of the strategy. Again, refer to Figure 3-1. Positive feedback includes high revenue, a high percentage of
customers renewing annual membership in a membership (warehouse) club, and low employee turnover and absenteeism.
Negative feedback includes falling sales revenue, low membership renewals, and high employee turnover and absenteeism.
Retail executives look for positive and negative feedback so they can determine the causes and then capitalize on
opportunities or rectify problems.
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Retail Management: A Strategic

Benefits of Strategic Retail Planning

Figure 3.1 Elements of a Retail Strategy

1. What’s the firm’s current status?

2. In which direction should it be heading?

• Situation analysis means being guided by organisational mission, ownership and

• Whether to base a business around the goods/services sold or around consumer

• Whether a retailer wants a place in the market as a leader or a follower

• Market scope: large or narrow customer base

• A firm’s mission should be continually reviewed and adjusted to reflect changing

• Eg: Amazon, Shopee, Lazada, Grab

Ownership and Management Alternatives

Checklist to Consider When Starting a

Selected Kinds of Retail Goods and

Selected Kinds of Retail Goods and

• A firm can pursue goals related to one or more these areas:

• Sales objectives - related to the volume of goods/services a retailer sells.

• Satisfaction of publics - stockholders, customers, suppliers, employees, and

• Image - a firm may be seen as innovative/conservative, specialised/broad-based,

Target Marketing Techniques and Their

Strategic Implications Mass Marketing Concentrated Marketing Differentiated Marketing

Figure 3.9 Developing an Overall Retail

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