Chapter 2, Retailing

Strategic Planning

Looking at the big picture, and making appropriate strategic decisions. Adapting the resources of the retailer to the opportunities and threats in the ever changing retail environment. Avoid big picture missteps, integrating the internet (Borders) for example.

Components of strategic planning: Mission Statement > Goals and Objectives > S.W.O.T. > Strategies > Retail Marketing Strategy, includes Target Market(s), Location(s), Retail Mix (Merchandise, Pricing, Advertising and Promotion, Customer Service, Store layout and design)

Mission Statement

Reason to be. Guiding principles. Values. How a retailer uses its resources. How it responds to the broader environment. How it intends to serve the needs of consumers.

Examples of Retailers' Mission Statements

Examples

• WalMart
• Barnes and Noble
• Target
• Nordstrom

Broad, but not too vague.

Goals and Objectives

Provides specific guidance to the retailer to the formulation of strategy. A control mechanism by establishing a standard against which a firm can measure and evaluate its performance. Specific and measurable.

• Financial Objectives
  • Profitability
  • Productivity
• Market Performance Objectives
  • Sales Volume
  • Market Share
• Societal Objectives
  • Employment
  • Taxes
  • Consumer Choice
  • Equity
  • Benefactor
• Personal Objectives
  • Self-gratification
  • Power and Authority
  • Status and Respect

Strategic Profit Model

Net Profit Margin (Net Profit / Total Sales)

x

Asset Turnover (Total Sales / Total Assets)

=

Return on Assets (Net Profit / Total Assets)

x

Financial Leverage (Total Assets / Net Worth)

=

Return on Net Worth (Net Profit / Net Worth)

Productivity measures, most common:

• average sales per square foot. (> $300 is about average)
• merchandise productivity, sales to stock ratio

Develop SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Then design Strategies, to take advantage of strengths and opportunities, and avoid weaknesses and threats

JC Penney about face with pricing strategy

Target price matching strategy: Is Target's Price Matching Policy a Mistake?