Retail Strategic Planning

Retail strategic planning is a detailed process organizations go through in order to

have the most successful operations possible. Steps in this strategic planning
process include situational analysis, set objectives, and the identification of target
markets. Once the initial set is complete, a second group of steps includes the use
of specific tactics to meet objectives, controlled processes, and feedback. In some
cases, the latter set of steps may not apply early on. Owners and executives are
responsible for guiding the company through each step and ensuring success in the
retail organization.
Situational analysis involves a review of the companys mission, opportunities, and
threats. These overarching goals ensure the retail strategic planning process has
solid footing for the remaining steps. For example, the mission is the theme that
guides the company at all times. Opportunities represent new options for increasing
revenue and profit. Threats are any external factor that can reduce the retail
businesss ability to succeed in its mission.
Objectives are the various goals a retail business has set for itself. Monetary goals
include sale and profit levels owners wish to achieve during each year. Retail
strategic planning may also include goals on presenting an image for the store to
consumers. Product positioning is another possibility. This defines how a company
places its products in the market in order to compete with other businesses and
gain market share.
Target markets represent the demographic groups a company believes will be most
apt to purchase its products. Retail strategic planning may also include information
on how to best reach these target markets, often through the use of marketing and
advertising campaigns. For example, a retail operation may start with a small, welldefined market and then progress out from there. Other times, a retail operation
may start with a strong national campaign if it has a large, broad target market. The
target markets of multiple retail chains may overlap, creating a need for strong
strategic planning.
Specific tactics and controlled processes define how a retail company governs itself.
These two steps in the retail strategic planning process ensure the company is both
efficient and effective in what it does. Feedback is necessary to assess how
consumers perceive the company and its products. Customer service departments
are often the liaison between the general public and retail operations. Internal
feedback represents information gleaned from operational managers and
employees, which can help the business improve operations.
Retail Strategy
Retail Strategy indicates how a retailer plans to focus their resources to accomplish
their objectives. It influences the retailers business activities and response to
market forces such as competition and economy. The following steps are involved in
developing a retail strategy:

1. Defining the business of the firm in terms of orientation towards a particular

sector.
2. Setting short-term and long-term objectives with regard to image and
profitability.
3. Identifying the target market towards which to direct organizational efforts on
the basis customers profile and needs.
4. Deciding the broad direction the company must take in future.
5. Implementing an integrated plan that encompasses all the aspects of
retailing like pricing, location and channel decisions.
6. Evaluating and revising the plan depending on the nature of the internal and
external environment.
Retail Organization
The term retail organization refers to the basic format or structure of a retail
business designed to cater to the needs of the end customer. Recently, some
scholars have started referring to India as a nation of shopkeepers. This epithet has
its roots in the huge number of retail enterprises in India, which were over 12 million
in 2003. About 78% of these are small family businesses utilizing only household
labour.
Retail firms may be independently owned, parts of a retail chain, operated as a
franchisee, leased departments, owned by manufacturers or wholesalers,
consumers owned or co-operative society.
A retail unit could be owned by:
Manufacturer (e.g., company owned retail outlets)
Wholesaler (e.g., Vastra outlet in Rajouri in New Delhi)
Independent retailer (Chanakya Sweet Shop near Hazratganj in Lucknow)
Consumer (consumer owned grocery stores in man y residential societies)
Co-operative society (e.g., Mother Dairy milk booths in Delhi)
Government (e.g., Cottage Emporia)
Ownership shared among franchiser and franchisee (e.g., Archies Gallery)
Although most Indian retailers fall in the category of small-scale units, there are also
some very big retailers. Organized retail stores are generally characterized by large,
professionally managed store formats providing goods and services that appeal to
customers, in an ambience that is conducive for shopping and provides a
memorable experience to customers.
From positioning and operating perspectives, each ownership format serves a
marketplace niche and presents certain advantages and disadvantages. Retail
executives must not lose sight of this in playing up their strengths and working
around their weaknesses.
Classification of Retail Units

Conceptual classification of a business unit provides the marketers with strategic

guidelines, useful in the design of retailing strategy. Besides, retail businesses are
extremely diverse and there are quite a few types of retail units. Therefore, retail
units are classified on multiple of ownership, geographical locations, kind of
customer interaction level of services provided etc.
1. Retailers Classified on the Basis of Ownership
One of the first decisions that the retailer has to make as a business owner is how
the company should be structured. This decision is likely to have long-term
implications, so it is important to consult with an accountant and attorney to help
one select preferred ownership structure.
There are four basic legal forms of ownership for retailers:
Sole proprietorship: The vast majority of small businesses start out as sole
proprietorships. These firms are owned by one person, usually the individual who
has the day-to-day responsibility for running the business.
Partnership: - A partnership is a common format in India for carrying out
business activities (particularly trading) on a small or medium scale. In a
partnership, two or more people share ownership of a single business.
Joint venture: A joint venture is not well defined in the law. Unless
incorporated or established as a firm as evidenced by a deed, joint ventures may be
taxed like association of persons, sometimes at maximum marginal rates. It acts like
a general partnership, but is clearly for a limited period of time or a single project.
Limited liability Company (public and private):- The Limited Liability
Company (LLC) is a relatively new type of hybrid business structure that is now
permissible in most states. The owners are members, and the duration of the LLC is
usually determined when the organization papers are filed.
2. Classification of Retailers on the basis of Operational Structure
Retail businesses are classified on the basis of their operational and organizational
structure. Operational structure defines the key strategic decision of retail entity,
whether to hire employees and manage the distributed sales function internally or
to reach customers though franchised outlets owned and operated by local
entrepreneurs.
Retail firms can be classified into five heads on the basis of their respective
operational structures:
Independent retail unit: The total number of retailers in India is estimated to
be over 5 million in 2003. About 78% of these are small family businesses utilizing
only household labour. An independent retailer owns one retail unit.
Retail Chain: A chain retailer operates multiple outlets (store units) under
common ownership; it usually engages in some level of centralized (or coordinated)
purchasing and decision making.

Franchising: Franchising involves a contractual arrangement between a

franchiser (which may be a manufacturer, a wholesaler, or a service sponsor) and a
retail franchisee, which allows the franchisee to conduct a given form of business
under and establishments name and according to a given pattern of business.
Leased Department or Shop-in-shop:- It refers to department in a retail store
that are rented to an outside party. Usually this is done in case of department and
specialty stores and also at times, in discount stores.
Co-operative Outlets: Co-operative outlets are generally owned and managed
by co-operative societies. In this context the detailed example of KendriyaBhandar
in India.
3. Classification of Retailers on the basis or Retail Location
Retailers have also been also been classified according to their store location.
Retailers can locate their stores in an isolated place and attract the customers to
the store on their own strengthsuch as a small grocery store or paan shop in a
colony, which attracts the customers staying close by.
Classification of retailers on the basis of location is discussed below:
Retailers in a free-standing location: Retailers located at a site which is not
connected to other retailers depend entirely on their sores drawing power and on
the various promotional tools to attract customers. This type of location has several
advantages including no competition, low rent, better visibility from the road, easy
parking and lower property costs. For example the Haldirams outlet on the DelhiJaipur highway and the McDonalds outlet on Delhi-Ludhiana highway.
Retailers in a Business-associated Location:- In this case, a retailer locates his
store in a place where a group o retail outlets, offering a variety of merchandise,
work together to attract customers to their retail area, and also compete against
each other for the same customers.
Retailers in Specialized Markets: - Besides the above location-based
classification, we also have in India-retailers who prefer specialized markets,
particularly traditional independent retailers or chain stores. In India, most of the
cities have specialized markets famous for a particular product category. For
example, in Chennai, Godown Street is famous for clothes, Bundertreet for
stationery products, Usman street for jewellery, T Nagar for ready-made garments,
Govindappannaicleen street for grocery, Poo Kadia for food and vegetables.
Airport Retailing: For quite some time, duty-free shops and newsstands
dominated the small amount of commercial space provided at airports. Lately,
serious efforts are being made to design new airport facilities in order to incorporate
substantial amounts of retail space.
The key features of airport retailing are:
Large groups of prospective shoppers
Captive audience

Strong sales per square foot of retail space

Strong sales of gift and travel items
Difficulty in replenishment
Longer operating hours
Duty-free shopping possible.

CORPORATE CHAINS
A corporate chain retailer operates multiple outlets (store units) under a common
ownership and name. Retail chains can range from comprising two stores to 1,000
stores. Some retail chains are division of larger corporations or holding companies.
An corporate chain retailer has many advantages. They enjoy bargaining power with
the suppliers due to volume of purchases. Suppliers service the orders from chains
promptly and extend a higher level of service and selling support. New brands reach
these stores faster. Wider coverage of markets allows chains to utilize all forms of
media. Most chains invest considerable time and resources in long-term planning,
monitoring threats and opportunities.
Chain retailers suffer from limited flexibility as they need to be consistent
throughout in terms of prices, promotions and product assortments. They have high
investments in fixed assets, rent, employees. Due to their spread these retailers
have reduced control, poor communication and time delays.
DEPARTMENTAL STORES
A department store is known for its large assortment and service. The goods and
services are organized into separate departments, with each department looking
after its own operations. It offers an extensive assortment of goods and services
that are organized into separate departments for the purpose of efficient buying,
assortment, promotion and ease of shopping for the consumer. Such a format
provides the wide range of selection of any general merchandize and serves as an
anchor store in the shopping centre. These stores cater to customers who are not
price conscious and are ready to pay for the service. These stores offer a full range
of products and services. They have well-planned merchandise return policies and
run loyalty programmes. They help in attracting high traffic. In India the number of
departmental stores is less than other forms of retail such as supermarkets,
discount stores. Shoppers Stop is the first one to open a department store in the
early 1990s and currently operates 19 stores in 10 cities in India. The man focus is
on lifestyle retailing and divided into five departments such as apparel, accessories,
home dcor, gift ideas and other services. Conversion rate is low in such stores. A
department store with 30% is considered to be successful. These stores face
competition from all formats as they deal in several products and services.
DISCOUNT STORES
A discount store is known for offering an product or service at a discounted rate. An
discount store offers a variety of merchandise. However the quality and price range
of the product is little different with limited service but discounted prices. They
mainly focus on the lower and middle income consumers unlike the departmental
stores which caters mostly to the higher income group. It targets the mass market

that looks for the best bargain. Wal-Mart, the largest retailer in the world is a
discounter. According to the Euromonitor (2006) report, in India there are 410
discount stores with 63,000 sq.meter selling space. By 2010, it reached to 555
discount retail outlets with 85,000 sq.meter selling space. Subiksha, Chennai based
discount retail chain is the leading discount store in the country. Competition is
forcing these stores to improve the experience and service to the customers without
compromising the price.
SUPERMARKETS
The supermarkets largely concentrate on selling food related products and are
smaller in size compared to hypermarkets. The supermarkets offer relatively less
assortment but focus on specific product categories. In India FoodWorld,
FoodBazaar, Nilgiris (30 plus stores ) are the leading supermarket operators.
Supermarket in Tamilnadu:
Chennai FoodWorld-27
Coimbatore FoodWorld 3
Erode FoodWorld 1
Pondicherry FoodWorld 1
Salem FoodWorld 1
Vellore FoodWorld 1

WAREHOUSE CLUBS
A warehouse club is a retailer that offers food and general merchandise with limited
services at low prices, mainly to other retailers, although the final consumers can
also buy directly from these stores. These stores appeal to price conscious
consumers who do not mind buying in large quantities and store them in home.
Such clubs are large in size and are generally located in low rent areas. The store
layout is simple. As in a warehouse, the aisles and racks are large suitable for large
trolleys to move around. The assortment is based on the basis of prices availability
of merchandise. Customers may not get the same product or merchandise on every
visit.