S15: RETAILING

Marketing Management:
Section E (2019-20)
Prof. Avinash Mulky
 5C-STP-4P-CA-CR Framework
5 C’s

Analysis Customers Company Competitors Collaborators Context

STP Market S Target market T P

Segmentation selection Positioning
the brand
Creating,
delivering and Product Promotion Place
communicating
Value
4 P’s
Capturing
Pricing
value

Sustaining Customer Customer

acquisition retention
value

Profits
Retailing

Retailer:
An organization that sells
goods and services to final
consumers for personal, non-
business use
Bangalore Retail Scenario

Population 10 Million
Consumption Expenditure Rs 2020 Bn

Total Retail Modern Retail

Retail Expenditure Rs. 640 Bn Rs. 154 Bn
Types of retail

• Store retailers

• Non-store retailing

• Online retailers
Retailing

• Store retailers
– Various size and assortment formats: Hypermarkets, supermarkets,
category killer, department stores, discount stores, convenience
stores
• Non-store retailers
– Network marketing or multi-level marketing
– Direct marketing
– Vending
• Online retailers
– Multi-product categories
– Single product category
Major types of store retailers

Type Characteristics Indian examples

Specialty store Narrow product line Titan, Bata, Raymonds
Department store Several product lines Shoppers Stop, Lifestyle
Supermarket/ Large self service store that Reliance Fresh, Star Sabka
Hypermarket sells daily needs , groceries Bazaar, More Megastore
Convenience store Small store selling necessities Kiranas, general stores
Pharmacy Medicines and FMCG Religare, Apollo Pharmacy
Discount store Low price, large supermarkets (Walmart) D Mart
Hard discount Limited selection, even lower (Aldi), (Lidl)
stores price
Off price retailer Leftover products “Factory outlets”
Category killer Deep assortment-one category Decathlon
Major types of non-store retailing

• Direct selling (Multi level selling)

– Amway, Herbalife

• Direct marketing
– Telemarketing, TV Home shop 18,

• Automatic vending
Major types of online retailers

• Merchant models
– Urban Ladder, Pepperfry
– Bigbasket, Town Essentials

• Marketplace models
– Flipkart, Amazon
Basic decisions in retailing

• Target segment
• Offline, Online or Multi-channel
• Format, No. of SKUs
• Categories of products carried
• National brands, private label or hybrid
• Pricing: Everyday Low Price /Promotions; Level of discounts
• Services offered
• Store atmosphere, store activities and experiences
• Communication and advertising
• Locations, number of outlets
Issues for Modern retail in India

How to compete with How to compete with online

traditional stores? retail?
• Become more relationship • Develop omni-channel
focused strategies
• Bring more science into • Improve customer
retailing experience
• Improve supply chain • Improve stocking in line
• Lower costs with customer demand
• Increase throughput
• Improve customer
experience
Trader Joe’s case

1. How do companies in the retailing industry make money?

2. What are the key sources of Trader Joe’s competitive

advantage?

3. What are the main threats to Trader Joe’s competitive

advantage? Is it sustainable?

4. How would you modify Trader Joe’s strategy moving

forward?
Strategy

• The determination of the long run goals and objectives of an

enterprise, the adoption of courses of action and the
allocation of resources necessary for carrying out these goals
Alfred Chandler, Strategy and Structure

• Goal-directed actions to gain & sustain competitive advantage

• Strategy is about doing things differently, not simply doing

them better than everyone else. This is the key to competitive
advantage.
 Strategy Across the Levels

• Where to Compete? • CORPORATE

– Should Amazon move more STRATEGY
aggressively into the offline
retail sector?
• How to Compete?
• BUSINESS STRATEGY
– Should Amazon focus on
service or low price in
offline retail?
• How to Implement? • FUNCTIONAL
– Should Amazon use its STRATEGY
existing fulfilment centres
to supply its offline retail
stores?
Competitive advantage

• A competitive advantage is an attribute that allows a company

to achieve superior profitability compared to its competitors.

• Sustainable competitive advantage occurs when a firm

implements a value-creating strategy which other companies
are unable to duplicate or find it too costly to imitate.
Sources of superior performance

INDUSTRY
ATTRACTIVENESS CORPORATE
Which business STRATEGY
HIGH RATE OF should we be in?
PROFITABILITY
How do we
make money
COMPETITIVE
ADVANTAGE BUSINESS
How should we STRATEGY
compete?
 Industry attractiveness: 5-Forces framework

SUPPLIERS

4. Bargaining power
of suppliers
3. Threat of
new entrants MARKET
COMPETITORS
POTENTIAL
SUBSTITUTES
ENTRANTS
2. Rivalry among
existing firms
5. Threat of substitute
products or services
1. Bargaining power
of customers

BUYERS

Source: Porter (1980)

Superior performance within an industry

DIFFERENTIATION
(Higher price)

COMPETITIVE
ADVANTAGE

COST LEADERSHIP
(Lower cost)
 Competitive advantage :Three Generic Strategies

COMPETITIVE ADVANTAGE

Uniqueness Perceived
Low Cost Position
By the Customer

Overall
Industrywide
Differentiation Cost Leadership

Particular
Segment Only Focus

Source: Adapted from Porter, M.E. 1980. Competitive Strategy, New York: Free Press, page 39.
Elements of a successful strategy

A unique value A distinctive value Strategic

proposition chain tradeoffs
Delivering a unique Choosing how the Making clear tradeoffs
value proposition organization will operate and choosing what
compared to differently to deliver its not to do
competitors value proposition

Fit across value Continuity over

chain time
Integrating activity Continuity of strategic
choices across the direction
value chain to fit
together and reinforce
each other
 Defining the value proposition

WHICH WHICH NEEDS,

CUSTOMERS? BENEFITS?

 Which end-  Which products?

consumers?  What features?
 Which channels  Which services?

WHAT RELATIVE
PRICES?

 Premium?
 Parity?
 Discounted?
https://www.isc.hbs.edu/strategy/creating-a-successful-strategy/Pages/unique-value-proposition.aspx
Distinctive value chain activities-example IKEA

Distinctive activities
Value proposition  Wide range of styles displayed
 A wide line of good in a huge warehouse with
quality, stylish, large inventories
functional furniture  Modular, ready to assemble,
and accessories easy to ship designs
sold with limited  In house design of all
customer service products
 Very low price  Ikea designer names for
points products
 Self-selection by customer
and minimal in-store service
 Extensive customer
information via catalogs and
website
 Suburban location with lot of
parking
 Long hours of operation
 On-site low cost restaurant
 Child care in store

https://www.isc.hbs.edu/strategy/creating-a-successful-strategy/Pages/distinctive-value-chain.aspx
Strategic Tradeoffs-example IKEA

https://www.isc.hbs.edu/strategy/creating-a-successful-strategy/Pages/making-strategic-trade-offs.aspx
Fit across the value chain

https://www.isc.hbs.edu/strategy/creating-a-successful-strategy/Pages/fit-across-the-value-chain.aspx
Continuity over time

• Frequent changes in direction are costly and confuse the

customer, and the staff.
• Continuity of strategy is essential to creating and sustaining
competitive advantage. This requires:
– Understanding the strategy throughout the organization
– Building truly unique skills and assets related to the strategy
– Establishing a clear identity with customers, channels, and vendors
• Should the company never change? NO
– Innovation and growth ensure success.
– However, the value proposition stays the same. The job of
management is to continuously improve how to realize it.
 Industry attractiveness: Grocery retail in US

SUPPLIERS

4. Bargaining power
of suppliers
3. Threat of
new entrants MARKET
COMPETITORS
POTENTIAL
SUBSTITUTES
ENTRANTS
2. Rivalry among
existing firms
5. Threat of substitute
products or services
1. Bargaining power
of customers

BUYERS

Source: Porter (1980)