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Takeaway Points

  • In general, there has been an overall increase in competition from dissimilar retailer types, called “format blurring.” Traditional retailers have seen significant competition as consumers increasingly shop at warehouse clubs, Wal-Mart, dollar stores, extreme value food formats like Aldi and Sav-A-Lot, office supply stores, factory outlets, and closeout-based web retailers.
  • One of the major long-term changes that has carried over from this recession is the increased concern for all consumers with “value.” An effective value strategy can deter the migration of consumers to other outlets. Among the strategies supermarkets need to consider in delivering value are more attractively priced private label products, warehouse “bulk” packages for selected goods (such as paper towels, facial tissue, dishwasher liquid, and detergents), the use of opportunistic buying as a strategy to offer low prices, pretesting goods for durability, and increasing buying power through cooperative buying agreements among noncompeting retailers. Appliance stores can demonstrate value through special purchases, listing certain appliances as “Best Buys” based on features, performance, and price.
  • Retailers need to make it easier for consumers to get special values. Specials should be communicated on blackboards in front of each store and can be grouped together as solutions (such as pasta, pasta sauce, ground beef, and Italian bread for a supermarket or an HDTV, a speaker system, and HDMI cables for an electronics store). Coupon offerings can be posted on a store’s web site.
  • Periods of low growth represent an ideal time for retailers to reexamine their operations for possible sources of additional revenues, as well as for ways to trim expenses. Some obvious areas of potential revenues that need to be examined are subletting unnecessary space to service vendors that can benefit from a store’s regular customer traffic base. This can include dry cleaners, in-house bakeries, and a full-service pharmacy within a supermarket; a full-service jewelry shop, a tailor shop, and an electronics retail operation within a department store; and an electronics repair and installation facility within an electronics store. Opportunities for format blurring should also be considered. Electronics that are rapidly dropping in price, such as cellular phones, HDTVs, and netbooks, are suitable candidates.
  • Periods of low growth are also an ideal time to reevaluate whether additional services should be continued or separately charged. For example, a furniture retailer may want to consider unbundling charges for delivery, installation, and carting away of one’s old furniture. In this way, consumers can select and pay for specific services that they value.
  • Periods of low growth generate opportunities due to weak competitors going out of business or closing underperforming stores, increased in-home food consumption (at the expense of restaurants), in-home catering, and in-home entertainment.
  • Two major competitive strategies that retailers need to carefully consider are low cost and differentiation. Low-cost retailers base their overall strategy around reducing product choice, self-service shopping environments, and an absence of services that consumers view as secondary in importance, as well as lower rental costs. Differentiation strategies are based on high levels of sales assistance, specialized merchandise, and a fun-based shopping environment. Value-based strategies combine elements of cost and differentiation by including only those services that are worth more to consumers than their cost to a retailer.
  • Retailers need to examine their ability to increasingly adopt a low cost or differentiation strategy through honestly assessing their capabilities. Retailers also need to assess opportunities in the low cost and differentiation sector by examining where the true “headroom” lies. Some retailers may choose to appeal to multiple market segments through offering different overall retail strategies.
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