Provide the right tools to make and evaluate strategic decisions in retailing.
- Retail companies: features and their impact on strategic set-up.
- Development strategies as emerging strategies.
- Strategic alternatives for small-scale retailers.
- Competitive strategies.
- Product range as a strategic problem.
- How to manage capital and labour factors.
- Differences between managing wholesale and retail companies; production, logistics and marketing.
- Size: the area of attraction and the size of the potential market.
- Structural know-how of the point of sale.
- Positioning: the map of preferences and the map of perceptions.
- The financial structure and the financial needs of commercial enterprises.
- Agreements, networks and alliances: branch enterprises and associations.
- The evolutionary cycle of association in distribution.
- Franchising – Investiment evaluation in the field of business.
Features of retail companies
Web Marketing and Web presence
Trust as a bond between customers unable to have “face to face” interaction.
- Improved sales process (customer targeting).
- Improved purchasing experience (customization).
- Improved user experience (support).
- Fear of being cannibalized by traditional marketing channels.
- Need to obtain trust and attract customer’s attention.
- Use of the web-site only for “window-shopping”.
Levels of presence on the web
Commercial enterprise management
Very often the principal aim of retail management is to increase turnover and improve profit margins.
Pathways towards development
- Modernizing sales points and improving supply.
- Rationalizing the organization even through associations.
- Acquisition/purchase of new areas for sales and services, or new points of sale, or businesses working in the same sales area or in different ones.
Strategic alternatives for retail commercial enterprises
Development paths for the point of sale
In order to steer positioning, competitive strategies must start with segmentation of demand (consumer behaviour and reasons behind the purchase).
The following aspects must be analyzed:
- Choice of products and assortment.
- Level of fitting out of the sales point and levels of practicality.
- Complementary services.
In the case of small companies, their lack of financial resources makes them concentrate on the business field and on the market area.
Managing value-generating activities
Basic factors and strategic decisions
In order to offer the basic mix of services contained in the distribution formula, transformation processes must be implemented with the aid of two categories of production input which can be grouped according to classical economic analysis as follows:
- Capital-related factors: space; plant and equipment; financial means.
- Labour-related factors: subordinate employment, non subordinate work, the entrepreneur and his/her family’s work.
Basic strategic decisions
Basic factors and strategic decision (cont.)
Choice of assortment
Especially for small or very small points of sale, it is necessary to optimize the range of products according to:
- Width (number of purchase opportunities offered);
- Depth (brands and testimonials);
- Consistency (stock on hand).
The range of products is evaluated according to the following:
- Completeness of the basket of goods required by the market (avoiding overlaps and cannibalism);
- Quality that matches price levels accepted by the customers;
- Visibility of products (display methods and techniques).
Size and location
Calculate carefully the volume of business needed in order to minimize average unit production costs. Determine the maximum work potential for the space and equipment available and, on the other hand, determine the best way to use the equipment for break-even point.
Use market analysis to establish areas that offer concrete opportunities for developing the company by considering:
- What solutions the real estate market offers;
- Possible limitations relating to town-planning, commercial and health and safety legislation.
Size and location (cont.)
Links clusters of customers to their ideal distribution formula
Analyses how customers perceive the positioning of signs in a competitive context, where some of the variables are considered discriminatory.
Principle components of assets and liabilities statement
- Storage equipment (shelves, cold stores, etc.).
- Handling equipment (forklifts, trans-pallets, tec.).
- Motor vehicles.
- Data processing equipment (hardware and software).
- Bar code reading system and invoicing system.
- Fixed plant (air-conditioning, lighting, electricity and water systems, alarms, heating).
- registered private brands.
Sources of finance
- Own means.
- Credit line.
- Tax relief and trade benefits.
- Credit on consignments.
Agreements, alliances and associations.
Agreements and alliances
Sometimes written agreements, or just based on trust, formalising the relationship between independent businesses in the same field on a legal, financial and commercial level.
The different types of agreements, include:
- Voluntary unions.
- Purchasing groups.
- Commercial affiliations.
These agreements can also become mergers or acquisitions.
Agreements, alliances and association (cont.)
- Can be set up between businesses operating in the same field (horizontal association), or between businesses above or below each other in the supply chain (vertical association).
- Allows traditional businesses to respond to the growth of large retail companies.
- To optimize the scale of management operations.
- To develop interrelationship economies.
- To develop new business and market areas which are more effective and efficient compared to single companies.
- Help the development of enterprise culture.
- Promote social and philanthropic work.
This is an Enterprise network which has “a central element called a “franchisor” linked to satellite elements called “franchisees” through business agreements established in a “franchising package deal”. The said satellites are completely independent and manage themselves within one entrepreneurial group project”.
It is a contract through which, with a fixed payment (fee) and/or a variable payment (royalties), there is the right to use:
- A certain distribution formula.
- The management know-how.
- Relationships within the industry.
- The notoriety of the brand (different from case to case).
- Respect rules of behaviour which independent entrepreneurs sometimes find hard to do.
- Make structural investiments (location, image of the point of sale, shelves, electronic equipments, erc.) which comply with the standards “imposed” by the franchisor.
- Pay an amount of managing expenses (rental, personnel, royalties, stock. etc.) which are affordable only if the volume of business is quite big.
The evaluation of investiment projects
The preferred methods for evaluating investiments in trade are:
- Direct capitalization of average operating income produced by the business being evaluated.
- Discount back the assumed net cash flow produced by a business over a specific period of time (up-dated net value).
The evaluation of investiment projects (cont.)
Correction of the estimated cash flow of the up-dated net value
For trade, it is necessary to correct or integrate the estimated up-dated net value, so that it is possible to measure the effects on the estimated net cash flow for 3/5 years of specific managerial resources and competences, partially quantified by the following perfomance indicators:
- Market share (numeric and weighted);
- Notoriety of the brand;
- Promotional aids received;
- Level of effectiveness of the product range (percentage of fresh and brand-name products);
- Prospects for markets where company is present, and its relative competitive position;
- Extension of payment obtained from the supplier;
- Average size of the points of sale and of the area for each worker;
- Productivity of the points of sale (turnover per square meter);
- Productivity of the workers (turnover per worker);
- Territorial distribution of the sales network and of the Distribution Centres;
- Effectiveness and efficiency of logistics.