CHAPTER 3: ANSWERS TO QUESTIONS FOR DISCUSSION
1.
Why is it necessary to develop a thorough, well-integrated retail
strategy? What could happen if a firm does not develop such a
strategy?
Without a predefined and well-integrated strategy, a retailer cannot
succeed in a competitive environment. A well-integrated retail strategy
better enables a retailer to explore the environmental opportunities that
are available, seek a differential advantage, develop an appealing
offering, coordinate activities, and anticipate and overcome crises.
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2.
How would situation analysis differ for a shoe store chain and an online
shoe retailer?
Situation analysis is the candid evaluation of the opportunities and
potential problems facing a prospective or existing retailer.
A shoe store chain may evaluate opportunities and problems such as
increased competition from department stores, new developments
affecting a large number of store units (such as increased sales of shoes
to tourists in certain markets), and may explore such overall
competitive advantages as free delivery, etc.
The online shoe retailer should devote more attention to global
influences, other Web-based competitors, delivery arrangements over
longer distances, the quality and ease of use of its Web site, and pricing
comparisons with other Web-based shoe retailers. The online shoe
retailer may also need to explore the possibility of free return shipping
due to issues with fit and color accuracy.
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3.
What are the pros and cons of starting a new hair salon versus buying
an existing one?
Starting a new hair salon offers a greater flexibility in location,
atmosphere, and choice of consumer market. It allows a strategy to be
fully tailored to the new owner’s desires and strengths. However,
starting a new hair salon entails construction or renovation costs, a time
lag until the store is ready to open (and then until planned sales levels
and profits are earned), an unknown name and image, and the need to
establish new supplier relationships.
Buying an existing hair salon allows a retailer to acquire an established
name, customer following, location, trained personnel, and facilities; to
open faster; to generate ongoing sales and profits; and to possibly
obtain good lease terms and/or financing from the seller. On the other
hand, store fixtures may also be older; there is less flexibility in
developing and enacting a strategy tailored to the new owner’s desires
and strengths; the seller’s inventory of shampoos, hair conditioners, and
nail polish may have to be purchased; and contractual obligations for
alarm and other services may have to be continued. Lastly, the value of
goodwill will also have to be determined.
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4.
Develop a checklist to help a prospective service retailer choose the
proper service category in which to operate. Include personal abilities,
financial resources, and time demands.
A checklist should include the following components:
Personal Abilities
Aptitudes
Education
Experience
Professional skills
Credit capability
Financial Resources
Initial investment required
Drawing account needs
Renovations/construction needs
Width/depth of assortment
Time Demands
Automation capability
Delegation of work
Degree of involvement desired
Off-hours activities
Stability vs. seasonality in sales
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5.
Why do retailers frequently underestimate the financial and time
requirements of a business?
Retailers often underestimate capital investments, operating expenses,
merchandise costs, and, most importantly, living expenses. In addition,
retailers sometimes expect immediate success and do not have the
financial resources to continue in business during the time period when
the firm is unprofitable.
Time requirements are often underestimated because some retailers
have difficulties delegating duties to employees, automation may not be
possible or have limited applications, and retailers are required to work
during off-hours to make purchases, keep records, etc. Many retailers
do not have sufficient funds to hire additional personnel.
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6.
A competing bicycle store has a better location than yours. It is in a
modern shopping center with a lot of customer traffic. Your store is in
an older neighborhood and requires customers to travel further to reach
you. How could you use a merchandising, pricing, and communications
strategy to overcome your disadvantageous location?
Merchandising decisions should be made which increase the width and
depth of the goods/services assortment. A better selection of
goods/services or concentration on special segments (such as mountain
bicycles, bicycles for enthusiasts, three-wheel bicycles for seniors, and
folding bicycles for apartment dwellers) may attract more customers.
Staff should also be comprised of bicycle enthusiasts who are
especially knowledgeable. The store can also offer to double the
manufacturer's warranty at a low cost, and to provide a free bicycle
tune-up within one year of the bicycle's purchase.
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Prices should be lower than those of the competitor, but still allow a
reasonable profit. The bicycle retailer should also match all local
competitor price levels.
Communications with customers can focus on the low prices, product
selection, exclusive merchandise and personal service that may not be
available from the competing retailer. Advertising can use slogans such
as “We may be out of the way, but it’s worth the drive,” etc.
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