Store retailing is a business that can easily be started. But with the rise of competition and many other risks in this industry, a store retailer must revisit and identify each business factor to have a competitive edge.
There are two interconnected elements to have a profitable retail business. The first one is related to marketing while the second one looks at the combination of operations and finance.
For the first element in marketing, there areĀ 5Ā positioningĀ options.Ā Positioning is about being relevantĀ and unique. You cannotĀ justĀ beĀ unique without being relevant. You have to find your relevance first before being unique. And relevance comes from satisfying unmet needs. It is therefore important for a store retailer to understand the unmet needs of their customers. WhoĀ isĀ the target market? And what is the unique set ofĀ unmet needs of this target marketĀ are you trying to satisfy?
1. Location
ConvenienceĀ storesĀ like 7-elevenĀ have siteĀ selection as one of their key factors for success. Because they sell on theĀ basisĀ of convenience, therefore they need to be located in the center of any particular trading area.
2.Ā Cost
If the retailer can purchase in volume or have legitimate ways to create lower cost of goods, then the retailer can position itself asĀ aĀ price leader. SM, for instance, has a lot of stores in the Philippines to enable them to have a high bargaining power. Their total cost is lower versus most other retailers. They can position themselves asĀ aĀ price leader offering total lower cost.
3. Brand
RustanāsĀ in the PhilippinesĀ has a prestige-image brand. If you get a gift from a person wrapped in aĀ RustanāsĀ gift wrapper, it makes you feel good or feel you are an important person,Ā thatās why get aĀ RustanāsĀ gift, complete with gift wrapping.
4. Service
Shopwise, a hypermarket in the Philippines, created an elite lane for their volume shoppers. Traditionally many supermarkets and hypermarkets would have express lane for people purchasing 7-8 pieces or less.Ā ButĀ ShopwiseĀ discovered a new truth andĀ that it is the volume customer who mustĀ be treated extra special.Ā So just like the business class of airlines with a special lane, the volume customers ofĀ ShopwiseĀ enjoyĀ the elite lane withĀ muchĀ shorter line and exclusive, specialized service and promos.
5. Experience
In the U.S. you have stores like the American Girl whichĀ provide a total experience within the store.Ā Beyond just sales of dolls and accessories, they also offerĀ customized hairstyling service (yes, for the dolls), tea-time service where the dolls have their own “high chair” and even musical shows featuring the stories behind the historical dolls.
IĀ alsoĀ mentioned that there are twoĀ differentĀ inter-related elements.Ā One is marketing. The other is about operating finance, referred to as the Mansmith 5SāsĀ of retail profit.
1. Spread
Making money by way of Ā good gross margin or taking advantage of deals to expand margins.
2. Speed
Making money via velocity or quickness of turnover. When a retailer has logistical advantage with fast replenishment, they can have aĀ better trading terms like volume discounts or rebates when ‘speed’ enables them to buy or sell in volume.
3. Save
Saving money largely deals with the the 3 Ws in store retailing. You can save by avoiding orĀ reducingĀ wastageĀ or shrinkage, by looking at productivity so that you can have more efficient wage orĀ wages, including having suppliers taking care of some of the expenses for manpower, or you can haveĀ better inventory control and product specs so you actually need lesserĀ warehouse space.
4. Space
Making moneyĀ byĀ leveraging limited display space by way ofĀ listing fee, or by charging rental or product highlight fee.
5. Support
Making money by getting supplier’s funds for business development like store opening support or promo support.
While all of these 5 Sās are potential profit areas, it doesnāt meanĀ thatĀ all the retailers will get them.Ā The bigger the chain, the more likelihood that they can enjoy all of the above benefits.Ā So itās important for retailers to think āhow can IĀ maximize myĀ profitabilityĀ by maximizing the value creation to customers making both the customers and stockholders happy at the same time?ā

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