In the retail world, effective strategy is what separates the dominant brands from the rest. Any significant change in business activities undertaken by household name retailers will most certainly be defined and driven by a strategic plan.
This is not to say that strategy is only for the big players, smaller operators can improve market share, profitability and sustainability through effective strategy, not to mention recruitment, talent retention and development. Strategy can touch all areas of business.
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Keeping pace with change
Most retailers in business today have a view on how they are running their business. However the greatest common weakness of most retailers is that they never stand back and re-examine or evaluate their view. They don’t review whether or not the way they are running the business is still the best way to do so given the prevailing economic environment, changing consumer demographics, changing consumer buying behaviour, changes in technology and changes in the competitive environment.
Often retailers don’t change their business strategy, instead spending a great deal of time attending to the huge amounts of day-to-day detail required to run their business. Because of the competitive nature of retail and the pressure on prices, retailers tend to have a strong return on investment and cost-management focus. This creates a negative momentum towards change.
Usually it is the new players that reinvent traditional models and concepts. It is new entrants to the market who often bring the most impactful innovation to retail. Indeed, it is often easier to create a new model than it is to change an existing model and often the larger the retail business, the more difficult it is to change.
Traditionally, retailers tend to change only when faced with the serious threat of competition. Now is the opportunity to adopt a more proactive approach to change.
The retail context
The unfortunate reality of many retailers taking a reactive approach to change and the fact is that it doesn’t need to be this way.
If good strategic planning is adopted however, businesses can foresee gaps in the market or external pressures and potential changes before they happen. This allows them to take a proactive stance and make changes to their position or to adopt new positions to gain strategic impetus or advance their competitive positions.
Good strategic planning starts with a shared vision of the desired future, and then works out the steps needed for the business to achieve that vision effectively. Obtaining and analysing information about current operations, forecasting future trends and identifying business opportunities are the basis for developing a vision of the future. Strategies act as a road map for arriving at the goal envisioned for the future of the business. Naturally, the strategies used to get you to the desired future must take into account current aspects of the business environment, both internal and external.
Retailers can no longer afford not to take a strategic approach to their business, one that is grounded in a financial understanding of their business.
The challenges inherent in operating in competitive markets and constant striving to gain market share and profitability require a long-range business perspective.
Strategic planning when considered in this light clearly requires an understanding of the economic climate and the market in which businesses operate. Retailers use strategic planning to step out of their business and consider the ‘big picture’.
Taking a strategic approach to business development in retail requires following a sequential methodology.
Fortunately it can be straightforward and relatively simple to apply.
Organisational mission, vision and values are ideally the core directing force behind all strategic activities and their development will be discussed further throughout this unit.
The first action of strategic planning is to ascertain the desired future position of the business as informed by the organisational mission, vision and values.
Following the establishment of desired business directions attention turns to strategy development moving through the following steps:
- Review customers, competitors and the marketplace
Moving from data to strategy
- Data analysis that reviews the current situation internally and within the retail sector used to inform detailed strategy development
From strategy to tactics
- How and what each area of business will do to fulfil the strategy
Implement strategy to achieve strategy
- Project management
- Consultation and communication
Seek feedback and measure current performance
- Review of outcomes using qualitative and quantitative measures
- Evaluation and recommendations for improvement and future implications
Businesses may adopt varying tools to support the development of their strategies given their budget and the scope and magnitude of the strategy in question. It is possible however for retailers to take a strategic approach to planning without the need for unnecessarily complexity using the guidelines above.
About ARA Retail Institute
ARA Retail Institute is Australia’s leading retail training provider for both accredited and non-accredited learning programs. For more information, please visit: www.retailinstitute.org.au