Why Is Strategic Planning Important?

Strategic planning is a necessary tool for retailers to remain successful in today’s highly competitive environment. Just take a drive down the "miracle mile" of your hometown or local community and look at the countless number of restaurants and stores. There are many retail options vying for a piece of the consumer’s pocketbook. Have you ever wondered how a store stays open when you never see cars in its parking lot?

Why Retailers Come and Go 

As we discussed earlier, retailers have been closing in record numbers - some due to their poor decisions and other factors out of their control (such as, the pandemic of 2020, economic pressures, consumers who have maxed out their credit cards, and so on). Over the years, one of the most notable closing was Toys R' Us. When Toys R' Us first opended it was like the panacea for toys. So what happened? It seems that once Walmart and Amazon moved heavily into toys, Toys "R" Us started losing its competitive edge. But of course, there were internal problems too. One year of very poor distribution at Christmas when lots of little kids did not get their toys, a website that lacked consumer functionality and ease of use—should I go on?

What can be learned from retailers that have come and gone? Go back in history a bit. Do any of you remember hearing the names Hills, Montgomery Ward, Circuit City, Ames, or Linens and More? You can probably add some names of your own; the list goes on and on. Think about this quote from Ernest Hemingway's The Sun Also Rises: "How did you go bankrupt? Gradually then suddenly" (p. 141).  What are the common threads among these failed retail chains? Consider these possibilities: Some expanded too quickly, others lost their key retail differentiation, and some used old approaches to approach new ways of competitive thinking.

Retail marketing strategy (or the lack thereof) plays a big role in why retailers come and go. Retailers often lose their competitive edge and no longer offer consumers a compelling reason to shop at their stores. Several years ago, two industry experts predicted problems in the retail industry. According to Anders and Stern (2004), "The retail landscape is littered with bodies of companies who simply were not good enough to compete for a customer’s business anymore…. Many of these companies were once shining stars of business" (p. 5).  Retailers need to beware of the "black hole"—the place where retail companies that are no longer relevant to customers go. Anders and Stern stress that retailers must have a defined position in the marketplace and in consumers’ minds. A retailer must be the best at something, whether it's price, solution-oriented service, fast service, dominant assortment, or fashion.

These factors create a lot of pressure for retailers and demonstrate why strategic planning is so important.  We know that retailers need to be flexible and have evolving business models.  Strategic planning allows all types of retailers to adapt and be proactive (not just reactive) to the opportunities and threats occurring in their constantly changing environments.

 

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References

Anders, W., & Stern, N. (2004). Winning at retail: Developing a sustained model for retail success. Hoboken, NJ: John Wiley & Sons, Inc.

Hemingway, E. (1926). The sun also rises. Hemingway Library Edition. New York, NY: Charles Scribner's Sons.