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Lesson 2: Retail Strategic Planning

Growth Opportunities

Retailers today need a growth orientation, but not a reckless one. If a retailer isn't growth minded, its ability to attract qualified staff (human resources) diminishes. Customers see growing retailers as reliable, eager to please, and constantly improving.

Vitality is required for survival in today’s competitive marketplace; however, it's difficult to maintain without growth. There are many examples in the news of retailers pursuing various growth strategies. Amazon is one of the retailers we frequently hear about that is pursuing growth opportunities.  Amazon's proposed installation service would enter a niche similar to the one currently occupied by Best Buy's Geek Squad. Amazon also wants to move into delivery services, an industry that has previously been dominated by companies like FedEx and UPS. Read about the reasons why Amazon wants to start its own delivery service in an article in Fortune (2018).

Another example of an established company pursuing a growth strategy is Canton, Massachusetts–based Dunkin' Donuts. In 2018, Dunkin' Donuts decided to drop the word donuts from its name. The idea of rebranding was considered a growth opportunity to encourage consumers to think of them not only as a breakfast choice but also for other meals and snacks throughout the day.  Forbes reported, "In the case of Dunkin' Donuts, the company has emphasized that the Dunkin'-only name is a continuation of the 'America Runs on Dunkin'' campaign that has been around for over a decade. Either way, this is substantial attempt to shift away from the word 'donuts'" (Lee, 2017, para. 6). 

Also trying to change consumer perceptions was Kentucky Fried Chicken, which moved to rename itself KFC.  KFC felt that in our day of consumer preference toward "healthy" food choice, having the word, "fried," in the brand name would not give the needed positive responses to push consumer sales.

Types of Growth Opportunities

The text discusses four growth opportunities that retailers may pursue: "market penetration, market expansion, retail format development, and diversification" (Levy, Weitz, & Grewal, 2019, p. 132). In your Principles of Marketing class, you probably discussed the product-market growth matrix. These growth opportunities mirror the same framework. Click on each tab to see more detail about each type. (Note: The first View All tab allows you to see all four types at once.)

1. Market Penetration

In this growth strategy, retailers use their existing retail format to encourage existing customers to buy more. The objective is to increase usage and purchases. Grocery stores use frequent-shopper or loyalty cards to accomplish this objective. Hotels, such as Sheraton, also have frequent-stay plans and reward programs that encourage frequent-stay members to spend more per stay. Airlines have frequent-flyer plans to encourage customers to use the same airline every time they travel. See the 2018 Customer Loyalty Statistics.

Most retailers are using these tactics today to support their market penetration growth strategies.

2. Market Expansion

This growth strategy is also called market development. Retailers use their existing retail format to reach a new target market. This new market could be a global customer (as when Toys "R" Us - now bankrupt - expanded to Japan). Gap followed this strategy when it used the same retail format to open Gap Kids, offering Gap clothes to children. 

Did you know that in 2014, Burger King acquired Tim Horton's, a Canadian chain restaurant known for its coffee and donuts, for $11.4 billion?  It seems that it has been a "rocky marriage." Read about a class-action lawsuit against RBI (Restaurant Brands International) by a group of Tim Hortons franchisees.

See your textbook for a discussion of global growth opportunities and the attractiveness of international markets.

3. Retail Format Development

This growth strategy is also called product development. To follow this growth option, retailers serve their existing target markets and customers with a new product, service, or retail format. When fast-food restaurants added breakfast to their menus, they were practicing retail format development, trying to offer existing customers expanded product offerings. Similarly, when brick-and-mortar stores develop online presences, they are offering existing customers alternative ways to purchase their products.

4. Diversification

This growth strategy involves offering a new retail format to a new target market. A diversified retailer operates multiple stores with different types of retail operations for different target markets. Here's an example of diversification. Kroger, known for its supermarkets, operates warehouses, convenience stores, and even jewelry stores. It also owns a manufacturing organization, meaning it's involved in vertical integration. In fact, in total, the company owns 37 food-processing plants. See the Kroger Fact Books for more information.

Food for Thought

Logistics and Customer Service Problem with Utilizing a Growth Strategy

See the customer feedback below about the British retailer, JoJo Maman Bébé. If you were hired as a retail consultant for JoJo Maman Bébé, what would you suggest? How has its growth strategy created problems in omnichannel management? Given its recent store openings in the United States, will any of the problems discussed above become resolved? Be specific.

An International Retailer Struggles to Satisfy a Customer in the United States
Emily's photo, the customer who gives the testimony

Photo of Emily

Background

The following testimonial is from a customer who made a purchase from British retailer JoJo Maman Bébé, which specializes in maternity clothing, baby wear, and nursery products. JoJo was founded in 1993. Then in 2017, the retailer launched a new U.S. company and began rolling out additional stores in the UK and Ireland. In 2018 it opened a few stores on the East Coast—in New York, New Jersey, and Connecticut (Farrell, 2017; Hall 2018).

Emily: A Customer Testimonial

"In October of 2017, I received a catalog for a company called 'JoJo Maman Bébé,' a British clothing company for mothers and babies. We had a four-month old baby and therefore, had started to receive lots of infant and baby catalogs. JoJo really caught my eye—because it was located in England. I had purchased clothes for myself multiple times at a similar British company, Boden, because their clothing is of high quality and has fun patterns and colors. Glancing at the catalog for JoJo, it seemed very similar to Boden.

Now that we had a new baby, I was hoping to buy some special outfits for the upcoming holidays. So, I decided to purchase a few outfits, winter hat, and quilted sack for transporting the baby in his car seat. It is always hard to know with babies what size will fit them—and so moms end up guessing—and are often wrong. So, I ordered the same outfit in two sizes, thinking I would return what didn’t fit. The clothes weren’t cheap—each outfit ran about $40, which is a lot for an infant, but I hoped the quality would be similar to what I experienced with Boden.

My first issue with the purchase was the shipping—each item shipped separately, and all told, it took about 3 weeks for me to receive 4 separate packages. THREE WEEKS—are you kidding me? I get my Amazon Prime in 2 days.

As it turned out, the items were adorable—and very high quality. But the sizing was totally off—one size was too small, another much too large. I needed to return two of the four items but the website had no return instructions—just "call us for returns."

I tried calling, but the recorded message said that their headquarters were located in England, and customer service reps could assist between 3am-5pm EST M-F. Time change issue completely overlapped with my workday schedule (as a physician at Yale Medical Center in Connecticut). As you can imagine, I don't have much free time. When I was eventually able to sneak away from work to call customer service, I was told they would send me a return label to adhere to the package. Then, I must mail back the package for a refund.

One month later, I still hadn’t received a refund. I called again (which again, took a significant effort since their customer service office operated on UK time). I was told it was in process, and they should be able to refund me in the next few days. A week later, the refund processed.

All in all—I will never shop at this retailer again. Their clothing is adorable but not worth the hassle. 

All in all—I will never shop at this retailer again. Their clothing is adorable but not worth the hassle. They have significant issues with distribution and all of their major customer touchpoints. It took far too long to receive the products in the first place and they were sent in four different boxes at four different times. The lack of information on their website on "how" to return items was not acceptable. Their refund repayment process was far too long. Meanwhile, JoJo had already charged by credit card and had my money. Even though they were selling to the US market, it seems that everything was conducted through their headquarters in England. Maybe now that they have stores open in the USA it will be different. But, I am not hopeful. I am choosing to go back to their UK competitor, Boden—who now carries an infant and children’s clothing line—and has none of these problem. Boden seems to have figured out how to expand internationally and successfully market to us in the USA.

Throughout this course there are numerous sections like this one, entitled "Food for Thought." These sections are filled with current-day issues or application of text material. Their intent is to be thought-provoking and spur discussion among your classmates. During the semester, you are required to choose two Food for Thought prompts and write a response/reaction for each.

 

References

Farrell, S. (2017). US expansion boosts JoJo Maman Bébé sales. Insider Media Limited. Retrieved from https://www.insidermedia.com/insider/wales/us-expansion-boosts-jojo-maman-bebe-sales

Hall, P. (2018). JoJo Maman Bébé to open first U.S. stores in Greenwich and Westport. Daily Voice Plus. Retrieved from https://dailyvoiceplus.com/fairfield/fairfield-business-journal/real-estate/jojo-maman-bebe-to-open-first-us-stores-in-greenwich-and-westport/753812/?utm_source=Fairfield%20County%20Business%20Journal

Lee, B.Y. (2017, August 6). Dunkin' Donuts moves to drop the "donuts" from its name. Forbes. Retrieved from https://www.forbes.com/sites/brucelee/2017/08/06/dunkin-donuts-tries-to-drop-the-donuts-for-now/#7ba70dfa151a


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