In my last article I looked at Retail Strategy & PESTLE, today we're going to look at how SWOT can be used when developing a strategy for the retail space.
SWOT is a staple of any marketing and branding plan. We'll demonstrate it today using an example of an unnamed but well known department store that began trading in the 18th century and employs currently c.27,000 people. It is currently in a distressed state.
• Well-known brand
• Long history on the high street
• It is an ‘anchor brand’ driving footfall that other organisations benefit from
• Stores are profitable
• Loyal customer base
• In-store Card is popular and associated data is valuable
• Quality goods
• Efficient website
• It has a tired image with dull presentation – sections labelled ‘Underwear’ ‘Bras’ etc
• Ageing demographic
• Too wide a range of merchandise
• Long terms leases across estate
• Over capacity – most stores have 2-3 stories
• UK not global offer on line
• It is trapped in a discounting spiral – it discounts heavily to shift goods. Customers wait until discounts before they buy which erodes margins
• Could drive a transformation agenda for the high street using anchor status
• Re-invigorate its brand to attract a new demographic (younger people)
• Design and develop high margin own brand(s)
• Artificial intelligence to mine existing data and identify new opportunities
• It might not survive as the high street comes under further pressure
• Its loyal customer base will decline over time
• It continues doing the same things it has done in the past avoiding radical change
• Being famous for discounting & spot sales prevents high margin sales
• Discounters take its market share
• Up market department store erode market share
So what would you do if you ran this business?
Using these tools you might decide to embark on a bold new strategy that opens up new opportunities and addresses the threats facing the business. The well-known high street department store highlighted above might decide that the best way to beat its competition is to:
- Sell only the top 25% selling items and top 25% of the most profitable items from the current range of goods
- Consolidate these on to one floor per store – this to appeal to the existing customers
- Develop a new exciting brand that sell high margin own branded goods
- Develop a sub brand selling edgy merchandise aimed at attracting 14 – 25 year olds
- Market by creating interest, fun, controversy, ‘all news is good news'
- Develop a sub brand for children focused on clothes and toys
- Make changes at a few stores to start then roll out
- Make the company famous for delivering a brilliant customer services across all parts of the customer journey.
The obvious question is what does that mean? There is no such thing as customer experience; rather there are lots of different types of customer experience. Families require a different experience to individuals, young from old and so on. This knowledge will have an impact on lots of areas – staff recruitment, training, advertising to name a few.
Let's take a step back and summarise how strategy is formed:
- Strategy is about entering a battle on the terms and conditions most suitable to an organisation
- It is about the when, the where and how the battle is won
- It can be complicated but also - particularly for SME’s - developing a winning strategy can be intuitive
- The tools identified above can help finesse strategy
- It is rarely the case that copying another organisations' strategy will result in success
If we look at large examples of these points:
- Amazon understands this and their approach to developing bricks and mortar stores is radically different (no PoS, profitability not the key metric….)
- The initial Apple stores offered a truly unique experience, one based on curiosity, surprise and discovery
- Originality trumps copying every time - eg Tesco setting up ‘Jacks’ to take on Aldi and Lidl has a high chance of failure
Strategy and strategy formulation is a fundamental requirement for any SME if they want to survive and prosper in a world where digital transformation is being driven by a demanding customer base.
May the force be with you.