1. Money
Send to a Friend via Email

Power Retailing: Not Just for Large Firms

Tips for Better Retailing

By

Business Week first popularized the term power retailing in citing the competitive advantages of certain large chains: They "are fast and focused. Merchandise is well-selected and plentiful. Customers go out of their way to shop at power retailers' stores because they know they'll find what they want with a minimum of hassles. Charles Lazarus of Toys "R" Us and Leslie H. Wexner of The Limited, Inc., showed that power retailing works in specialty formats. Sam M. Walton applied it to his Wal-Mart discount stores." Costco, Foot Locker, and Home Depot are also leading practitioners of power retailing.

What these power retailers all have in common is that they use consistent, directed, and comprehensive strategies. They identify customer needs and pay constant attention to the marketplace; place orders early and in quantity, emphasizing power assortments to dominate competitors; and use modern computer and inventory-control systems. Some critics believe the major weakness of power retailing among chain retailers is that management policies are too often standardized and centralized.

There are three key principles that every retailer, regardless of size or line of business, could learn from the concept of power retailing: One, there must always be a "game plan" for the firm that is outlined in advance. Two, the retailer's focus must always be on consumers and how to best satisfy them. Three, to be most effective in the marketplace, a firm needs to be dominant in at least one aspect of its strategy. In the broadest sense, power could result from having the longest store hours, the best delivery policy, and so on. As a result, a small firm could be a power retailer by serving an unfulfilled consumer need.

At the same time, every retailer must also recognize consumers' minimum expectations for each element of its strategy (such as the store hours, product assortment, and customer services). Working women expect stores to have evening hours; this is a minimum requirement. Even if a firm dominates in other areas of its strategy, it must still satisfy the minimum standards set by consumers.

Here are six very different ways for a firm to act as a power retailer. Two or more of the approaches could be combined to yield greater power:

  1. Be price oriented and cost efficient to appeal to price-sensitive shoppers.
  2. Be upscale to appeal to full-service, status-conscious consumers.
  3. Be convenience oriented to appeal to consumers interested in shopping ease, nearby locations, or long store hours.
  4. Offer a dominant assortment with an extensive selection in the product lines carried to appeal to consumers interested in variety and in-store shopping comparisons.
  5. Be customer service-oriented to appeal to people who are frustrated by the decline in retail service - as they perceive it.
  6. Be innovative or exclusive and provide a unique method of operations (such as kiosks at shopping centers) or carry products/brands/services not stocked by other stores to appeal to customers who are innovators, bored, or looking for items not in the me-too mold.

Retailers will probably not be able to succeed in the long-run if they are mid-level in all of the six areas just identified; they must do a superior job in at least one area. The amount of competition will be too intense for them to do otherwise. It should also be kept in mind that a price-oriented strategy may be the easiest for competitors to duplicate, at least in the short- run, and that price-sensitive shoppers often have little store loyalty.

Joel R. Evans, Ph.D., is the RMI Distinguished Professor of Business and Barry Berman, Ph.D., is the Miller Distinguished Professor of Business - both in the Zarb School of Business at Hofstra University. Drs. Evans and Berman are co-authors of 10E: Marketing, Marketing in the 21st Century and Retail Management: A Strategic Approach, 10E. They are also partners in Berman Evans Associates, a consulting firm. They may be reached at mktjre@hofstra.edu or mktbxb@hofstra.edu.

Readers Respond: What makes your retail business different from the competitors?

©2014 About.com. All rights reserved.