Where Strategies Come From

October 10, 2013  by in Business Strategy, Industry   

By Bob George

If you are the typical retailer, as you read the feature article, your thoughts will center on your own operation and whether or not you should pursue the strategies.

Be warned!

What works for one retailer in specific markets may not work for another one in another.

The landscape is littered with the remnants of the next great thing. Strategies are the result of a thoughtful process that considers your company against the competitive setting in which it exists.

Often overlooked is the foundation upon which the strategy is based—the assumptions. Assumptions are defined as “those statements about probable developments which cannot be predicted with accuracy, over which the business may have limited control, and which may have a major impact on the attainment of goals and objectives.” Unfortunately, our assumptions are often ingrained in our thought processes over years of talking to ourselves. Do any of the following statements ring true to you?

·         Consumers are price driven ignoring style and quality.

·         The features and benefits that define quality cannot be communicated to the typical consumer.

·         The only way to motivate the consumer to buy is a promotional message.

·         Consumers will not buy without seeing, feeling, or sitting on a product.

 

Because of these deep-seated beliefs, we often miss the real breakthrough strategies. What was the source of the visions for retailers such as I.O. Metro, Room & Board, and Frontgate (yes, an online retailer)? I assure you that it was not from the assumptions above. Go to their Web sites to understand their assumptions and then compare them to your own.

The retailers and manufacturers that will survive and prosper are those looking beyond their accepted assumptions and identify the emerging trends. For example;

·         Almost 58 percent of consumers are willing to pay more for ‘sustainable’ product.

·         The quality delivered by American-made “Amish built” is a value to a growing number of consumers.

·         The retail experience delivered by certain lifestyle retailers results in margins 1.5 times those of the traditional independent dealers.

 

With a set of assumptions in place, the next step requires an honest evaluation of a company’s strengths and weaknesses in combination with an identification of your threats and opportunities. What do I mean by that? The definitions are below.

 

Strengths — Significant positive factors or competitive advantages within an organization that may be capitalized upon in the future.

Weaknesses—Significant negative factors or competitive disadvantages within an organization that may prevent that organization from achieving its goals and objectives.

Opportunities—Major external situations or events that may exist now or will occur in the future that, if exploited, could improve organizational performance.

Threats—Major external obstructions or risks that may now or in the future which should be avoided, minimized, or managed.

 

After this careful thought process, you can then begin to define the Strategic Elements of a plan. If the following are a part of your plan, go back to the beginning and start over!

·         Lower prices for products that are designed to replicate similar higher priced products. Low average unit selling price on premium bedding, bonded leather, etc.

·         Sales promotion that begin with 50 percent off and continue down the slippery slope to 60 percent and more off.

·         New after-sale add-ons beyond delivery charges.

While this is frustrating to the consumer, it is not as bad as the airlines’ baggage fees … yet.