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    Four Strategies Retailers Can Use to Gain a Competitive Advantage

    by | Jan 11, 2023 | Blog | 0 comments

    “Competitive advantage is a company’s ability to perform in one or more ways that competitors cannot or will not match.” – Philip Kotler.

    Are you a manager or retail salesperson looking for ways to give your business a competitive edge? You’re in luck. In the digital age, retailers no longer have to rely on traditional methods of competition — they must rise above the rest and stand out from the pack if they want to succeed. To do that, innovation and creativity are qualities that separate businesses from one another in today’s cut-throat retail industry. Fortunately, there are several strategies retailers can employ to gain an advantage over their competitors. This blog discusses four proven strategies retailers can use to leverage a competitive advantage over their rivals.

    What does competitive advantage mean?

    Competitive advantage is a unique attribute, resource, circumstance, or capacity that a company uses to achieve a favorable business position over competitors.

    What is the purpose of competitive advantage?

    The purpose of having a competitive advantage is to distinguish a company from the competition by offering products or services in a way that adds value. Further, the goal of competitive advantage is to strengthen the capacity of a business to outcompete rivals operating in the same industry or battling for the same target audience.

    l) Retail Cost leadership Strategy

    The cost leadership strategy is a business-level strategy that emphasizes reducing all costs associated with getting the product to the customer, including the cost of production, marketing, and distribution of goods. In turn, these operational efficiencies allow the retailer to offer low-priced goods to consumers. Cost leadership is an effective strategy insofar as a retailer can maintain low prices on good quality products and attract enough customers to be profitable and gain market share.

    Example of a Retail Cost Leadership Strategy

    “Every Day Low Prices on a Broad Assortment – Anytime, Anywhere. Every Day Low Price (EDLP) is the cornerstone of our strategy, and our price focus has never been stronger. Today’s customer seeks the convenience of one-stop shopping that we offer.” – corporate.walmart.com

    Walmart is the best-known example of a successful cost leadership strategy. “Every Day Low Price” (EDLP) is the central theme behind the Walmart brand. As a result, Walmart has led the US retail market with its EDLP business model for decades.

    ll) Retail Differentiation Strategy

    A differentiation strategy is an innovation a retailer offers, allowing it to stand out among competitors. Employing differentiation usually emphasizes a value-added component that distinguishes a company relative to competitors. Moreover, the difference must provide increased utility to consumers to keep them loyal.

    Example of Retail Differentiation Strategy

    “Above all else, when it comes to brand differentiation, the most important thing is that customers will actually enjoy the product. Not only does this make them feel as though they’ve made a worthwhile purchase, but it will also leave them wanting more.” – thescaleup.com

    Lush’s business model emphasizes the ethical sourcing of (organic) raw materials and professionally crafted products. In the same vein, the Lush differentiation strategy engenders socially responsible business practices, unique eco-friendly packaging, and high-quality handmade products. These innovations encourage customers to associate the brand with positive attributes. The business model is supplemented with the following value-added features:

    • Solving customers’ unique (self-care) problems
    • Selling products that are innovative and unique within the industry
    • Maintaining a physical and online presence
    • Selling a strong assortment of products

    In sum, Lush’s differentiation approach appeals to contemporary market trends of more socially conscious consumers. Socially conscious consumers use their purchasing decisions to improve the world around them. Their consumption choices are based on a product’s ethical standing on issues, such as the environment or animal rights.

    lll) Retail Defensive Strategy

    A defensive strategy is a marketing strategy that aims to maintain a company’s current (repeat) customer base they are losing due to competition. Defensive strategies occur in response to competitors operating in the same industry and selling to the same target market. Examples of defensive strategies include the following:

    • Pricing war is an attempt to outcompete a rival based on price
    • Offering features (warranties) that add value to the product or customer experience
    • Boosting advertising campaigns to increase product awareness
    • Partnering with suppliers or retailers to create barriers for competitors.

    The objective of a defensive business strategy is to fend off aggressive attacks. When under attack by stiff competition, businesses that fail to adopt defensive tactics risk losing repeat customers, market share, and profits.

    Example of a Retail Defensive Strategy

    Blockbuster Video was one of the world’s biggest and most recognized DVD rental companies. So when Netflix entered the entertainment industry, Blockbuster implemented defensive tactics in response. For example, Blockbuster canceled late fees for DVDs returned after the rental period had ended.

    lV) Retail Strategic Alliances

    Strategic alliances are arrangements between two companies that decide to pool resources to undertake a mutually beneficial endeavor. These agreements can improve the delivery of services, enhance the consumer shopping experience or reduce costs. Strategic alliances are vital as it allows companies to leverage assets and provide added value to customers.

    Example of Retail Strategic Alliances

    Barnes & Noble and Starbucks created a strategic alliance allowing the two retailers to add a complementary element to each other’s business model. The agreement permitted Starbucks to open coffee shops inside Barnes & Nobles bookstores. The combination allowed customers to enjoy coffee while they read their newly purchased books. As a result, the alliance increased overall traffic for both companies as well as sales and profits.

    Business Level Strategy Summarized

    Business-level strategies facilitates an organizations capacity to gain advantages over rivals by adding consumer value to the market. The overarching goal of business-level strategies is to strengthen a company’s position enabling them to thrive. Businesses that are able to leverage innovation is crucial to obtaining a competitive advantage and improving the possibility of future profitability.

    In order to succeed in the fiercely competitive retail industry, managers and salespersons must take the initiative to stay ahead of the pack. Cost leadership, differentiation, forming defensive strategies, and alliances are four strategies that can be implemented to help gain a competitive edge over competitors. Additionally, businesses can tailor their services to optimize efficiency and operations by focusing on their customers’ needs and wants. Though there is no foolproof method for business success, these strategies give retailers the skills to navigate shifting market trends and remain ahead of their rivals. Ultimately, it is up to each business’ ingenuity how they use these strategies to their advantage to achieve success.

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