•
At The Intersection Of Several Types Of Retailers
From a strategic perspective, Walgreens has a unique position in the marketplace, sitting at the intersection of Wal-Mart, small discounters, Target, and grocery store chains. The medium size and neighborhood-centric locations of typical Walgreens make them akin to small discounters. Walgreens’ scale allows it to offer low prices à la Wal-Mart. The uniqueness of some of Walgreens’ merchandise is similar in ways to Target’s offerings. And Walgreens’ offering of some staple groceries put it in line with grocery stores. The “trick” for Walgreens is to leverage some of these aspects of its offerings into targeting buyer groups which value a significant combination of many or all of them. If they can locate large pockets of these profiled consumers within given geographic locations, they will be hugely successful in this recession and in any economic climate, no matter how terrible.
How To Use Its Position To Gain Buyers
In sitting at this strategic intersection, Walgreens can gain buyers by:
1. Keeping Low Prices For Many Merchandised Items
2. Maintain and Develop Relevant Signature Brands (Non-Staples)
3. Stock Need-To-Have Grocery Items (Staples & Certain Non-Staples)
Prescription Savings Card Is A Winner
A bright spot for Walgreens is its prescription savings card which is increasing in usage and members. This offers people savings on the purchase of prescription drugs, which can be a substantial expense especially for people on a fixed income. Walgreens has a recession-proof winner here and should put more resources behind increased marketing to targeted groups. Here, they can utilize the advantage of their scale to move returns beyond other investment of resources.
Match Position With Informed Strategy And Right Tactics
Walgreens’ positioning and strategy must be “in-synch” especially during this economic downturn. They need to build solid links to key buyer groups through understanding their demographics and lifestyle preferences. This needs to be turned into pinpointing geographical locations where groups with desired demographics and lifestyles are located. Bets need to be placed in these areas – whether with a new store or upgrading an existing store. Simple line extensions of “stripped-out” non- or less value-added features will yield ultra-value private label product lines – which can counter-intuitively be branded boldly by wrapping these items into a special designated section or store-within-a-store. This is a marketer’s dream: being able to brand generic low cost items! At the intersection where Walgreens sits, what would you do?
•
Database To Track Strategic Buyer Groups
An advanced marketing strategy for small retailers is to focus on key strategic buyer groups within their industry. This can be done readily by leveraging a small retailer’s localness to stay close to key buyer groups. Concretely, a data base of buyer preferences must be maintained and updated regularly. In this database, a retailer should record the following information about each customer:
1. All Merchandise Purchased
2. Any Special Treatment Given or Requested
3. Family and Friends Mentioned or Who Are Current or Potential Buyers
4. Relevant Changes In Living Situation
These pieces of information will help retailers identify and target groups of buyers willing to trade up, or more importantly for this economy, maintain the price for performance balance. For most small retailers, it is important for them to stay away from trying to entice Wal-Mart preferring buyer groups. They usually can not compete on price – and should not waste resources targeting buyers who trade down on price for lower quality, service, or performance.
How To Effectively Lower Prices For Maximum Profitability
There is a case where lowering prices for small retailers is effective and desirable – but without trading down price for performance. A retailer can maintain the price performance proportionality by offering small samplings of items or services for proportionately lowered price points. This accomplishes several objectives:
1. Increases Opportunistic and Incremental Sales
2. Allows Sampling of Higher-Priced Product Offerings
3. Obtains Price-Conscious Buyers W/O Competing Directly With “Big Box” Retailers
Small Retailer Example Of Lowering Price Points
Surfin’ Seafood, a Seattle-based seller of freshly caught seafood, is a great example of a small retailer offering a sampler type package to price-conscious customers. They expect to lose about 50% of their sales this holiday season as a direct result of corporations in the area cutting back on their discretionary expenditures of packaged seafood as holiday gifts for employees and customers. To regain some of this projected loss, they introduced a $50 gift package with fewer pieces versus their typical packages which sell for between $85 and $195. Surfin’ Seafood’s offering is a classic example of moving down price points to capture substantial incremental sales without disproportionately sacrificing performance, perceived quality, and the reputation that a small retailer has achieved. This kind of move can be highly beneficial and profitable – but it is tricky and must be done strategically and with care!
Three Characteristics Of Good Blue Ocean Strategy For Small Retailers
In the final analysis, for a small retailer there are three Blue Ocean characteristics of a good strategy. First, diverge from targeting price-elastic buyer groups, and understand the key dimensions of high utility for your customers – record key information about them and all customers. Second, focus on buyers willing to maintain and continue buying in a given price range even in this economic downturn – leverage your localization advantages such as closeness to key customer groups and understanding many aspects of the local market. Lastly, develop a tagline or brand motto which concisely differentiates your offerings in the market – and more importantly, among your key buyer groups. Small retailers can do better than just survive using these strategies – their businesses can prosper as their nimble boats sail the Blue Ocean Seas unfettered.
•
Purchasing Strategy Problem
Home Depot had a problem in early 2007 – one riding mower was sold in two years in an Arizona store, and West Coast stores couldn’t keep Makita power tools in stock, according to the October 7th, 2008 edition of the Wall Street Journal. Their purchasing system was out of whack, and did not take into account regional and local customer buying preferences and patterns. This stemmed from a decision in 2001 by then-CEO Robert Nardelli to consolidate nine regional purchasing offices into a centralized buying operation at its Atlanta headquarters. This led to increased inventory for a variety of items less favored or unused by local customers, and an under-stocking of items popular with local customers.
Change To Localization Orientation Is Key
The new CEO, Frank Blake, tackled this problem, and changed Home Depot’s purchasing system which favored national uniformity at the expense of local preferences to a less centralized system. His new system balanced local demand with national efficiency. Localization of purchasing for retailers is critical for two reasons. First, it can lead directly the development of blue oceans in products and services. Secondly, from a shorter-term, more quarterly perspective, it enables a retailer’s stores to own marketspace geographically. Wal-Mart’s meteoric rise is based in creating local monopolies in “small town” America. The real explosion for retailers occurs when geography is linked to demographics and usage habits.
Wal-Mart Example: Link Geography To Demographics And Usage
Wal-Mart is beginning to understand this linkage – they created a group of 350 people around the country to better respond to local preferences. Wal-Mart also hired experts to produce more detailed demographic information about each store’s customer base. By linking demographics and customer usage to a locale or region, a retailer becomes more responsive and speedier in spotting buying trends and habits which affect an individual store’s profitability and margins. These twin metrics are even more important now during our current challenging economy as consumer sentiment and buying habits are shifting more toward value. Even Target’s usual value proposition and communication to its customers of “Expect More, Pay Less” is being skewed by them to the “Pay Less” side – truly a sign of the current tough times.
Home Depot Blue Ocean Strategy Localization Wal-Mart Robert Nardelli Frank Blake Turbo Tagger
Mike Bolden is dedicated to helping organizations win, dominate
and monopolize markets. We provide insight into cutting edge marketing
strategies and best practice initiatives with a strong emphasis on
Blue Ocean Strategy. Read more about 
