In: Other Topics

Submitted By ananditajindal
Words 2722
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Models of retail competition
This chapter examines the effects of competition on a retailer’s performance. As noted in Chapter 1, retailing in the United States was once a growth industry that was able to increase profits solely on the basis of an increasing population base. Today’s slower population growth rates have turned retailing into a business where successful regional and national retailers can grow only by taking sales away from competitors. However, retail competition at the local level is more complex. Depending upon the economic base of the regional economy, it is possible for an area’s population and disposable income to grow even while the country’s is slowing. For example, Phoenix and Las Vegas are like many Sunbelt communities where a vibrant local economy, combined with attractiveness to retirees and second-home owners, results in a growing sales potential for many retailers. A retailer could grow in such a venue without having to take sales away from competitor. Just the opposite would occur in areas such as Mansfield and Youngstown, Ohio, which are experiencing a counting economic slump.
A retailer must always be on the offensive by studying the changing competitive environment, especially its local competition, and differentiating itself from that competition. Only by creating a differential advantage that is extremely difficult to copy in terms of time and money can retailer hope for continued success. Prime examples of such differentiation are category killers, such as The Home Depot and Lowe’s, with their large selection; Wal-Mart, whose technologically advanced distribution system results in significantly lower operating costs than its competitors; Target, with a more fashionable and contemporary merchandise assortment and a more colorful and softer store atmosphere than other mass merchandise discounters; Amazon, with its significant…...

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