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Abstract
The paper presents the analysis of business concept applications on the example of a big Canadian company Shoppers Drug Mart. A systematic literature review provides information on retail networks and the peculiarities of their functioning. It also proves the importance of using diverse strategies such as measurement of distribution effectiveness, estimation of network economies, customer segmentation, etc., to manage a retail network efficiently.
Special attention is given to retail formats and specialty services of Shoppers Drug Mart. It is stated that such customer segmentation attracts consumers and contributes to customer satisfaction. Another aspect reviewed in the paper is the impact of the companys business concept of the functional areas. The paper also suggests ways to maintain the market share of retail networks. Finally, the perspectives of Shoppers Drug Mart in the sustainable development of the business are outlined.
Introduction
Business concepts selected and applied are usually crucial for the development of this or that company. The business dictionary defines the business concept as an idea or a business that includes basic information such as the service or product, the target demographic, and a unique selling proposition that gives a company an advantage over competitors (n.d., para.1). In fact, a business concept can be treated as a new product or an innovative approach to human relations management or the companys marketing in general. Selecting prior concepts is one of the stages passes by a company in the process of its development. When a concept is formulated, it becomes a component of the companys business plan.
On the whole, the concepts and priorities determine the relations with many stakeholders, which are necessary for long and successful relations between the company, its investors, customers, and other parties involved. As a rule, companies apply mission statements to identify their ideas and attitudes (Anitsal, Anitsal, & Tulay, 2013). They are particularly important for high performing retailers because these companies have many partners and customers who need to be aware of the companys strategy.
Apart from mission statements, there are numerous ways of attracting customers and investors. Thus, some companies focus on advertising, the development of new products, or the implementation of emerging technologies. However, for big retailers such as Shoppers Drug Mart Corporation, an efficient retail network is a primary concern. The main goal of this network is to make the company and its products and services attractive and available for the customers. However, before evaluating the efficiency of a companys business concept, the review of similar practices can be useful. Thus, current research aims at investigating the peculiarities of retail networks and the following analysis of such a network of Shoppers Drug Mart Corporation.
Systematic Literary Review
A systematic review of existing studies and their results can become a basis for further research of the companys business concept (Rousseau, 2012). It will help to evaluate the companys practices and suggest possible ways for improvement.
Beule, Porl, and Weghe (2014) suggest a model for robustly benchmarking and predicting retail network performance. The authors conduct a study presenting a modified Huff model, which considers spatial competition between stores of the same brand, brand attraction based on actual brand performance and spatially variable substitution (Beule et al., 2014, p. 1). The study is based on the fact that the role of benchmarks in the assessment of retailers operational performance is big since they provide a fair analysis of inner and outer impacts. The researchers analyze approaches to benchmarking and predicting turnover and suggest their own approach to the problem.
Then developed model, which is an improved variant of the Huff model, is tested as compared to the original one (Beule et al., 2014). The authors claim that the new model, which proved to be more efficient than the basic one, can be applied for various purposes (Beule et al., 2014). For example, it can be used for predicting the profitability of new store locations, thus contributing to the stability of the whole retail network.
Lau provides research aimed at measuring the distribution effectiveness of a retail network with the use of data envelopment analysis. On the whole, efficiency is among the main aims of supply chain management. It is crucial for retail companies, the success of which greatly depends on the proper and timely distribution of resources. The author supposes that data envelopment analysis can be applied as an alternative method to rationalize a retail distribution network through comparison of distribution performance among different stores in the network, thus providing greater overall efficiency (Lau, 2013, p. 2).
The author provides an empirical example of a retail network rationalization. It consists of the consideration of the companys background, sample selection, the development of the research methodology, and the analysis of the results. The research proved that data envelopment analysis is a reliable method to analyze and compare sales and distribution cost data (Lau, 2013). It demands fewer aggregate data for its operation.
Consequently, the application of such analysis is comparatively easier, and its results are clear and comprehensible. Finally, the author concludes that data envelopment analysis can be used as a flexible and user-friendly method in distribution network rationalization (Lau, 2013). However, the research has some limitations due to the limited number of stores analyzed and the relatively small set of inputs and outputs used in the analysis (Lau, 2013, p. 10).
A study by Ellikson, Houghton, and Timmis (2013) provides an estimation of network economies in retail chains. The study estimates the impacts of chain economies, business stealing, and comparative advantages of heterogeneous companies in the discount retail industry. Then researchers provide examples of the so-called big box chain stores such as Wal-Mart, Kmart, and Target (Ellikson et al., 2013, p. 170).
One of the problems discussed is the estimation of the number and location of stores in various markets. The research reveals diverse preferences of the mentioned big retailers in locating their shops. Thus, Wal-Mart stores were mainly placed in rural areas, while Kmart and Target preferred more urban locations (Ellikson et al., 2013). This choice was determined by choice of their target customers. The authors conclude the article by the limitations, which include the modeling of entry behavior as a static game (Ellikson et al., 2013, p. 188).
Secondly, the researchers were forced to restrict our structural errors to only allow for a market-level unobservable that is common across all firms (Ellikson et al., 2013, p. 188). Nevertheless, the bias which can be provoked by this omission would define the direction of finding strong local chain effects (Ellikson et al., 2013, p. 188).
Kumar et al. provide a comparative analysis of differential consumer responses across supermarkets and specialty stores. The research was conducted in the conditions of a changing retailing industry. Ahlert et al. (qtd. in Kumar, Trivedi, Bezawada, & Sridhar, 2012, p. 561) state that the appearance and functioning of different retail formats can be explained by three major factors, such as competitive advantages sought by retailers, consumer trends and their purchasing behavior, and changing role of the manufacturing industry. The researchers state that in the conditions of increasing competition in the retail market, companies should pay attention to consumer shopping behavior and variations in-store formats (Kumar et al., 2012). Such an approach can have a positive impact on the competitive ability of a retailer.
The research is aimed to address the issues of consumers responsiveness, their preference in certain store formats, and strategic implications for the retailer. Thus, then researchers suggest a heterogeneous model of consumer purchase behavior that studies differential response across different store formats (Kumar et al., 2012, p. 562). The model includes prices and promotions, store characteristics such as distance and assortment, and external factors such as seasonal effects, while controlling for individual differences or heterogeneity by incorporating random effects (Kumar et al. 562).
The model is evaluated with the help of some households that do the shopping in stores of two different formats. Moreover, the research focuses on the influence of price and promotion market share and profits. The research revealed a correlation between the choice of a product and store category preference (Kumar et al., 2012). Also, the research revealed the dependence of purchase activity from some external factors such as holidays, for example (Kumar et al., 2012).
On the whole, then research showed the importance of a store format choice for retailers success. The attention should be given to the category preference, marketing mix, store format characteristics, and external factors together with cross-category correlation. Managerial implications of the research include means of defining a positioning strategy for a diverse market characterized by heterogeneous consumer needs and intense competition (Kumar et al., 2012, p. 568).
The research itself applied a conceptual framework of heterogeneous consumer shopping behavior across different store formats for similar product categories, to offer a model which includes factors such as store characteristics, marketing variables, category characteristics, and external factors (Kumar et al., 2012, p. 568). Finally, it should be mentioned that the study contributes to the explanation of dome concerns which are related to big retail formats both in developing and developed countries.
Speaking about retail networks, the role of the supply chain should be mentioned. A study by Sadghiani, Torabi, and Sahebjamnia (2015) suggests a design of a retail supply chain network under operational and disruption risks. The authors introduce the idea that the issue of the supply chain network design demands some strategic decisions (Sadghiani et al., 2015). Thus, the number of facilities, their location, and capacity necessary to provide consumers with goods timely and effectively should be considered by retail companies.
One of the complications here is that the supply chain networks should function for several years, and their efficiency cannot be obvious from the start. Thus, there is a need for assessing operation risks that may appear (Sadghiani et al., 2015). It is necessary to provide a retail network with a reliable supply of goods and thus contribute to customers satisfaction. The researchers underline the importance of a transportation network necessary to transfer goods to retail stores from the facilities where they are stored.
The authors suggest a multi-step solution methodology which consists of possibilistic programming approach (Sadghiani et al., 2015, p. 102). After the test of the suggested retail supply chain network models, some managerial implications are suggested. They deal with the transport necessary for goods delivery to retail stores and the decisions of companies top management on this problem (Sadghiani et al., 2015). Moreover, the provided model is an attempt to incorporate robustness and resilience measures simultaneously into the problem of retail supply chain network development (Sadghiani et al., 2015, p. 102). In addition, Sadghiani et al. provide a case study of a well-known retail chain in Tehran (2015).
The chain has twenty-four branches and sells the variety of supplies. The study provides seventeen scenarios of chain development including the possibilities of different natural and other disasters. The case study allows to evaluate the suggested model. On the whole, the model is useful for the assessment of managers strategic decisions on the issue of transportation.
Hard discounters make a particular category among retail companies. The research by Cliquet and Guillo (2013) regards the issue of retail network special expansion with the use of the percolation theory to hard discounters. The study focuses on the spatial arrangement of a retail network (Cliquet & Guillo, 2013). This arrangement can be well planned or influenced by some conditions.
The authors review special strategies in retaining which become crucial in the conditions of a contemporary competitive retail marker (Cliquet & Guillo, 2013). For example, the strategies of market penetration or expansion can be used in retailing. The authors compare diffusion and percolation theories as applied to the expansion strategy. As the basis for theory application, hard discount networks in France are used. It is mentioned that their success is determined by the cost control to preserve affordable prices and provide a competitive advantage (Cliquet & Guillo, 2013). This approach attracts customers and contributes to their loyalty.
The authors claim that the internal marketing, the brand diffusion and the logistical function should be improved with the existence of a percolating cluster. The existence of gaps between isolated clusters should compel retailers to restructure their networks. Locating new outlets or relocating existing stores in order to create a percolating cluster will allow the network to enter the next step of the retailing wheel (Cliquet & Guillo, 2013, p. 180). However, the strategy of hard discount store network needs careful consideration of customers demand in every location to provide a suitable choice of goods.
Another important aspect of business which is particularly necessary for big retailing companies is customer segmentation. According to Rousseau, Customer segmentation optimizes product and service features to customize against market segments, according to their value and cost (2012, p. 231). The issue of customer segmentation appears in the context of the customer relationship management (CRM). According to Lamb, Hair, and McDaniel, CRM is a process which enables companies to prioritize their marketing focus on different customer groups according to each groups long-term value to the company or supply chain (2016, p. 222).
When a company identifies its high-value customers, it concentrates on consideration of interests and needs in services and goods of this category. Lamb et al. conclude that the CRM process comprises customer segmentation by value which is followed by the development of customers loyal attitude (2016). Lamb et al. also speak of the importance of retailing (2016). The authors define the types of in-store retailers which include department stores, specialty stores, supermarkets, drugstores, convenience, discount, full-line stores and many others (Lamb et al., 2016).
Moreover, then researchers deal with the issue of rise of nonstore retailing which enables customers to shop without visiting a physical store location (Lamb et al., 2016, p. 249). Nonstore retailing includes automatic vending, self-service technologies, direct retailing, direct marketing, telemarketing, direct mail, shop-at-home television networks, and online retailing (Lamb et al., 2016). Finally, the authors provide advice on executing a retail marketing strategy.
It comprises several stages. First of all, a target market should be defined. Secondly, the retailing mix should be selected. It means the choice of product, its promotion, the selection of location, calculation of price, and retail store presentation. Finally, the employees should be found and carefully trained. Only dedicated professionals can provide success to the retail location. One of their primary tasks is the organization of an efficient customer service (Lamb et al., 2016).
Customer segmentation is applicable to many business spheres. However, it is more important for retail companies. Thus, Tsai et al. discover customer segmentation issues and strategies for an automobile leadership. The authors claim that customers are considered to be valuable assets for many world companies functioning in the field of service (Tsai, Hu, & Lu, 2013). One of the ways to profitability and preservation of competitive ability is the realization and fulfillment of customers desires.
The article by Tsai et al. provides the results of a case study of customer segmentation on the example of a car dealer in Taiwan (Tsai et al., 2013). In this case, the process of customer segmentation is preceded by extraction of information from the car sales database; the automotive services database; basic customer information, and the call center database (Tsai et al., 2013). The research is an attempt to use clustering techniques for customer segmentation as applied to automobile industry. In this case, the records of product sale are less important than records on repair and maintenance services (Tsai et al., 2013).
Thus, this fact should be considered during segmentation to provide the development of services or marketing strategies which satisfy all customer groups. The authors conclude that customer segmentation significant for the high efficiency of CRM (Tsai et al., 2013).
Muller and Haase investigate the issue of customer segmentation in retail facility location planning (2014). The article represents situations in which retail store chains prefer to control the competition on the market. The companys management in similar situations makes a decision on the location of new facilities to make them comfortable to the customers. A model of customer segmentation presented by the authors enables retailers to develop excellent network of shopping facilities (Muller and Haase, 2014). The approach suggested in the research can be applied to reinforce managerial decisions.
Another approach to customer segmentation is suggested by Fotaki, Spruit, Brinkkemper, & Meijer (2014). They explore big data opportunities and their application in online customer segmentation. It is a useful study because contemporary business competition makes many companies provide also online activity. The researchers consider customer segmentation an integral part of online marketing (Fotaki et al., 2014).
It includes the distribution of customers into definite groups. Customer segmentation is treated as an effective way to manage various customers with diverse purchase priorities. It allows the development of corresponding marketing strategies. Online customers segmentation can be provided in accordance with peculiar features which are traced online with the application of particular techniques and algorithms (Fotaki et al., 2014).
Different segmentation types are grounded on diverse customer characteristics collected from some sources. As a rule, customer segmentation types correspond various business goals and tasks taking into account companys marketing goals (Fotaki et al. 2014). The research unites the aspects of online marketing, customer segmentation, and big data analysis into the Online Customer Segmentation Framework which provides algorithms of tools and techniques application to big databases (Fotaki et al., 2014).
Summarizing the research findings which deal with retail networks and peculiarities of their functioning, it can be concluded that despite many investigations, there is no detailed study dedicated to pharmaceutic retail company. Then major concepts to be considered while developing a retail network are as follows. First of all, it is important to select instruments which can be used to predict the efficiency of the network performance.
For example, a model for robustly benchmarking suggested by Beule et al. (2014) can be applied. Secondly, a measurement of distribution effectiveness of a retail network can be included. Here Lau (2013) suggests data envelopment analysis as a possible method. It is also necessary to provide estimation of network economies in retail chains (Ellikson et al., 2013). It is particularly important for big chain stores. When it comes to big retailers, the meaning of a supply chain is a meaningful component to be considered. It should me mentioned that a supply chain network design often demands strategic decisions from managers (Sadghiani et al., 2015).
A particular place in retailing is given to hard discounters Cliquet and Guillo (2013). Consumers are probably among the most influential factors for retail chain development. Thus, their response to various retail networks should be investigated. One more crucial aspect to investigate regarding retail networks is customer segmentation. It allows companies to consider needs and interests of consumers and thus provide them with necessary goods and services.
In case of customer segmentation, it is necessary to consider the peculiarities of the field of its application. Thus, the principles of segmentation for the automobile dealership and grocery supplies will differ substantially. Another sphere to use customer segmentation is location planning (Muller & Haase, 2014). On the whole, the variety of aspects influencing the functioning of the retail network makes its development and successful management a complicated process. Nevertheless, in case all necessary considerations were made, a retail network will provide long and efficient functioning of a company with constant income.
Company Analysis
Global retailers concentrate on various issues. Thus, according to data of the research conducted by Anitsal et al. (2013), the major concerns include product or service, people, production process, place and price or value. Among the top 100 global retailers, forty-five percent consider people component to be decisive for their business. This component comprises general stakeholders, or employees (associates), customers and shareholders (investors) (Anitsal et al., 2013, p. 7).
It means that the companys business concept and mission statement are selected with the consideration of interests of a certain group of people. For Shoppers Drug Mart Corporation (Canada), customer satisfaction is a main goal (Anitsal et al., 2013). Thus, customer value is considered to be the moving force for companys marketing activities. Shoppers Drug Mart Corporation formulate their goal as follows: To be the leading drugstore retailer in all communities across Canada by providing superior customer satisfaction beyond expectation, resulting in a hassle free, feel good experience (as cited in Anitsal et al., 2013, p. 9).
The researchers conclude that most of the global retailers try to provide satisfaction to their customers (Anitsal et al, 2013, p. 11). They tend to do mere than expected to attract even more customers or guarantee the improvement of then existing goods or services. The methods the companies use include the following: being customer-centric, competitive prices, high quality, great selection, superior customer service, convenient location, continuous innovation, desired lifestyle, long-term relationships and customer value (Anitsal et al., 2013, p. 11).
Shoppers Drug Mart is one of six companies which constitute the Loblaw Family of Companies which are united by a motto Live Life Well (Loblaw Companies Limited, 2015, p. 3). Its value proposition Your Life, Made Easier mirrors the general companys guarantee to provide the customers with convenience and wellness (Loblaw Companies Limited, 2015, p. 2). Shoppers Drug Mart is one of the leading retail companies in Canada.
For example, its Beauty Boutique was one of the winners of 31st annual Retail Store of the Year design competition (Wilson, 2014). According to Wilson, the 4,500-sq.-ft. in-store shop uses sophisticated materials and lighting to create an environment befitting of luxury brands but still approachable to the mass market (2014, 14) which contributed to its popularity. As of 2012, it was at the top of the list of the leading Canadian brands with the estimated enterprise value of 9,059 million of CAD dollars (Leading 10 Canadian retail brands in 2012, by brand value, 2017).
Its brand value took the second position in the rating with 1,926 million CAD dollars. A year earlier, in 2011, Shoppers Drug Mart had the biggest share market share among the leading retailers in the pharmacy and personal care sector occupying 31.8 percent of the market (Leading retailers in the pharmacy and personal care sector in Canada 2011, by market share, 2017).
Shoppers Drug Mart Corporation is a company comprising full-service drug stores in Canada (Our company, n.d.). It has a retail network which includes some retail formats and specialty services. Thus, retail formats include Shoppers Drug Mart, Shoppers Simply Pharmacy, and Murale while Shoppers Home Health Care, Specialty Health Network, and MediSystem Pharmacy belong to specialty services (Retail formats and specialty service, n.d.). All those formats and services have diverse functions to meet the needs of customers.
Thus, Shoppers Drug Mart suggests a broad variety of products for health, beauty and convenience. It has over 1,259 locations throughout Canada. Shoppers Simply Pharmacy includes retail pharmacies which are placed in the buildings of healthcare institutions. Such location allows them to provide customers with necessary medications, professional services and timely advice. Finally, Murale as one of the retail formats makes an innovate beauty destination for those seeking unparalleled service and access to the worlds best beauty brands (Retail formats and specialty services, n.d.). Murale is considered a luxury branch focusing on the advanced care and opportunity for high-level expertize and personal approach to service and care.
Specialty services comprise some more specific functions. Thus, Shoppers Home Health Care provides sale and service of assisted-living devices, medical equipment, home-care products and durable mobility equipment to institutional and retail customers (Retail formats and specialty services, n.d., par. 4). This service is organized through fifty-six store locations. Another service is Specialty Health Network. it was created to support patient with chronic diseases or acute conditions with complex drug therapy. Finally, MediSystem Pharmacy supplies pharmaceutical goods and innovative services. This service is aimed at the residents and patients in long-term care facilities, retirement communities or organizations that deliver specialized care (Retail formats and specialty services, n.d., par. 6).
In fact, the existence of the companys various retail formats and specialty services are an example of customer segmentation which is an integral part of work with consumers in a big retain corporation. Customer segmentation is a strategy used by the companies providing the market investigation. It is necessary to single out the particular categories of customers united by some characteristics. It is vital for the companys functioning since the segmentation provides an advantage of understanding the particular needs and demands of consumers and thus enables their satisfaction. Some companies can try to embrace the needs of the whole market.
However, such approach is not efficient but time-consuming. On the other hand, corporations which select customer segmentation approach, get certain benefits. They can focus on certain target categories. Thus, companies can discover the needs and interests of these categories more carefully which will increase their competitive ability. The segmentation approach suggests the consideration of consumers peculiarities and not treating them as all alike personalities. As a rule, customers are sensitive to companys attitudes and segmentation through addressing their particular features and characteristics is going to attract customers attention to the company and its products or services.
The segmentation approach used by Shoppers Drug Mart proves the awareness of the company that the customers have diverse needs. As a result, the company provides services and develops varied retail formats to address different segmentation characteristics such as geographic, demographic, needs segmentation, etc. Geographic segmentation is probably the first one realized by Shoppers Drug Mart Corporation. It is revealed in the number of retail shops throughout the country.
Thus, there is a retail network of 1,259 associate-owned locations providing a broad range of products and services in health, beauty and convenience ( Retail Formats and Specialty Services ). Demographic segmentation is implemented in one of the retail formats.
It is Murale which is mainly designed for women since it focuses on skin care and beauty issues. Needs segmentation is addressed by Shoppers Drug Mart trough specialty services. Thus, the company provides medical equipment or home-care appliances at Shoppers Home and Health Care; it suggests pharmacy services for ill people through Specialty Health Network; and provide pharmaceutical goods for individuals who need long-term care in special facilities or retirement communities (Retail formats and specialty services, n.d.).
The advantages of customer segmentation for Shopper Drug Mart include customer attention to the services provided. Moreover, the fact that the company is in leading position in the pharmacy and personal care market of Canada is the proof of the efficiency of the selected business concept and the company strategies.
Influence of the Selected Business Concept on Functional Areas
In any business, the functional arrears are interconnected and interdependent. The changes in one sphere cause alterations in the others. Thus, the diverse retail network of Shopper Drug Mart Corporation has a significant impact on the companys functional areas. The development of such network is an attempt of company to address various needs of its customers. In fact, the company tries to make its stores together with the whole network comfortable for different categories of population.
It is an efficient approach which favors the increase of customers satisfaction. Another field of retail network impact is the companys marketing. As a big retailer, Shoppers Drug Mart targets different consumer audiences which can be accessed through various channels. Customer focused marketing strategies are considered to be the most effective (Rousseau, 2012). Thus, the retail network developed by Shoppers Drug Mart attempts to meet the needs of diverse populations.
Here belong people concerned about their health or beauty, patients suffering from acute or chronic conditions, residents of long-term health facilities, and so on. The company pays much attention to the exploration of innovative ways to meet the needs of its individual customers as well as the whole healthcare system. To achieve this objective, Shoppers Drug Mart promotes certain empowerment of pharmacists in minor ailments (Shoppers Drug Mart, 2016b, p. 16). It should be mentioned that Shoppers Drug Mart supports the empowerment of pharmacist as the company believes that these healthcare professionals can address minor medical conditions.
This approach provides evident benefits for the patients. First of all, the access to care improves and there is no need to wait for a long time to get doctors advice (Shoppers Drug Mart, 2016b, p. 6). According to the survey, 83 percent of respondents reported the ability to start treatment earlier, 79 percent admitted the positive moment of avoiding unnecessary visits to a doctor, and 74 percent focused on convenience of consultation with a pharmacist (Shoppers Drug Mart, 2016b, p. 6).
As for the general benefits for Canadian health care system, they include the reduction of doctors office visits because of minor ailments which, according to statistics, comprised 18 percent of all visits to general practitioners (Shoppe
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