“A Newcomer” versus “First Mover”: Retail Location Strategy for Differentiation

Abstract

In a competitive business environment, retailers brand themselves using unique location strategies. New retailers, especially, use their location strategy to construct a different brand concept from that of the first mover. Therefore, retail chains in the same industry show different location patterns. This article aims to investigate how a new retailer uses its location strategy to differentiate itself from the first mover by comparing the location patterns of two coffee chains. The location patterns of Starbucks Coffee (a “first mover” that employs a premium brand concept) and Ediya Coffee (a “new retail chain” that promotes an economical brand concept) are analyzed for the study. We use a Bayesian spatial model to explore the two retailers' location patterns in Seoul, Korea. Considerable differences are found in the spatial distribution patterns of the two coffee franchises. Starbucks has formed store groupings in prime areas such as the city center based on its cluster location strategy, reflecting its premium brand concept. Conversely, many Ediya Coffee shops have been located in less desirable areas such as fringe areas with low land prices, reflecting their economical brand concept and differentiating the company from Starbucks. These findings lead to a useful marketing implication for a retail startup formulating its location strategy for differentiation. Furthermore, this study's company-level analysis of retail location patterns provides a better understanding of complex retail geography.

在竞争的商业环境中, 零售商运用特殊的区位策略进行自我行销。新的零售商, 特别运用其区位策略来打造与先行者不同的品牌概念。同一产业中的零售连锁店, 因而显示出不同的区位模式。本文旨在透过比较两大咖啡连锁店的区位模式, 探讨新的零售商如何运用其区位策略, 将自身与先行者进行区隔。本研究分析星巴克咖啡 (引入优质品牌概念的 “先行者”) 的区位模式与帝亚咖啡 (推销经济实惠品牌概念的 “新连锁店”) 之案例。我们运用贝叶斯空间模型, 探讨上述两大零售商在韩国首尔的区位模式。研究发现, 两大咖啡连锁店的空间分佈模式有相当大的差异。星巴克根据其集群区位策略, 在诸如市中心等优越区位形成了商店群体, 反映了其优质品牌之概念。反之, 帝亚咖啡店则多半位于诸如土地价格低廉的边缘区位等较不受到偏好的地区, 反映出其经济实惠的品牌概念, 并与星巴克进行差异化。这些研究发现, 得出对新创零售业者在形成差异化的区位策略时有用的行销意涵。再者, 此一针对公司层级零售区位模式的分析, 对于复杂的零售地理提供了更佳的理解。

En un entorno de negocios competitivo, los comerciantes minoristas se marcan a sí mismos usando estrategias de localización únicas. Los nuevos minoristas, en especial, usan su estrategia de localización para construir un concepto de marca diferente al del primer minorista que se ubicó en el espacio referido. En consecuencia, las cadenas de minoristas de la misma industria muestran diferentes patrones de localización. Este artículo utiliza la comparación de los patrones de localización de dos cadenas de cafetería, con el propósito de investigar la manera como un minorista recién llegado usa su estrategia de localización para diferenciarse a sí mismo del minorista inicial. Para el estudio se analizaron los patrones de localización del Café Starbucks (un “primero en llegar” que emplea un concepto de marca premium) y del Café Ediya (una “nueva cadena de minoristas” que promueve un concepto de marca económica). Usamos un modelo espacial bayesiano para explorar los dos patrones de localización de minoristas en Seúl, Corea. Se encontraron considerables diferencias en los patrones de distribución espacial de las dos franquicias del café. Starbucks ha ubicado grupos de tiendas en áreas primas, como el centro de la ciudad, con base en su estrategia de localización en agrupamiento, lo cual refleja su concepto de marca súper. A la inversa, muchas tiendas de Café Ediya han sido ubicadas en áreas menos deseables, como las zonas marginales donde los precios de la tierra son bajos, reflejando su concepto de marca económica, marcando de ese modo diferencia con la compañía Starbucks. Estos descubrimientos conducen a una útil implicación de mercadeo para una nueva empresa que formula su estrategia de localización por diferenciación. Más aun, este análisis del estudio de los patrones de localización minorista, a nivel de compañía, provee un mejor entendimiento de la compleja geografía del comercio minorista.

Key Words:

• Bayesian spatial modeling
• brand concept
• differentiation
• location strategy
• retail geography

关键词:

• 贝叶斯空间模式化
• 品牌概念
• 差异化
• 区位策略
• 零售地理。

Palabras clave:

• modelado espacial bayesiano
• concepto de marca
• diferenciación
• estrategia de localización
• geografía del comercio minorista

Acknowledgments

The authors thank Dr. Jaehwan Kim in the Business School at Korea University and Dr. Yongwan Chun in the School of Economic, Political and Policy Sciences at the University of Texas at Dallas for their contributions to this article. In addition, the authors thank the editor and anonymous reviewers for their comments and suggestions toward improving this article.

Notes

¹ Brand concept is a general basis of the brand positioning adopted by a company. Brand positioning decisions are guided by the brand concept (Park, Jaworski, and MacInnis 1986).

² Brand image consists of the general perceptions and the set of beliefs that consumers have about a particular brand (Aaker 1991; Meenaghan 1995; Nandan 2005).

³ Brand value is “the net present value of future cash flows from a branded product minus the net present value of future cash flows from a similar unbranded product—or, in simpler terms, what the brand is worth to management and shareholders” (Tiwari 2010, 421).

⁴ On average, a dong has a population of approximately 24,400.

⁵ is calculated by the formula , where is business openings in administrative district .

⁶ It seems counterintuitive to form a cluster of stores in a small area because this strategy can lead to cannibalization, which can negatively influence the profitability of these coffee shops (Koehn 2001; Rainey 2012). Six marketing advantages (Rubinfeld and Hemingway 2005; Song 2013) induce Starbucks to implement the cluster strategy: (1(1) ) maximizing first mover advantage by ensuring local market dominance, (2(2) ) raising the level of brand recognition in a short period of time, (3(3) ) enhancing the effectiveness of the marketing program by narrowing the range of target customers and regions, (4(4) ) creating an entry barrier for potential competitors, (5(5) ) making it easier to bring in substitute workers from nearby stores when there is sudden employee absence at a store, and (6(6) ) optimizing logistics network planning by reducing the costs of supplying ingredients.

⁷ Ediya provides a cup of Caffè Americano at a maximum 40 percent lower price compared with other coffee shop chains in South Korea (Korea Consumer Agency 2015).

Additional information

Notes on contributors

Jinhyung Lee

JINHYUNG LEE is a PhD student in the Department of Geography at The Ohio State University, Columbus, OH 43210. E-mail: [email protected]. His research involves using geographic information science, spatiotemporal analysis and modeling, and time geography to study transportation and urban science.

Youngho Kim

YOUNGHO KIM is an Associate Professor in the Department of Geography Education at Korea University, Seoul, Korea. E-mail: [email protected]. His research interests include spatial statistics, geographic information science, and spatial epidemiology.