Final answer:
The final component in a retail strategy is building a sustainable competitive advantage, considering factors such as the production model and cost structure. This enables differentiation in competitive markets, like those found in Amazon's practices, and addresses the balance between product variety and efficiency, impacting consumer choice and cost.
Step-by-step explanation:
The final element in a retail strategy, after selecting a target market and a retail mix, is the retailer's approach to building a sustainable competitive advantage. Retailers need to consider their production model and cost structure to determine what to sell, the quantity of output, and the pricing strategy. This approach helps retailers like Amazon to undercut the prices of competitors by considering factors such as the cost of shipping and enables them to thrive in different market structures. In monopolistically competitive markets, firms can increase demand for their products through various means aside from advertising, such as product differentiation, improving product quality, or enhancing customer service. Monopolistically competitive industries tend to avoid long-run equilibrium due to constant product differentiation and competition, which leads to neither allocative nor productive efficiency.
In terms of product variety, there is a balance to be found. While variety ensures consumer choice and caters to diverse preferences, it does come with the opportunity cost of higher prices due to less economies of scale. Firms have to analyze and decide the right amount of variety they can offer without overwhelming consumers or inflating costs unnecessarily.