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Retail Management Theories

Environmental theory states that external factors like customers, competitors, and technology affect the birth, success, or decline of retail outlets. Retailers must adapt to changes to succeed. Cyclical theory explains that retailers go through entry, growth, maturity, and decline phases. Those that cannot adapt are replaced by newer formats. Conflict theory views retail development as a constant revolution as new formats challenge old ones and become the new standard. The concept of a retail life cycle shows formats progressing through innovation, growth, maturity, and decline stages over 5-8 years if they cannot change with the market. Independent retailers have flexibility but less scale, while chains have bargaining power but difficulty controlling many stores. Franchising contracts allow others to use

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205 views6 pages

Retail Management Theories

Environmental theory states that external factors like customers, competitors, and technology affect the birth, success, or decline of retail outlets. Retailers must adapt to changes to succeed. Cyclical theory explains that retailers go through entry, growth, maturity, and decline phases. Those that cannot adapt are replaced by newer formats. Conflict theory views retail development as a constant revolution as new formats challenge old ones and become the new standard. The concept of a retail life cycle shows formats progressing through innovation, growth, maturity, and decline stages over 5-8 years if they cannot change with the market. Independent retailers have flexibility but less scale, while chains have bargaining power but difficulty controlling many stores. Franchising contracts allow others to use

Uploaded by

Sivaraman P. S.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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THEORIES OF RETAIL DEVELOPMENT

Environmental Theory:
customers
competitors
changing technology
Effecting birth, success of decline of retail outlets.
Example:
Decline of Departmental stores
---------------------non adaptability of transforming to Super/Hyper markets.
ABILITY TO ADAPT TO CAHNGES IS THE SUCCESS FACTOR.

Cyclical Theory:
entry phase
Low status & price, minimum services, limited product offers, poor services.
trading up phase
Expensive facilities, higher rents, more locations, higher prices, more products.
vulnerability phase
Declining ROI, myopic by nature, scrambled merchandising.
Example:
Departmental stores started as successful stores, but were cut by
supermarkets and discount stores.

Conflict theory:
Thesis
Individual shop owners open shops throughout India.
Antithesis
Opposed to Thesis. Departmental stores comes up as competitors to
challenge the small shops throughout India.
Synthesis
Blending of Thesis & Antithesis. Supermarkets & hypermarkets have come up.
Synthesis becomes Thesis for another round of revolution.

Concept of Life cycle in retail:


Innovations
More convenience, few competitors, rapid growth rate, moderate profitability,
lasts upto 5 years.
Growth
Increase in sales, few competitors emerge, gains leadership, high investments,
high profitability, lasts or 5 8 yrs.
Maturity
Competitive pressure, decreased growth rate, declining profits, unattractive
offers.
Decline
Looses competitive edge, negative growth rate, profits very less.
Example:
Shoppers Stop opened outlet for clothing. Later on Westside,
Clobus and Lifestyle came into the market, so it had to diversify to
jewelry, cosmetics & acquired Crosswords.

RETAIL FORMATS:
Depends upon:
products / services offered
pricing policy
the format operates
communication mix
on these parameters.
store size
looks of store
location of store
CLASSIFICATION OF RETIAL FORMATS:
Store based formats
Non store based formats
independent retailer
chain stores
franchise
leased departments
consumer cooperatives

convenience stores
supermarkets
hypermarkets
specialty stores
departmental stores
off price retailers
catalogue showrooms
discount dept. stores
category killers
warehouse clubs

INDIPENDENT RETAILERS
owns one store
advantage easy entry
one to one relation with customers
no economies of scales
less bargaining power
CHAIN RETAILER
2 or more outlets under common ownership
similar merchandise
similar ambience, ads, promotions
more bargaining power
ads and promotions are cost effective
difficult to control all stores at once
FRANCHISING
contractual agreement
use the format for a fees
trademark / product franchise Archies stores
business format franchise Mc Donalds

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