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Module 1 Session 3

The document discusses four main theories of retail development: 1) Environmental theory which states that retail institutions must change and adapt to socioeconomic, cultural, technological, and legal changes in the environment to survive. 2) Cyclical theory which proposes retail evolves in cycles from an entry phase with low prices and minimum services to a trade-up phase with more services and higher prices to an eventual vulnerable phase. Specifically, it discusses the Wheel of Retailing Theory and its three phases: entry, trade-up, and vulnerability. 3) Life cycle theory which suggests retail institutions progress through different stages similar to the human life cycle. 4) Conflict theory which views retail development as a dialectical process with ongoing conflicts and resolutions between different

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132 views16 pages

Module 1 Session 3

The document discusses four main theories of retail development: 1) Environmental theory which states that retail institutions must change and adapt to socioeconomic, cultural, technological, and legal changes in the environment to survive. 2) Cyclical theory which proposes retail evolves in cycles from an entry phase with low prices and minimum services to a trade-up phase with more services and higher prices to an eventual vulnerable phase. Specifically, it discusses the Wheel of Retailing Theory and its three phases: entry, trade-up, and vulnerability. 3) Life cycle theory which suggests retail institutions progress through different stages similar to the human life cycle. 4) Conflict theory which views retail development as a dialectical process with ongoing conflicts and resolutions between different

Uploaded by

assrmurty
Copyright
© Attribution Non-Commercial (BY-NC)
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: Retail Development

Session 3
Theories that explain the evolution of retailing

1. Environmental theory. (Natural selection


theory)

2. Cyclical Theory
a. The Wheel of Retailing Theory
b. The Accordion Theory

3. Life Cycle theory in Retail

4. Conflict theory (The Dialectic process theory)


Environmental Theory
(Darwin’s Natural Selection Theory-species)
Gist –retail institution

Socio economic change


Cultural trends

Technology

Legal variables
Environmental Theory

To survive: must change

Increase in income (friendly environment factor)


Increase in population (friendly)

Household size increase, but income fix


(not friendly)

Mobility (friendly) for urban


Rural lose customers
Environmental Theory

Mobility (customers started store patronage)

Researchers: specialized store will survive

Technology change: decrease importance


of salesperson
Example 1

Department store mid 1800 in


US & Europe

Before: small customized craft stores

Willingness to accept fixed prices,


invention of elevator, advanced packaging, automobiles
As time went, sluggish economic, strong competition,
department stores affected

Shopping mall

Change to discount department stores,


Moved to shopping mall sites
Specialty stores
Example 2

Chain stores 1930s, US

Acquisition of other retail institutions

Automobiles, highways: promoted it


Example 3

Mail order retailing 1900s

Increased working women

Post office service


literacy

Direct retailing – save on expensive real


estate cost, inventory
Cyclical theory
Evolve in a cycle.
Low-high-low
1) The Wheel of Retailing Theory
Mc Nair (1958)

Vulnerable phase

Trade-up phase

Entry phase
Entry phase

Innovative institutions
Low prices, min. services
Low profit margin

Low margins-but can help penetrate


market

Once successful, others imitate

End of entry phase, same type of


institutions have increased
Trade up phase

More services (food courts, restrooms, carts, delivery, etc)


Prices increased

Appeal the middle and upper class

Peak of trade up: increase in sales, profitability,


market share because retail store mix improved
Vulnerability phase
Vulnerability phase

Easy replacement by other retailers

Lose market share & profitability

Mature: focus on non product marketing, new innovations


Example

Department store-shopping mall

Limitations

Not all start with low prices

Other factors also need to be taken into account other than price

Might apply for growing countries

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