THEORIES OF THEORIES OF RETAIL RETAIL

DEVELOPMENTDEVELOPMENT

THEORIES OF THEORIES OF RETAIL RETAIL

DEVELOPMENTDEVELOPMENT

KRITHIKA G.K.KRITHIKA G.K.Asst. ProfessorAsst. ProfessorFashion Mgt. StudiesFashion Mgt. Studies

• No single theory can be universally applicable & acceptable

• Theories very from market to market – based on maturity & socio-economic conditions

• Explain process of – retail development, – importance of competitive pressures, – investments in organizational capabilities & – creation of sustainable competitive

advantage etc.

Theories of Retail Development:Theories of Retail Development:

• Environment Theory

• Cyclical Theory

• Conflict Theory

1. Environmental Theory1. Environmental Theory

• Darwinian approach “survival of the fittest”

• Change in retail is attributed to change in the environment in which retailers operate

• Core of the theory - ability to adapt to change successfully

2. Cyclical Theory2. Cyclical Theory

• “The Wheel of Retailing” Theory – by McNair

• Retail innovators (RI)– low-price operators, low cost structure, low profit margin requirements, offer real advantages, take customers away from competition

• RI prosper – deve. & estb. Business, lose focus on wht. was imp. earlier (trade-up), give space for new entrants to repeat process (discounters & low cost structures).

• Theory does not explain deve. Of retail of all markets.

The Wheel of RetailingThe Wheel of Retailing

Source: http://www.emeraldinsight.com/fig/0701030703001.png

Entry PhaseVulnerability Phase

Trading-up Phase

3. Conflict Theory3. Conflict Theory• Exists b/w operators of similar formats or broad retail

categories

• Retail innovation leads to development of more formats & does not reduce no. of formats available to consumer.

• Retail - dialectic process – blend two opposites – develop new format

• Thesis – Individual retailers

• Antithesis – Department stores (opposite of thesis)

• Synthesis – Supermarkets & Hypermarkets (blending of thesis & antithesis)

Theory of Retail ConflictTheory of Retail Conflict

Discount Store Department Store

Discount DepartmentStore