KRITIKA KUMAR

Theories of Retailing

Theories of Retailing

Cyclical TheoriesWheel of RetailingAccordian Theory

Evolutionary TheoriesDialectic ProcessNatural Selection

Cyclical Theories

Wheel of Retailing

Stage 1:Low Price, Low Service, limited product offerings.

Stage 2: Improve merchandise offering, better service, higher prices

Stage 3: Conservatism, declining ROI, increased competition

Wheel of Retailing

Cyclical Theories

Accordion TheoryEvolution of retail institutions from general,

broad-based outlets with wide assortments, to narrow-based institutions carrying specialised assortments, and back to general, broad-based assortments. Synonymous with general-specific-general theory. 

Evolutionary Theories

Dialectic ProcessRetailers mutually adapt in the face of

competition from “opposites”.When challenged by a competitor with a

differential advantage, the established retailer will adopt strategies and tactics in the direction of that advantage (making the innovator less attractive)

Dialectic Process

Evolutionary Theories

Natural SelectionRetailing institutions that can most effectively

adapt to environmental changes are the ones most likely to prosper or survive.

Environmental need for a certain kind of retailing institution → it will evolve

Need ceases to exist → the institution will tend to disappear

Institutions that most effectively adapt to environmental changes are most likely to survive

Retail Life Cycle

Retail organizations pass through identifiable stages of innovation, development, maturity and decline.

Stages of Retail Life Cycle:InnovationAccelerated GrowthMaturityDecline

InnovationDifferentiated services, product and format.Few competitorsRapid growthModerate profit

Accelerated GrowthIncrease in salesEmergence of competitorsOrganization try to attain leadershipHigher investmentCost pressure

MaturityIncreased competitionDecrease in growth rateRepositioning: strategy, format & merchandise

mix

DeclineLoses Competitive edgeNegative rate of growthProfitability declineCost run higher

Retail Life Cycle