Dipartimento di Economia

Corso di laurea in Trade Marketing e Strategie Commerciali

Tesi di Laurea Specialistica


A SERVICE-DOMINANT LOGIC
PROSPECTIVE TO RETAIL INNOVATION


Relatore:
Ch.mo Prof. Edoardo Sabbadin


Laureando:
Siro Descrovi



A.A. 2013/2014

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Table of Content

- Prefazione
- Introduction
1 Service
1.1 Tailoring a fitted definition for Service
1.1.1 The Good-Dominant approach
1.1.2 IHIP frame
1.1.3 From value co-production to value co-creation
1.2 Service Science through time and space
1.3 Service-Dominant Logic: a new mindset to look at social and
economic exchange phenomena
1.3.1 An evolving scenario
1.3.2 A new definition of Service, and the 10 FPs of the Service-Dominant Logic
1.3.3 Conclusion
2 Retail Innovation
2.1 Retailing through time
2.2 Innovation Theories through time
2.2.1 The Wheel of Retailing
2.2.2 The Retail Accordion
2.2.3 The Retail Life Cycle
2.2.4 The Big Middle
2.2.5 Different Levels of Retail Innovation
2.3 The Pyramid of Innovation
3 A new Framework for Retail Innovation
3.1 Continuing Innovation
3.2 The Service-dominant logic dressed up with retail innovation
3.2.1 Implies for retailers and scholars
3.3 Conclusions
References
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4
- Prefazione

Marcel Proust ne Alla ricerca del tempo perduto, sosteneva che Il vero viaggio di scoperta non
consiste nel cercare nuove terre, ma nellavere nuovi occhi. Io da sempre credo che la crescita
personale e professionale risieda dietro la consapevolezza delle cose e losservazione delle
stesse da diversi punti di vista, al fine di poterne compiere unanalisi sempre pi avvolgente e
riuscire a scorgere ogni dettaglio che le caratterizza.
Con questo spirito dunque, ho voluto affrontare questa tesi di laurea magistrale, e grazie al
supporto curioso e stimolante del prof. Edoardo Sabbadin, ho voluto provare ad osservare un
fenomeno chiave del retail sotto un diverso punto di vista.
Il tema principale linnovazione di retail. Lho scelto perch linnovazione un po un
modo di guardare al futuro, di sfidare se stessi, di adattarsi al cambiamento. Darwin stesso ci
dice che non sopravvive il pi forte o il pi intelligente, ma chi si adatta pi velocemente al
cambiamento, e quindi ecco perch tanto amore e passione dietro linnovazione, per il futuro,
per un senso di sopravvivenza, intesa come della specie (nel caso di Darwin), ma anche di
mercato, competitiva e non solo.
Innovazione non tutto per, di retail, uno specifico ramo del marketing, del quale ho deciso
di studiare le diverse dinamiche e specializzarmi in questa laurea specialistica di trade
marketing e strategie commerciali che ormai volge al termine. Il retail perch il punto di
contatto tra tutto ci che viene effettuato prima, a monte, risultato di ricerche, indagini,
esperimenti, ed il mercato: vero e puro banco di prova, giudice dellintuizione e di quanto fatto,
ma anche ponte tra bisogni ed il loro soddisfacimento, punto di contatto tra due mondi tanto
distanti, quanto vicini.
Lo scopo di questa tesi dunque, quello di provare a dare un cambio di prospettiva
allinnovazione di retail attraverso ladattamento di una logica di servizio.
Linnovazione da sempre infatti stata studiata attraverso linnovazione di prodotto, dal
momento che i studi sulleconomia moderna nascono con la rivoluzione industriale, avvenuta
non tanto sui servizi, ma sui prodotti. Questo ha portato ad interpretare e relazionarsi
allinnovazione, indipendentemente se essa fosse di prodotto o di servizio, ed alleconomia
generale, in unottica prodotto centrica.

5
La sfida dunque, sta nellosservare innanzitutto se si pu parlare di un cambiamento di
paradigma generale in termini economici, passando quindi da uno studio prodotto centrico ad
uno servizio centrico, salvo poi capire se nel retail, e pi precisamente nellinnovazione di
retail, questi modelli possano essere implementati, fornire una coerente ed innovativa chiave di
lettura, e quindi portare valore al mondo accademico e manageriale di retail attraverso un
cambiamento del punto dosservazione che possa aprire ulteriori fasi di ricerca ed analisi in
futuro.
Un ulteriore elemento che mi fa piacere sottolineare la scelta stilistica e linguistica
della tesi.
Essa stata redatta come un conceptual paper in lingua inglese.
La forma del conceptual paper esce un po dalle logiche attuali che vedono lo studio delle
practice come fonte iniziale di ricerca, ma parte da una rivisitazione concettuale dei temi
servizio e innovazione di retail, al fine di poter consegnare al lettore un elaborato che si adatti
alle condizioni attuali e future, ma che non ne dipenda, al fine di produrre un lavoro che non
esaurisca la propria utilit al cambiare delle mode o dei costumi.
Linglese invece stato preferito allitaliano, nonostante la laurea sia in lingua italiana, il
dibattito culturale per tenere viva la propria lingua natia ed una maggior facilit di utilizzo da
parte di chi scrive, perch credo che la ricerca debba essere portata avanti in una lingua
neutrale (in questo caso linglese), in modo da permettere ad altri di apprezzarne, criticarne e
migliorarne il contenuto, a livello universale, in quanto laggettivo che pi si avvicina al
termine universit.
Un triplice sforzo dunque, mi ha accompagnato durante la stesura di questo elaborato:
lanalisi dinamica delle diverse letterature di servizio e di innovazione di retail, la
concettualizzazione ed unione delle due tramite il modello di studio pi pertinente con il
successivo adattamento agli scenari attuali e futuri e lesercizio linguistico con una lingua non
nativa, che porta da un lato uno stimolo al miglioramento ed alladattamento (Darwin), ma al
tempo stesso toglie pi di qualche sfumatura al pensiero ed alla divulgazione dello stesso.
Nonostante ci, spero di essere riuscito a portare a termine il mio obiettivo, e perci
devo ringraziare coloro i quali mi sono stati vicini in questo momento di sfida personale nei
modi pi diversi e pure a loro insaputa, dandomi punti di riflessione, preziosi per la messa in
discussione continua del proprio lavoro, unica via per produrre un qualcosa che possa avere
valore.
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Per una volta dunque, lasciatemi fare i nomi, e quindi un piacere poter ringraziare per iscritto
i miei genitori, Mauro e Pina, per avermi sostenuto in ogni modo in cui un genitore pu
sostenere un figlio, con loro i nonni ed i parenti tutti. Sara, per il suo prezioso contributo di
supporto costante e consiglio nellutilizzo della lingua inglese, Susanna per aver ascoltato ed
entusiasmato le mie intuizioni sulle continue nuove e diverse idee, di nuovo il prof. Edoardo
Sabbadin per avermi stimolato in pi occasioni ed avermi lasciato una sempre pi rara libert di
pensiero ed affiancato durante questo percorso di tesi e tutte le persone che in questo periodo
universitario hanno saputo maturare in me criticit di pensiero e curiosit di diverso genere:
dalle pi accademiche a quelle pi quotidiane e culturali, per essere state ed essere fonte di
ispirazione e messa in discussione costante. Di queste non far i nomi, ma credo si possa dire
che la lettura di codeste poche righe di prefazione possa essere unautocertificazione della
propria appartenenza al ringraziamento suddetto.

Possiamo iniziare.

Lasciatemi fare solo unultima nota stilistica: la font scelta per la stesura dellelaborato una
Bodoni, ed stata utilizzata per rendere omaggio alla citt di Parma, la quale mi ha
deliziosamente accolto in questi due anni di laurea specialistica e di cui porter sempre un
bellissimo ricordo.

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8
- Introduction

Retailers are getting used to having a central role on people lives, on the industry in which they
work and on society as well. No wonder if the biggest company in the world is not more an
industrial company as it was in the 70s (it was General Motors with a total sales of 24,3 billion
of dollars), but it is a retailer (Wal-Mart with a total sales of 476 billion of dollars) (source:
Fortune). Society changes and evolves, people tend to do things in different ways, and while a
dynamism takes place in different countries, powers equilibria and the importance of the
different institutions have been turned upside down.
Therefore it is interesting to analyze how retailers change in order to see how they adapt their
sales policies to new customers needs, and how they compete in a business which has been
always characterized by a high degree of competition (Shaw, 1992).
Thus, one of the typical issue observed when it comes to retail is how they innovate: what are
the drivers of innovation and how their innovation can be conceptualized and formalized.
Businesses, innovation and processes has been always studied with an industrial
approach, due to the fact that modern economy was born with Industrial Revolution, based on
goods, and so research has been principally made on them (Vargo, Lush, 2007). This aspect
implies that also the innovation of activities which are service based rather than good based as
retailing is, has been studied with good-centric theories and frameworks (McNair, 1958;
Hollander 1966; Davidson et al., 1976; Lugli, 1976; Levy et al., 2005).
So, the purpose of this paper is finding out a service-centered framework that could be used to
explain, analyze and design retail innovation according to the modern state of distribution in
order to give a contemporary point of view and interpretation of retail innovation to academics
and retailers.
To achieve this aim, and answer to this research question, it has been done a deep
review of both service and retail innovation literature, in order to understand with a dynamic
approach what are the most modern and complete theories designed to address these majors.
After doing that, it has been necessary to put in action a conceptual work so as to understand
how the two theories could be merged in order to develop a change of view in the retail
innovation study and find out a new prospective to address this issue.
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The first chapter is about service: its aim is finding out a current definition of service in order to
understand what it really is. This will be done developing a historical process in order to range
on different countries, schools and philosophies, reviewing the whole literature developed on
this subject. As a matter of fact, it will be recognized the most innovative framework to address
services, to give them a definition and a model to interpret businesses, economies and society.
The second chapter is about retail innovation and like the services chapter, it will
address the principal theme of the section with a historical and geographical approach in order
to dynamically understand the different theories and methods used to conceptualize retail
innovation over the time. The principal goals of this section are both giving a whole and general
frame of the different theories developed by academics and identify the more appropriate
theories which explain retail innovation, according to the present and future scenarios.
The last chapter is the conceptualization of how the most innovative and supported
framework based on service can be adapted to retail innovation in order to develop an
alternative point of view and prospective to address this topic from both academical and
managerial side. How retail combinations can be used and what are the principal aims that
retailers should keep always in mind when it comes to innovation.


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1 Service


1.1 Tailoring a fitted definition for Service

1.1.1 The Good-Dominant approach

Giving a definition to the term service is not so easy as it could appear; it is due to the intrinsic
nature of the entire sector and its evolution over the time, and for this, defining service and
service sector has been a challenge for many scholars who have spent their thoughts and their
deductive and inductive reasonings, developing different definitions over the years, analyzing
from the narrow to the broad.
Cook et al. (1999) has developed a guiding light in the literature of Service Science unifying
the different definitions of service developed over the years. Therefore, follow their contribute
appeared to be a good point for going through the different definitions and scholars which
treated the topic, analyzing the evolution of this subject and what has been changed in the
course of time, so as to point out possible perspectives and scenarios.
The purpose of this section is to achieve a satisfying definition of service for the present and
future economy, showing the reasons why it is the right one. To do that, it is necessary to recall
the pace of these studies, from the definition to the entire subject, analyzing the different
currents developed and undertaken by the principal Schools in the world specialized on this
field.
Starting from the beginning, an early attempt to define the term Service was put forth
by the Definitions Committee of the American Marketing Association (1960, p. 21) as follows:
Activities, benefits, or satisfactions which are offered for sale, or are provided in connection
with the sale of goods. Examples are amusements, hotel service, electric service,
transportation, the services of barber shops and beauty shops, repair and maintenance service,
the work of credit rating bureaus. This list is merely illustrative and no attempt has been made
to make it complete. The term also applies to the various activities such as credit extension,
advice and help of sales people, delivery, by which the seller serves the convenience of his
customers.
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This, like other early definitions, is made by a list of activities and examples, and according to
Judd (1964) it couldnt be used for a generalization of the concept, due to its lack of precision,
given by its dependence upon listed examples.
Reviewing the literature it is possible to face two different approaches to define service:
on the one hand. There are scholars who tried to give a broader definition of it, following the
example of AMA which did it for first in 1960. On the other hand there are other scholars who
have chosen a narrow approach, producing narrower definitions that, although their contribute
is almost on the scope of what one might consider a service, they provide a useful tool for
determining those industries that should be included in the calculation of relevant statistics for
what we consider the service sector of our economy (Cook et al., 1999).
Among scholars who belongs to the first category, a brilliant contribute has been given
by Murdick, Render and Russel (1990) with their definition of service:
Services can be defined as economic activities that produce time, place, form, or psychological
utilities. A maid service saves the consumers time from doing household chores himself or
herself. Department stores and grocery stores provide many commodities for sale in one
convenient place. A database service puts together information in a form more useful for the
manager. A night out at a restaurant provides psychological refreshment in the middle of a
busy workweek.
This conceptualization shows a first insight on some aspects that should be studied when it
comes to service: service quality, fist of all, and secondly customers satisfaction. Cook et al.
(1999) emphasize those aspects: the importance of understand and re-analyze the core
benefits of products, focalizing in aspects as quality, product design and process design for
developing an advantage on competition.
On the contrary, narrower definitions instead, show the trend to think services like
something that couldnt be separated from goods, because their delivery depends strictly on the
presence of them, and showing that their aims is adding value to goods value.
According to Cook et al. (1999), this thesis is supported by Zeithaml and Bitner (1996) when
they argue that In simple terms, services are deeds, processes, and performance, showing the
not tangible nature of them and introducing their non-separation to goods peculiarity. This
aspect has been argued by different academics, who approach these studying with a Good-
Dominant logic, or prospective, given by Industrial Revolution and relative industrial studies.
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This logic has been used to analyze and study other phenomenas and majors, such as operation,
marketing and service through the years.
This thesis is confirmed by the fact that different contributes of academics show a tendency to
make the wight of goods prevails on the services one such as Berry and Parasuraman (1991):
Manufactured goods and services are inextricably related, and savvy manufacturers are as
interested in the quality of their services as of their goods. These companies realize that
customers buy products whose core benefit is delivered not by a good or service, but by both,
or even better, a very incisive Levitt (1972) when states: There is no such thing as a service
industry. There are only industries whose service components are greater or less than those of
other industries. Everybody is in service.
In other terms, services have always been considered as support to goods, like features with the
aim to increase and make a better value of them.
Hill (1977) started his reasoning about what service is and what goods are, with some
observations on reality and what is supposed to be a sort of service (e.g., the shipment of goods
by a transport firm; the repair of a vehicle or redecoration of a house; the shampooing of hair by
a hairdresser), pointing out two aspects present in each case.
First, in every case there are some goods or a person which experience a change of their
condition, and second, that change is developed by the activity of another business unit (one or
more than one). Starting from this point, Hill shows that service may be defined as a change in
the condition of a person, or of a good belonging to some economic unit, which is brought
about as the result of the activity of some other economic unit, with the prior agreement of the
former person or economic unit.
According to the author, in this way, one unit "serves" the other and with it there are
two distinct roles which are a client and a provider. Hill continues with another consideration:
due to the fact that in this transaction, nothing is actually exchange between them in the way
that the ownership of goods is transferred from one unit to another, is quite inappropriate to
talk about immaterial goods.
The last clarification shows another contribute pro our first classification, in which the author
tries to define service arguing a definition from a Good-Dominant logic, showing indeed, a
tendency to analyze and study a different major with tools, words, and concepts taking from an
another conceptual contest, the one acquired by the Industrial Revolution and based firstly on
goods.
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According to Gummesson (2012) this part of research could be framed in that period of studies
where academics passed from the Services are not recognized, all is goods and manufacturing
era, introduced by Smith (1723-1790), to The era of goods-service differences where
scholars started to get used to the idea of adding special services marketing to existing good
marketing started up, and think about services in terms of IHIPs definition (Lovelock, 1983).


1.1.2 IHIP frame

After this first current of good-centric definitions, there are a second frame which has been
developed by scholars who have tried to define services classifying them, instead of giving a
pure definition, dividing them to goods, and emphasizing on their sole nature.
This method found a successful development with Lovelock (1983) who designed a frame to
classify operatively the different types of services so as to find a helpful classification for service
marketing.
To do that, Lovelock creates five matrixes to answer to five aspects concern the service
marketing. These matrixes, subsequently, define a series of dimensions which represent the
key characteristics of a service and so, from the development of these focal points, the author
achieves to the well known and quoted acronym IHIP, which stands for Inseparability,
Heterogeneity, Intangibility and Perishability.
Inseparability denotes the fact that services are consumed in the same moment they are
produced, so they cannot be stored and therefore demand instability cannot be solved with
store process. Thus, quality control can not be achieve before the consumption of the service.
Heterogeneity instead, represents the broad variety of services which depends on the client
prospective, to the subsequently personalization of them, over the different perceptions by
clients. All this contributes to extend a wide range of services.
Intangibility implies that services have not material consistence so they are represented by
performances, not goods, becoming an experience for the clients which will tend to give a
subjective prospective, rather than an objective one.
Perishability means that services cannot be stored, and in consequence, to gain benefits, the
customers have to be actively involved in the process and if they dont use it that service will
expire.
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The IHIP frame has been taken as a model to define service, and in particular those
characteristics have had an impact on marketing strategies, most of all on service marketing.


1.1.3 From value co-production to value co-creation

Reviewing the literature, there are other developments that have amplify these notions of
service, going to emphasize some aspects that are the concept of activity or series of activities
[) which are provide as solutions to customer problems (Grnroos, 1990) or value that
can be rented (Lovelock and Gummesson, 2004).
In 2006, Fitzsimmons and Fitzsimmons confirm the role of customers as co-producer, when
they define service as A time-perishable, intangible experience performed for a customer
acting in the role of co-producer.
Solutions to customer problems, value-creating, and intangible experience co-
producing, are concepts that added to the IHIP frame, bring us to an another level of
conceptualization of service, which is taking distance from the previous Good-Dominant logic
and going to the direction of something different, a neutral approach to service, a study of the
process of value-creation and value-co-creation.
According to Spohrer and Maglio (2007), the process behind what it could be defined as a
service supply, puts customer inside it, re-defining its role from pure client, to co-producer.
Thanks to that, its position can be summarized and identified through three characteristics,
which are:
- a key-role in the value production, which means becoming co-producer
- client has roles and responsibilities in the process
- the produced value is represented by the new status of the client or its good, thanks to service
transformation.
Cavenago and Mezzanzanica (2010), after having illustrated the different steps of the
service supply process, show how the client is a completing part of the process because it takes
advantages form the relation with supplier and a customized experience, most of times, tailored
on its needs. Indeed, client has an experience from the whole process, and not only from the
final result.
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According to Pekkola (2007), client demand, is the factor that most of all influences supply
and final result of a service: as a matter of fact, production and consumption are develop at the
same time and they cause a strong dependence from the client.
When it comes to define service, according to what said until now, there is a central
point, a central expression which recurred often and it is value co-production.
According to Cavenago and Mezzanzanica (2010), reading what Fuchs said in 1968, before all
the academics, about the identification of client as a co-producer actor, to Ostrom (1996) who
developed a properly and well accepted definition of co-production - a process throw which
input from people, coming from the outside of a production organization, are transformed in
services and goods used by people again - they come to think that co-production means
involving client in the service process, and the interaction between client and supplier is a
dimension strictly correlated with co-production and collaboration.
It is important define another concept of this definition in order to understand the following
statements which is value.
One of the most used definition of value is the one written by Woodruff and Gardial (1996).
They sustain that the relevant value to customers is the customers perception of what they
want to have happen [...] in a specific use situation, with the help of a product or service
offering, in order to accomplish a desired purpose or goal.
A pioneering view is given by Vargo and Lusch (2007) when they provoke the old
terminology used by Service Science with the concept of co-production, showing a the better
concept of it through value co-creation.
In fact, according to the FP6 of the Service-Dominant logic (which well discuss later), when it
comes to talk not only about services but also to goods production, it is better to use the term
creation, due to the fact that production is a term received in dowry from the industrial
revolution and industrial studies which have been developed on the merely goods production.
Rather than, looking at services, or goods as well, in a Service-Dominant logic view, that
consider not only goods but also service as distinct concepts, it is better to say co-creation of
value, because production is only about goods, while creation include both goods and service
development.
Another prospective of value creation (in this case), is given by Grnroos (2010) when
he points out that Value creation is the process of creating value-in-use out of such
resources, and this because only the resources needed to the service delivery are produced,
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while service, for its nature of production-consumption, is generated with the collaboration
between client and firm, at the same moment it is used by the client, extracting the highest
value-in-use from the available resources.
However, an important aspect that should be deducted from this paragraph, is that a
fundamental aspect of the service supply process is the collaboration between client and
supplier, or even better (Vargo and Lusch, 2007) the collaborative nature of value creation.



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1.2 Service Science through time and space

Looking at the past, the separation of studies between Industrial Economics and Service
Economics has developed a gap between two different subjects: around the world the second
one has spread its studies in different Universities and Research Centers, moving over the old
one, which was build on the first years of the Industrial Revolution and had a strong impact on
the production of goods. Its only recently that North American University has been starting to
develop appropriate research centers that link ICT field with management and economics
science, in order to merge old knowledge about Industrial Economics and engineering, to the
modern approach at the Service Economies.
What is born is a new field of studies, which is define Service Science, Management and
Engineering (SSME): a brand new area of studies where it is possible build theories, models
and applications and that connects two fields which have been studied in time,
separately (Bitner et al., 2007).
From this prospective, according to Spohrer and Maglio (2007), who define it as the
application of scientific, management, and engineering disciplines to task that one person,
organization, or system beneficially performs for and with another person, organization, or
system (services), it is wise consider SSME divided it in three parts, which are:
- implementation of scientific principles in order to study services and their evolution;
- service management to understand the best way to create a project system and deliver each
service;
- service engineering to discover new technologies for producing or delivering services.
According to Bitner et al. (2007), the main purpose of Service Science is to offer a
scientific analysis to service subject, in order to achieve maximum performances, solve
problems directly connect to the services characteristics and then, systematize innovation
development.
To understand how Service Science is developing among academics and what are the main
currents on this major, is important to review the contributes from European Academies that
are studying this argument.
Indeed, according to Cavenago and Mezzanzanica (2010), the 38,7% of research papers
developed on this field is produced by American academics, while 38,5% from Europe (where
UK has 38,7%). So, after having analyzed the modernest theories from US, is important to see
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an exposition of the principal contributes in order to understand where academic literature is
going, so as to have a complete prospective of the Service Science around the world, finding out
what will be the trends of this major.
As shown, Nordic School of Service gave strong and pioneering contributes on this
argument during the 70s. There are important considerations of Cavenago and Mezzanzanica
(2010) on this school, which has always been lead by a marketing driven prospective, arriving
to Grnroos (1991), one of the most known academics who have addressed these topics, where
it is possible observed an analytic study on service management, entirely developed on
marketing areas, such as internal marketing and international marketing.
Its only since 2005 that this approach has been evolving becoming more focus on two main
macro aspects which are: relationship with client and service quality. Thanks to an analytical
review of service quality systems, written by Cian and Cervai (2013) it is easy to understand
why the Nordic School of Service has studied these aspect together for all these time: it is from a
deep study of the service quality level that actors (e.g., companies) can achieve high goals of
retention rate and therefore build a relationship with clients over the time.
Looking around in Europe, there are also other Schools which have developed different
approaches to the Service Science: on a side there is UK where after the Industrial Revolution,
where studies about services were not already distinct from studies about goods and production
of goods, it stands out an important change of direction during the end of the 80s when after
years of questions and theories, academics like Lockyer (1986), Morris and Johnston (1987),
definitely accepted that, according to Cavenago and Mezzanzanica, a separated definition,
analysis and study of services will be truly helpful to understand the dynamics of a changing
world, and a changing supply system, maybe also thanks to the influence of the Nordic Schools.
Another interesting prospective is given by German studies, which are focalized on the
importance of the employees and their satisfaction over the customer satisfaction, a
fundamental aspect of the Service Science. That is because the manufactured based economy
and the German approach which looks very deep at the importance of the employees into the
governance and the economy, In fact, according to Kantasperger and Kunz (2005) there is a
strong connection between these two variables, that are employees satisfaction on a side, and
customer satisfaction on the other side: as to say that the perception of the service quality by the
customer is driven by the capacity of the employee to delivery a high quality service, thing that
depends on the satisfaction of the employee about its jobs, its social dimension and other soft
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variables. This approach is due to the employed-oriented soul which has been characterized
Germany since the beginning of its industrial history.
Among the different contributions given by Italian scholars, according to Cavenago and
Mezzanzanica (2010), there is a particular current which refers to the value creation through
knowledge management, handled with the support of technology and relationships. This
approach implies the fact that when it comes to deal with service delivery, the salient themes is
technology which is a key element to move and manage information, to create new knowledge
at different levels of the organization and thus, to make innovation easier to develop.
Indeed, according to Cavenago and Mezzanzanica (2010) which are part of the italian current,
Service Science is a way to reduce the problem and the effects of delocalization: as a matter
of fact, delocalization of the goods production is easier and more effective in results rather than
a delocalization in low cost countries and economies of services production, where there is a
high contribution of what is defined as knowledge management.
It is only more recently that it has been developing a meeting of minds between US
studies with the Service-Dominant logic and the Nordic School of Service, where in a recent
contribute, Grnroos and Ravald (2011), admit that the role of marketing is reframed
beyond its conventional boards.
However, Grnroos and Ravald challenged a particular and important point of Lush and Vargo
s (2007) view when it comes to the roles of producers and consumers in a goods-dominant
logic, where they are distinct, whereas in a Service-Dominant logic perspective are not
(examine in depth later). According to Grnroos and Ravald, a clarification of the roles of
different actors in value creation is necessary considering the implications for research and
practice in marketing.
That is important because with this different view, it is possible to understand the separated
role of the firm and the client in the service supply process, and precisely the firm would be
responsible for the production process, including development, design, manufacturing and
delivery as well as back-office and front-office activities.
This aspect focuses the attention on the different responsibilities of value facilitation and value
creation that the supplier has in the service delivery process and its impact on the measurement
of the service quality.
In the end, as Gummesson (2012) noted, IBM has recently been having such an
interesting role in defining and developing Service Science, almost thanks to Spohrer and
20
Maglio (2007), who after having reviewed the entire panorama and the evolution of service
major through the time, they demonstrated that economies are shifting from agriculture and
manufacturing to services. Thus, considering a Service-Dominant logic to approach present
and future challenges and business, re-design the actual academic system moving to a multi-
disciplinary scenario is necessary to form a new specialty that increases our understanding of
value coproduction in sociotechnical systems.





21
1.3 Service-Dominant Logic: a new mindset to look
at social and economic exchange phenomena

Among the different conceptualizations and theories about service and service science
developed by scholars and reviewed so far, a salient contribute at the literature has been
provided by Steve Vargo and Bob Lush in 2004.
According to Gummesson (2010), the authors have inventoried research from all over the
world, including both Nordic School and US publications in order to obtain a synthesis of
scattered research, which has been synthesized in a research paper, published in 2004 after ten
years of writing and five of journal reviewing, named Evolving to a New Dominant Logic for
Marketing.
Initially, the principal aim of Vargo and Lush (2004) was changing the prospective from which
academics has studied marketing across the time since its first development, when it was seen
as a study of distribution and exchange of commodities and manufactured products (Shaw,
1912).
However, after having argued about different aspects, as discussed subsequently, and
generalized their first strictly marketing approach, they achieved to present what they arrived to
consider as a mindset, a lens through which to look at social and economic exchange
phenomena (Vargo, Lush, 2007).
To understand why they have defined their research paper in that way, it is essential going
through the whole conceptualization and argumentation, the main reasons behind their line of
thinking and the ten foundational premises on which the entire logic is sustained and the
implications for further studies and developments.


1.3.1 An evolving scenario

As seen so far, services have been studied through a Good-Dominant logic, which Vargo and
Lush sustain, has traditionally define service as a residual (that which is not tangible good;
Rathmell, 1966) something offered to enhance a good (value-added services), or what have
become classified as services industries.
22
This imply that marketing as well has always been studying with this approach, although the
economy has shift from agriculture and manufactured sector to a service one (Spohrer, Maglio,
2007). During the first years of the twenty century, its role moved from the classical one
proposed by Shaw (1912) to an institutional one (Nystrom, 1915) before, and functional one
(Weld, 1917) after, passing through the Marketing Management theories (Kotler, 1967) to
the more recent Relationship Marketing (Berry, 1983) and Service Marketing (Grnroos,
1984) theories, part of the what has quoted as Marketing as a Social and Economic Process.
According to Rust (1998), it would be important to integrate a view of goods and services to
explain and approach to evolutionary scenario, closing the economic period where they have
been viewed separately; indeed he argued: The typical service research article documented
ways in which services were different form goods Its time for a change. Service research is
not a niche field characterized by arcane points of difference with the dominant goods
management field.
So, Vargo and Lush tried to answer to the call, understanding that marketing has shifted form
the exchange of tangible goods (manufactured things) to the exchange of intangibles,
specialized skills and knowledge, and processes. This has been a step to re-design the
marketing approach toward a more comprehensive and inclusive dominant logic, one that
integrates goods with services and provides a richer foundation for the development of
marketing thought and practice.
To understand the evolution of the approach with which companies and academics
should look at customers and at their own businesses, even they are service delivery or
manufacturers, is fair quoting Gummesson (1995) who stated: Customers do not buy goods
or services: they buy offerings which render services which create value The traditional
division between goods and services is long outdated. It is not a matter of redefining services
and seeing them form a customer prospective; activities render services, things render services.
The shift in focus to services is a shift from the means and the producer perspective to the
utilization and the customer prospective.
A deep contribute to underline the fact that the conceptual shift is driven by customers
purchases and how they interpret what they buy: something, a good or a service, that aims to
satisfy a certain need.
23
In other words, Marketing has been moving from a goods-dominant view where the central
focus was on tangible outputs and discrete transactions to a Service-Dominant view in which
intangibility, exchange processes, and relationships are central (Vargo, Lush, 2004).
Thus, another provocation arrived form Alderson (1957) who advised: What is needed is not
an interpretation of the utility created by marketing, but a marketing interpretation of the
whole process of creating utility. A contribute that shows the importance, and the lack as well,
of a frame able to re-understanding and re-design marketing and its role in business, and in
society as well, after having admit and recognize (Shostack, 1977) that the classical marketing
mix, the seminal literature, and the language of marketing all derive from the manufacture of
physical-goods, and for this reason, it couldnt fit how customers interpret their purchases and
their collocation on the value-chain.
To complete this introducing section to the Vargo and Lush work, is important to
spend a few words about the passage from operand resources to operant resources.
Costantin and Lusch (1994) define operand resources as resources on which an operation or
act is performed to produced an effect, an operant resources, those employed to act on operand
resources.
This is an important differentiation, helpful to understand the evolution of the whole scenario
due to the fact that according to Vargo and Lush (2004), since Malthus work (1798) the term
resources have meant natural resources that humans draw on for support, and in a goods-
center dominant logic, the operand resources (which include row materials, minerals, land)
were considerate the principal elements on which possession firms or nations would build a
competitive advantage, or in other words, primary.
However time passes and things evolve, and in the late twentieth century, as human began to
realize that skills and knowledge were the most important types of resources, operant resources
start overcoming the operand ones. In fact, Zimmerman (1951) was the first among academics,
who realized that there was a shift from resources seen as operand, which implies static and
finite, to a view where skills and knowledge took place and their nature, dynamic and infinite,
alter the prospective of them. Resources are not; they become, the well known quote of
Zimmerman was one aspect that change the mindset and contribute to make some doubts about
the present (Good-Dominant logic) approach rise.


24
1.3.2 A new definition of Service, and the 10 FPs of the
Service-Dominant Logic

In the end, it is the time to appreciate the work of Vargo and Lush, and after having analyzed all
the different parts that contribute to describe the actual scenario, starting from the definition of
service, according to Vargo and Lush, which define it as the application of specialized
competences (knowledge and skills) through deeds, processes, and performances for the
benefit of another entity or the entity itself.
A definition that recall different conceptualization analyzed before, and which focuses on
specialized competences, knowledge and skills, and that is applicable to all marketing
offerings, including those that involve tangible output (goods) in the process of service
provision.
This was the first, a sort of zero point of the theory, and it is helpful to understand the
implications develop further and the entire mindset. Nevertheless its trying to define a fine
concept as service is (due to its dynamic nature), it develops a conceptualization that embeds
not only service, but also goods, unifying them under the label of marketing offerings, and
putting marketing at the center of the definition, as a cardinal point to address the whole
mindset.
Thus, Vargo and Lush defined ten key points through which they developed a mindset
called Service-Dominant Logic, which re-define the strategical and cultural approach to
marketing, at first, but which effects and interpretation could be extended to organizations
(profit and no-profit), markets, economics and society, as they noted in a different update of
their work, published in 2007, in which they clarify some points illustrated in the first research
paper published in 2004.
For the purpose of this thesis is important to review and discuss the different
foundational premises (FPs) analyze and understand them, in order to apply their view further.
For this reason, it is wise seeing one by one each FP, at last version, after has been updated by a
debate among academics from over the world, which has pointed out different weak points, and
which has permitted Vargo and Lush to develop a new version of their first paper, which clarify
meanings and implication over the mindset.
The first FP states: Service is the fundamental basis of exchange.
25
This first premise implies that service is the application of specialized skills and knowledge,
which are the two basis operant resources in a scenario where specialization is the most
efficient way to develop skills in order to perform better and achieve scale effects.
Indeed, the authors show that when it comes to talk about basis of exchange, since Platos time,
specialization skills has been recognized as basis of exchange, while the concept of the division
of labor served as the foundation for Smiths (1904) work.
Therefore, since having defined service as the application of specialized skills and knowledge, it
is possible to say that service is the fundamental basis of exchange.
The second FP goes over the first one and emphases on the fact that Indirect
exchange masks the fundamental basis of exchange.
Nevertheless it has been shown that service is the fundamental basis of exchange, in the
economy, organizations has monetized the whole system creating indirect exchange units that
people exchange overcoming the pure and essential basis of exchange, defined as service. So,
Vargo and Lusch showed that money, goods, organizations, and vertical marketing systems are
only the exchange vehicles, and so, service is provided through complex combination of them.
After having stated the bases of the exchange and showed why academics dont
appreciate that fact, the authors debate on goods, saying: Goods are distribution
mechanisms for service provision.
This is a strong statement, which turns the entire prospective to the economy, where goods
(and their exchange) have always been seen as fundamental pillars of it, into a new point of view
where goods are no more the common denominator of exchange, but distribution mechanisms
for service provision.
Therefore, tangible goods can be considered as a capsule where knowledge and skills (stated as
service, and so, basis of exchange) can be indirectly transferred by embedding them in them.
This conceptualization has been developed by other academics, and among them Vargo and
Lush quote Kotler (1977): the importance of physical products lies not so much in owning
them as in obtaining the services they render, and on the same direction Gummesson (1995)
when he argues that activities render services, things render services.
The whole line of reasoning conducts us to the inevitably conclusion of Gutman (1982) when
goods are viewed as distribution mechanisms for services, or the provision of satisfaction for
higher-order needs.
26
The following premise is about competitive advantage, and it suggests a connection
between knowledge (defined it in a wide meaning: in 2007 Vargo and Lush substituted it with
the more general operant resources), arguing: Operant resources are the fundamental
source of competitive advantage.
This is a crucial point, which summarizes different current economic theories about
competitive advantage where it shown that firms productivity is primarily dependent on
knowledge or technology (Capon, Glazer, 1987).
In fact, observing the dynamic of these concepts evolution, is easy to appreciate how, while in
the neoclassic model of economic growth, the development of knowledge in society was
exogenous to the competitive system. With Dickson (1992) academics start converting to a
view suggesting that the firms that do the best are the firms that learn most quickly in a
dynamic and evolving competitive market.
In other terms, due to the characteristics of the evolving scenario, the adaptation to the new
logic of markets (goods, service, work as well) is a fundamental pillar to build and maintain a
competitive advantage, and this adaptation is highly correlated, according to Vargo and Lush to
knowledge, or even better, to operant resources.
At the end, this assumption, should be contextualized in a scenario where, according to Evans
and Wurster (1997) every business is an information business.
Now, having analyzed different assumptions regarding service, indirect exchanges,
goods and operant resources, Vargo and Lush argue one of the most important premises of this
new prospective, saying: All economies are service economies.
A deep conceptualization that is an inherent consequence of what said until now, and that is
based on two aspects. On the one hand, economists have taught marketing scholars to think
about economic development in terms of era or economies, such as hunter-gatherer,
agricultural, and industrial, and on the other hand, activities and processes through which each
era has been developed at a macro-specialization level, are characterized by the refinement and
application of specialized knowledge and skills, which are, service.
Thus, according to Vargo and Lush, services are not just now becoming important, but they
always did, and so, is reasonable to think that: services and the operant resources they
represent have always characterized the essence of economic activity.
27
Reviewing the literature about service, the expressions of value, value production, or
even value-in-use are very common, and they dress different meanings and interpretation
according to different academics and theories.
The contribute of Vargo and Lush on this argument could be substantially summarize in the
sixth FP of their research paper, saying: The customer is always a co-creator of value.
This premise emphasizes the role of the customer on the service, and so product, development
and delivery as well. In fact, while customer has always been a potential target of a business,
authors talk about the normative goal of marketing is customer responsiveness, the passage
of the spotlight from operant resource, where the customer was merely a target, to operand
resource, where it becomes primarily a co-producer has signed a re-conceptualization of its
role into the supply chain.
The extension of this idea has been supported by Oliver, Rust and Varki (1998) who have
pointed out the paradigm of real-time marketing, seen as the integration of mass
customization and relationship marketing with the interacted design of services and products
which meet costumers unique changing needs.
So, according to what said in this paragraph, the presence of the customer in the design
process, is an essential element to develop solutions which answer to its needs, and for doing
that, is necessary to recognize its role in the value creation, that is, a co-creator.
Thus, when customer is considerate a substantial part of the co-creation funnel, The
enterprise, cannot deliver value, but only offer value proposition.
The meaning of this premise is an inherent consequence of the previous one, and it is due to
the fact that there is a strong differentiation between embedded value (value in exchange) and
value in use.
According to Gummesson (1998) if the customer is the focal point of marketing, value
creation is only possible when a good or service is consumed. An unsold good has no value, and
a service provider without customers cannot produce anything. This shows the importance of
the customer in what could be figured as a form of synthesis of elements which transform the
value embedded into the real value.
Thus, company can only offers a value proposition, that customer provides to develop into
value, or even better, value in use. On this point, a contribute of Grnroos (2000) about the
new and active role of marketing, and thus of the enterprises, into the economy, clarifies the
assumption: the focus of marketing is value creation rather than value distribution, and
28
facilitation and support of a value-creating process rather than simply distributing ready-made
value to customers.
The last FP of the original research paper (other two of them were added in the paper of
2007) is about a position of the entire theory following some pillars of the marketing theory
developed during the last decades.
Therefore, Vargo and Lush emphasize this aspect arguing: A service-center view is
inherently customer oriented and relational, underlying that interactivity, integration,
customization, and coproduction are the hallmarks of a service-centered view and its inherent
focus on the customer and the relationship.
Thus, according to this line of reasoning, is logical considering the whole theory and new
paradigms as part of the relationship marketing current, which was born in service literature
with Grnroos (1994), and develop on different fields concern marketing aspects.
After closing the debate on this premise, Vargo and Lush note that this view harks basck to
pre-Industrial Revolution days, when providers were close to their customers and involved in
relationships that offered customized services, to underline the not new evidence of it, and
above all, how those conceptualizations are not more than a re-application of what have always
existed before the overcome of industrialization.
The last two FPs, have been added by Vargo and Lush in 2007, after a few year debate on those
premises and on their (nonetheless they are sustain the mindset is not of their propriety)
theories, thanks to the contribute of several academics on this topic, due to the relevance of this
prospective in the whole literature.
The first says: All social and economics actors are social integrators, and its the
evolution of the original one (Vargo, Lush, 2006) which argued: organizations exist to
integrate and transform microspecialized competences into complex services that are
demanded in the marketplace.
This is a focal point to understand, and even better interpret the role of organizations in
economy and in society as well. But considering that all economic entities are resource
integrators, according Arnould (2006) who noted that the resource-integration role of firms is
equally applicable to individuals and households, so out of a business and economic frame, a
true extension of the concept has been possible, along the social side, involving not only
organizations but all social and economics actors.
29
The second and last one, focuses on a concept that summarizes many aspects described
so far, recalling the roles of customers and the value-creation, arguing: Value is always
uniquely and phenomenologically determined by the beneficiary.
The focus should be put on the term phenomenologically that according to Vargo and Lush
consists in the experiential essence of value-determination, which recall the concept of value-
in-use as the main part of value-co-creation with the always main character that is the
beneficiary. Thus, after having said that enterprises can only offer a value proposition and
argued on the centrality of customer, is easily to derive that the determination of value is a
matter concerns with the beneficiarys experience of it, as authors underlined with this last FP.


1.3.3 Conclusion

As said at the beginning of this chapter, giving a right definition and collocation to service and
service sector has been challenging since the beginning of the first research on economy and
business. Due to its nature and the evolution of different prospectives and points of views to
analyze and understand them, nowadays there is a large literature that shows the whole
evolution.
In these years, thanks to ICT and its role in service science (Spohrer, Maglio, 2007)
which has overcome some limits of the most well accepted definition of service (Lovelock,
1983; Cavenago, Mezzanzanica, 2010) different academics have been alerting, through years,
the need of (Alderson, 1957; Zimmerman, 1951; Gummesson, 1995) a new mindset to
understand the evolving scenario and the independence of service from goods, or even better
from a Good-centric prospective born and developed with the Industrial Revolution, to a wider
understanding of it, rooted in the pre-Industrial revolution era, and declinable to this new
present, characterized by the meaning of value, and the recognition or even assumption of the
importance of the application knowledge and skills (service) in the economy, considering them
the basis unit of exchange of it.
According to this, the Service-Dominant logic can be as a consistent frame to analyzing and
interpret the entire system, or, as Vargo and Lush (2007) argues: a mindset, a lens through
which to look at social and economic exchange phenomena so they can potentially be seen
more clearly.
30
2 Retail Innovation


2.1 Retailing through time

According to the Oxford Dictionary, Retail stands for the sale of goods to the public in
relatively small quantities for use or consumption rather than for resale and its origin is from
the use of Old French retaille which indicates a piece cut-off, from retailler, from re-
(expressing intensive force) + tailler 'to cut.
It is important to start from the definition of retail, because in this section it is think in the
pursuit of having an in-depth analysis on the evolution of retail sector. For this reason,
beginning from the definition it seems to be a good start to get in this industry.
Reading again the definition and the origin of the word retail, it is undeniable that the
common usage of this term refers to the transactional act that involves a merchant (retailer) and
one (or more) client. The differentiation thing is that this transaction is about small quantities,
mainly for use or consumption rather than for resale, that means it is addressed to final
consumers.
Looking deeper at the role of retailers in the society, Niemeier et al. (2013: 10)
emphasizes the fact that it is an intermediary which has to know both demand and supply in
order to match the flow of goods with information about them in order to earn the highest
possible return on the money invested in inventory.
This focus is a pillar in the explanation of what a retailer should do in order to achieve profits: it
has to read and understand the market, its clients, adjust to it and upgrade its range or selling
techniques so as to adapt its offer, fitting as best as possible to customers needs, in order to
develop loyalty among clients.
Niemeir et al. (2013: 9-25) explain the evolution of the role of retailer reviewing the
most important changes in its history, dividing them into three main eras which are: the
mercantile, the modern, and the digital one.
The first one, the mercantile era refers to the traveling merchants of the late Middle
Ages which can be consider the first form of what it is considered a retailer (definition above).
31
In fact, before that, craftsmen used to sell products produced by them directly to people, but it
was only with merchants that retailing born as we know now.
At that time retail was highly connected to travel living: merchants used to buy goods from
specialist centers of production and organize themselves to sell those products through
markets, fairs, and networks of peddlers. Sea routes pioneering gave a strong contributes to the
evolution of this industry and with it, European merchants were be able to enlarge their ranges
of products, trading goods from India, China, Japan and America. Little by little it comes to
become a global market, and with it agents start to born on the main harbor cities, allowing
merchants to develop their own business without staying away from home for long times.
Following the path of evolution, in the 18th Century, different areas and streets in big
cities such as London or Paris, start becoming point of interests for trading. In this scenario,
the figure of shop owner start blooming: it was a merchant who knew most customers by
name, and thank to that, it was relatively easy to purchase stock that was likely to sell (Neimeir
et al., 2013:12).
From this period, retail passed to the second era, the modern one, thanks to the
Industrial Revolution in the mid-18th Century. The extraordinary wave of change and
technology innovation that characterized this era is one of the main reason behind such an
impressive development of innovation along the entire retail industry.
As a matter of fact, this era, starting with the Industrial Revolution, has been extended until the
end of the 20th Century, and it has seen different changes in all sectors, and in the retail one as
well. Under its bridge many distribution model has been passed, and among them it is worthy to
remember (Nystrom, 1915: 195-254) chains model, with the cases of A&P in the US and Penn
Bazars or Lipton in UK (Shaw, 1992: 136-165), the evolution of the monster shops and the
arrival of the department stores, the case of Bon March in Paris and other entrepreneurs which
set a great numbers of department stores in US and UK as well in that period (e.g.; Marshall
Field, Selfridges). It is also important to quote the mail-order business, from which Sears and
Roebuck & Co. were born, and remember how all those forms of retail distributions has
influenced each other, at the first time, and has had an impressive impact in what could be
considered one of the most important evolution and revolution in distribution of this era: the
self-service supermarket (Zimmerman, 1955: 18). It would be embracing not quoting Piggly
Wiggly and the contribution of Michael J. Cullen with the opening of the first King Kullen at
Jamaica Avaenue, Long Island.
32

After it there has been the time of other two impressive phenomena, which are on the one hand
the development of category killers which has been able to combine specialization with low
prices in specific categories of products, and the hypermarket: developed in French and spread
around the world nevertheless its size, and of course, it successive crisis and the rise of the
convenience stores (Cardinali, 2009: 78-81).
Last but not least, Nemer et al. (2013: 20) mention the phenomena of vertical retail, most
notably in clothing, were manufacturers start developing their own retail stores (e.g.:
Benetton).
The last remarkable act of this era is provided by the globalization: as a matter of fact, thanks to
the development of capital markets in the middle of the 1990s and its expectations for cross-
boarder expansion by leading retailers, the following spread of multinational company, has
provoked a uniformity of tastes in lot of sector (e.g.: fashion, electronic) but without impacting
in certain tastes and consumption habits.
So well, if expansion was seen as an important tool to improve productivity and profits, thanks
to economies of scale and volume, it is turned out that in certain industries such as food, the
gain of a uniformity in tastes and consumption it cannot be easily achieved, making many
retailers focus again on local scale and formats more closely aligned with domestic consumer
needs (Nemer et al.: 2013: 22).
Finally it takes place the last era, noted also as digital era. It is born over the wedding
of the Internet with the retail industry, and it is really concerned with the new economy and the
development of business process in an online environment.
Thanks to this fact, lot of retailers have seen the opportunity of enlarging their business, and
the concept of e-tail spread throughout the web. But like every story which starts with a strong
boost, there was no happy ending and the dot-com bubble exploded bringing a cold wind of
skepticism over retailers on the new electronic commerce.
Despite it, some companies has been able to recover from the explosion focusing on specific
ranges of products and improving their performances. Not only digital retailers, but brick &
mortgage retailers as well, started to look at e-commerce with interest, and so many of them
have started implementing digital and electronic systems in order to provide an answer to the
new needs of a new customer (Fabris, 2003).

33
Reviewing the path of the evolution in retail, Ellickson (2007: 2) argues that one of the
central themes of the distribution industry is that the state of constant change and continual
evolution pervades the entire history of the industry. It has been present from the reactions of
independent grocers to the rise of the Great Atlantic & Pacific Tea Company (A&P) in the
1920s, to the response by incumbent chains to the introduction of the supermarket format in
the 1940s through to the controversies surrounding Wal-Mart at the end of the last century up
to now.
As a matter of fact, on the one hand initially modernization of distribution system was provided
by a standardization process (e.g., from the independent grocers to channels), reach through a
reduction of the service level that has bring distribution to the supermarket formula,
considered the triumph of the self service technique. However, on the other hand, at the same
time, different distribution formats has adopted a trading up process during their evolution,
adding services, in order to better response to a maturing demand.
Another notable observation provided by Ellickson (2007: 12) is about the end of the
modern era and how it has been clear that information owned by retailers has been and is going
to be a source of power which is going to shift the bargaining equilibrium in their favor, due
to this invisible asset that they possessed.
Therefore, it has never been so important as now to understand the evolution of the
distribution, because of its role in society and its power along the supply chain, thanks to
information and digital evolution as well.
To do that, it is important to look at the different models and frameworks used to
conceptualize and predict the retail innovation, so as to finding out which could be a model or a
theory that more than the others fits the present and future historical period analyzed and
discuss more over.





34
2.2 Innovation Theories through time

After having synthesized a brief history of retailing, it is time to go into the main theme of this
chapter. This means doing a wide analysis of the different theories and frameworks developed
over the years to understand and predict the phenomena of retail innovation.
The purpose of this review across the wide literature about retail innovation theory is to get
some insights about it, necessary to grasp a new (or even different) theoretical point of view in
order to propose a change of viewing in order to understand the present and future scenarios
involving retail business, and retail innovation as well.


35
2.2.1 The Wheel of Retailing

One of the most quoted theory about retail innovation is the Wheel of Retailing.
This theory was developed by McNair at the end of the 50s (McNair, 1958) and it is design to
find a reason behind the innovation in the retail sector, that means, to understand what are the
drivers that bring new players into the industry and that bring other ones out of it.
To explain that, McNair supposed that the introduction of a new player is due to at a price
competition, and to be precise, at a hole in low price segment left by existent retailers who have,
over the time, developed a common strategy of trading up.
According to Hollander (1960: 1), the Wheel of Retailing shows that new types of
retailers usually enter the market at slow status, low-margins and low-price operators.
Gradually they acquire more elaborate establishments and facilities, with both increased
investments and higher operating costs. Finally they mature as high-cost, high-price
merchants, vulnerable to newer types who, in turn, go through the same pattern.

Figure 1. The Wheel of Retailing

source: Reynolds et al., 2007

36
In spite of the wight of this theory and the huge contribute that it has given to the retail
literature, there are many academics which demonstrate that this framework has many lacks
when it comes to enlarge this scenario up to the whole retail industry, and to predict every retail
innovation.
The first to admit the limits of this theory has been Hollander (1960: 41) which after
having analyzed points in favor and against the McNairs concept, argued that however it seems
to properly describe a fairly common pattern of retail innovation in industrial, expanding
economies, it could not be generalized in every case of retail innovation, because there are
many evidences against it (Hollander, 1960).
After this first article which has commented the wheel theory, many other academics
has taken part of this debate, and according to Levy et al. (2005), some notable examples of
those commentators are Goldman (1975), who has been critical of the hypothesis and it agreed
with Hollanders conclusion, or Brown (1995) who has instead been supportive.
Among italian commentators on this theory, is worthy quoting Lugli (1989: 5-10) who
despite it admit the relevance of its role among the trades management, and nevertheless the
different improves that the retail theory has obtained from different academics (Hollander,
1960; Spranzi, 1969), it seems to be many limits.
First of all, the implication that the actors are distribution formats which moves
homogeneously, has been outdated by Spranzi (1969) when he argues that discounts demand
is not constant, and its variation influences the lifecycle of new distribution formats. Another
critic is about the purpose of innovation that, rather coming only from supplys drivers it could
be addressed to an independent evolution of the demand in front of a stability of the supplys
elements.
In the end, summarizing Luglis point of view (1989: 5-10) about the wheel theory, it comes
that mechanisms behind retail innovation cannot reduce to price competition, but they can have
different origins due to environment and demands factors, and so, the McNairs theory does
not explain all the changes in the distribution scenarios.
Indeed, a final and summarizing conclusion has been written by Cardinali (2009: 2)
who summaries the evidence that the Wheel of Retailing, nevertheless all its weaknesses, has
the merit to link retail innovation to price competition, and thus, to have conceptualized one of
the drivers of innovation, that is an internal mechanism of supply, separated from the
environment and demands ones.
37
2.2.2 The Retail Accordion

According to Reynolds et al. (2007: 649) due to the difficult of wheel theory adaption to
different sectors, most commentators have preferred the idea of a subsequent retail
accordion, developed by Hollander (1966) where the McNairs theory is improved by the
concept of a continuing fluctuation between a retail sector dominated by on the one and
general merchandisers and then, on the other, by specialist.

Figure 2. The Retail Accordion

source: Reynolds et al., 2007


In fact, Hollander (1966) argues that watching at the evolution of retail sector, it seems to be a
sort of accordion pattern: there are different oscillations which characterize the evolution of the
different retail formats.
Looking at the words of Ralph Hower (1943) about merchandise assortments, he argues that in
all business evolutions appears to be an alternating movement in the dominant method of
38
conducting operations: on the one hand the specialization of the functions performed and on
the other hand specialization toward the integration of related activities under on management.
This trend is applicable to the many retail business and sector like drug trade, food
trade, bookstores and others (Hollander, 1966: 32-36). To explain this phenomena, the
author emphasizes the concept of accordion with the metaphor of an orchestra or an accordion
band: while some players are compressing the music boxes, others are extending them, and
then, while some players are leaving the band, new ones join it. Therefore, in retail population
it is possible to look at changes as arrivals or departures of merchants with various assortments,
as well as the expansion or contractions of assortments among the continuing firms.
Thus, there are two opposite forces that operate in the retail industry: on the one hand
there are theories and philosophy like the one-stop store, rather than The Sell-Everything
System which tend to enlarge the range or products available under the same roof in order to
give a complete shopping experience to the customers; on the other hand, the tendency of
specializing existent range of products as noted in The Dry Goods Economists editorial paper
in 1906.
Reynols et al. (2007) make some examples of these trend, comparing category killers such as
Toys r Us and IKEA with apparel specialists such as Burton Group and Next which respond to
the specialization current, to Tesco, Asda and Wal Marts non food activities that provides for a
resurgence of general merchandisers.
In conclusion of this second theory, it is necessary to recognize the extending intent of
Hollister that has taken the dynamic approach of the wheel theory, and he has added a new
contribute showing how the retail changes are readable as a continuos passage from an
assortment specialization to an assortment enlargement. This means going over the price-
competition factor shown by wheel theory, but rather emphasizing on a natural waving into the
merchandising strategies that characterized retail businesses.
39
2.2.3 The Retail Life Cycle

A dynamic approach to understand the evolution of retail industry over the time is The Retail
Life Cycle (Davidson et al., 1976). The concept has been developed by Willliam R. Davidson,
Albert D. Bates and Stephen J. Bass and published at the end of the 70s.
So far, it has played different roles as in academic so in managerial environment, becoming on
the one hand a theoretical pillar to analyze retail innovation through new lens (Reynolds et al.,
2007) as a framework to analyze the evolutive path followed by different kind of retailers in
order to predict possible developments and future opportunities (Sun et al., 2009; Palmer,
2005).
This model is an adjustment of the concept of product lifecycle in marketing, initially
proposed by Levitt (1956), to the retail industry. In fact Davidson et al. developed four stages
of retail evolution, in order to explain patterns of evolution among retail organizations and to
forecast future retail innovations.
The aim of Davidson et al. was to overcome the biggest limits of the Wheeling of Retail that,
according to the authors, could be summarized in: on the one hand a cost focus tends to make
the concept somewhat limited in explaining the evolutionary behavior of newer, less price-
oriented retail innovations, such as the convenience food store and the home improvement
center, and on the other hand a lack of determination of the pace with which retail innovations
rise and fall. Doing that, they meant to obtain and suggest practical implications, including
policies and strategies to develop so as to achieve at sustain profits at each of the four stages.
In fact, the concept of the Retail Life Cycle is based on the theory that as it happens for
many products, as retailing institutions pass through an identifiable life cycle (Davidson et al.,
1970; McCammon, Bates, 1971) that according to the authors is divided among four stages
that are: Innovation, Accelerated development, Maturity and Decline.
Innovation is the earliest phase of a retail institution, in which it borns thanks to a new
concept that represents a sharp departure from existing retailing approaches and as a result
tends to enjoy a significant advantage. In other terms, the retail institution has to have a
significant advantage to other competitors in order to have a value proposition that worths its
join into the market. At this phase customers are usually attracted by the new concept and so,
nevertheless sales tend to increase sharply, profits stay low due to a companys lack of size to
achieve at economies of scale to capitalize start-up costs.
40
Passed this first stage, it comes the Accelerated development, a phase where both
volume and profits experience rapid rates of growth. In order to achieve larger economies of
scale and develop their business, companies tend to enlarge their boundaries (mainly
geographic). Doing that, they start hurting conventional outlets which begin to develop
retaliatory programs to face the competition.
Maturity is the third stage and it is probably the most important phase in the retail
institution life. Thanks to differentiation and competition some problems start coming to light,
most of them regarding organization complexity and difficulty of control over the whole
organization that can be translated in a slip of the quality of operation. After that, a second
problem could be addressed increasing the dimensions of surface, facing a loss of profitability
for meter square and so, a reduction of profitability.
Decline is the following phase which could be avoided if managers can understand their
position in the retail life cycle and implement solutions to reposition the retail institution and
prolong maturity or convert it in a new concept.

Figure 3. The Retail Life Cycle

source: Davidson et al., 1976

41
According to Davidson et al. (1976), despite the difficult to determinate when a particular
institution riches the maturity stage, and of course, the length of the different phases (it could
be partially achieved only with a data and previsional model), this model can be a very helpful
tool in projecting retail developments and planning marketing strategy.
Among the different insights that we can gain from the institutional life cycle, the authors push
on some aspects. First of all, a flexible thinking at the management level is needed to face the
evolutionary change and that can be operatively translated in an implementation of different
management styles or groups during the different stages of development. Second, try to find
new ways to extend the last of the maturity phase, renewing and recapturing the interest of
existing customers so as to keep their loyalty in the face of new forms of competition.
However, the research paper ends with a tough concept, that evidences interesting
insight starting from the whole conceptualization, that is: The retail life cycle is a natural
evolutionary process and executives can do very little to counteract it. What they can do is plan
more effectively in order to sustain profitability in the different stages. Such planning implies
continuous rethinking and revision of operations. This in turn means that retailing will
continue to be an area of turbulence and uncertainty for some time to come.



42
2.2.4 The Big Middle

A recent theory which has made fall upon different commentators, according to Reynolds et al.
(2007) is the one noted as The Big Middle, developed and presented by Michael Levy, Dhruv
Grewal, Robert A. Peterson and Bob Connolly in the first years of the new Century (2005).
Always according to Reynolds et al. (2007) this approach has the benefit of combining life
cycle elements (both the effects of incremental scale economies and birth and death) along the
key notion of format innovation, together with relative price and non-price factors.
In other terms, Levy et al. try to depict format evolution in the USA with a framework
which on the one hand keeps in mind a dynamic aspect assumed by the Retail Life Cycle,
showing a model that not only divides and depicts formats and strategies for themselves, but
that show the proactive evolution of them; and on the other hand, it does not only consider the
price factor as the key factor of innovation (as the Wheel of Retailing does), but it put the
attention also on non-price aspects, going to improve and fix some lacks of the McNairs
theory.
Before showing their theory, Levy et al. quotes some commentators who critic and
support the wheel hypotheses (Goldman, 1975; Brown, 1995) gaining at a conclusion that
the wheel hypothesis offers only limited explanatory or predictive power. After this
consideration, they admit that although several hypotheses have been proffered to explain
changes in the structure and evolution of retiling institutions, none has obtained the discourse
level of the Wheel of Retailing or the retailing accordion hypotheses.
However, to build their theory, they recall on three different conceptualizations that have
contributed to design the concept of the Big Middle.
The first one is developed by Maronick and Walkers (1974) and observes that new
retail institutions result when retailers borrow the best practices of very different
competitors, and so that inside the innovating process there is a process of thesis, antithesis
and synthesis.
The second one follows Charles Darwins contribute and emphasizes the hypothesis of a
natural selection among retailing institutions (Dreesmann, 1968; Forester, 1955), which
means that in retailing, those institutions best able to adapt to changes in their customers,
technology, competition, and legal environments have the greatest chance of success.
Finally, the third theory is the retail life cycle (Davidson et al., 1976).
43

However, although their contributes to understand the structure and evolution of retailing
institutions, according to Levy et al. (2005), they have a lack of explanations when it comes to
argue about how and why retail institutions develop.
As a matter of fact, the Middle Box theory tries to give a preliminary hypothesis regarding how
retailing institutions begin and develop, through a dynamic approach that considers an
evolutionary point of view and that it does not reconnect the whole system on a mere price
factor.
After having analyzed different contributes, important for the development of this
framework, it is time to understand what it means with the term Big Middle.
According to Levy et al. (2005), the Big Middle is defined as the market-space in which the
largest retailers compete in the long run, because there is where the largest number of potential
customers reside.
In other words, it is a conceptualization of a moment through the life of a retail institution
where it arrived after some kind of evolution and that contains the high level of competition.
In fact, although new retailers do not have to be in the Big Middle segment in the first run,
because they could be low-price specialist or innovative, when it comes to search for scale
economies, increased revenues or incremental profits, they go into the Big Middle.
So, starting from the beginning, there are four segments, and each retailer exist in one
of them, and those are: innovative, Big Middle, low-price and in trouble.

Figure 4. The Big Middle

source: Levy et al., 2005
44


Retailers that occupy the innovative segment direct their strategies toward quality-
conscious markets who seek premium offerings; low-price retailers appeal to price-conscious
markets; Big Middle retailers thrive because of their value offerings, and in trouble retailers are
unable to deliver high value relative to their competitors (Levy et al., 2005: 85).
As a matter of fact, low-price and innovative segments are at the opposite sides,
Therefore retailers which belongs to those segment at first, transition to the Big-Middle
segment when they are able to transform their niche appeal into mass market or large segment
appeal leveraging their respective strengths.
The peculiarity of this model lies in the no possibilities of rest on their laurels after
having moved into the Big-Middle. In fact, when a retailer moved into it, it has to deal with a
high competition, focusing its efforts on maintaining and sustaining its value proposition: the
skills that got them to the Big-Middle, according to Levy et al. (2005:86) have to be constantly
audited, fine tuned and in many cases, changed if they are to remain viable.
If it does not happen, the retailers will pass into the In-Trouble zone, where it has to re-invent
itself in order to compete at an another level focusing on low-price or innovation as driver to
challenging again its markets competition.
This model has different advantages, and one of them is advising distributions
managers on the path that they have to follow in order to enlarge their business and get in the
Big-Middle segment (if this is their growth strategy). In fact, Levy et al. (2005: 87) sustain that
acting on some value levers, that are: innovative merchandise and need-satisfying assortment
over technology, supply chain management, price optimization and store/name image, they
can produce significant effects on the customers. However, to do that, they need to understand
customers behavior from perspectives that heretofore have been ignored.
The last passage is understandable focusing on the opposite direction that a new retail format
has to take to go to the middle, or even better, the Big-Middle.
A change of view is a fundamental element to start the path that will bring the business in a
successful business, competing with other retailers and enlarging its market.
As a matter of fact, it is wise to underline the comment of Reynolds et al. (2007: 651) about the
Big-Middle theory: achieving scale economies allows innovative and low-price retailers to move
into the big middle. Complacency, or inability to sustain the correct balance between price
45
and non-price factors for customers results in failing retailers moving into the in trouble
segment.
However, all these models watch and describe evolution mostly in the long time
periods, overlooking short terms, without giving an adequate view to understand short changes
that happen inside the retail formats and business models, before they move in one or another
direction.


46
2.2.5 Different Levels of Retail Innovation

Reviewed some of the main theories that have tried to understand and forecast the path of retail
evolution, it has found out that they describe both the different phases of the different
evolutions (Davidson et al., 1976; Levy et al., 2005) and the dynamic connotation of them
(Levy et al., 2005; McNair, 1958; Hollander, 1966).
However, the one of the main critics on those theories and models (Reynolds et al., 2007) is
that they look at the long term transformations which are important to understand trends and to
forecast possible developing ways for retail industry, but they lack on the short term changes.
As a matter of fact, using those frameworks to observe and analyze the dynamic of retail
industry, it is possible to find a lack in the explanation of the transitory phases, which are
characterized by different levels of innovation as well, but that are not relevant to the study of
the macro phenomena. Competition however, is not only a matter of format, but it is inside the
entire industry and the different micro-innovations that retailers have to put in action in order
to lead their sector.
Therefore many academics (Lugli 1976, 1998; Castaldo, 2001; Dudpuis, 2002; Pine,
Gilmore, 1999; Reynolds et al. 2007; Cardinali, 2009) have focused their attention on both
the long term and the short term aspects of retail innovation, giving different contributes to the
innovation theory in retail industry.
Consequently, the main purpose of this section is to discuss the different contributes
give by those scholars in order to achieve at a wide knowledge of the principal theories that
explain retail innovation today, going through them so as to sound out if they are still fitted for
the present and future scenario or if there are any rooms for improvement.
Cardinali (2009) has developed a well shaped review of the literature of the last thirty
years, finding out peculiarities and points in common along the different theories. So, follow
her contribute seems to be a wise way to classify and summarize the different themes pointed
out by academics over the time.
One of the first Italian scholars to deal with distribution has been professor Gianpiero
Lugli (1976) who getting over the wheel theory, he classified retail innovation in two different
ways that are primary (format) and secondary (concept).
Lugli has distinctly separated retail innovation in two segments: the first concerns the entry of a
new distribution format on the market, it is recognizable thanks the supply of a new set of
47
services that did not exist before. The second one, instead, is about the different combination
of a present set of service in a new concept.
The main advantage of this theory is that it allows analysts, scholars or managers to give a
valuation of the innovation put in action with a new distribution formula. Indeed, thanks to
Lugli explanation it is possible to rank the different new entries in retail industry, classifying
them into primary or secondary innovation.
However, looking deeper to this segmentation and according to the author, while primary
innovation lies to respond to a lower price demand, in a price-competition scenario that recalls
for many aspects the wheel theory, secondary innovation concerns with the trading-up process
that follow through a service demand, typical of a maturity period.
In a subsequent issue, Lugli (1998), focusing more on a strategic aspects, illustrates
how a secondary innovation is composed and he argues that it could be generated basically
performing on three variable: content, context and infrastructure.
When it comes to the first one, the content, Lugli argues that innovation could be reach
leveraging on variables about the range of products. As a matter of fact, innovation could be
lead acting on the level of service present in the product and on the composition of it, that
means both on the width and the proof of the range rather than the weight of the different
brands.
Referring to the context, instead, the three tools that a retailer can manage are facilities layout,
commodity-related layout and display.
Finally, the infrastructure section concerns involving the customer in the co-creation of value
through a co-creation of service inside the outlet.
As a matter of fact, Cardinali (2009: 3) suggests that from this point of view it is possible to
address every change of retail mix to a secondary innovation, and therefore just an improvement
of one of them is sufficient to create a new concept.
Going further with the analysis of the different approaches developed by recent
authors, it is worthy to quote Castaldo (2001), who shows a new conceptualization of retail
innovation that goes against the traditional approach. The author argues that viewing the
spread of the new retail innovations, far from commercial activities, it makes sense enlarge its
boundaries classifying it in three new different dimensions: strategic, operative and transverse.
The peculiarity of this new approach is the insert of the transverse dimension of innovation. As
a matter of fact, while strategic innovation refers to formats, positioning and branding,
48
operative innovation to retail mix tools, environment and services, the new, transverse
innovation, represents all the issues concerned experiential shopping, technological and
relational innovation.
Therefore according to Castaldo (2001) there is an another way to innovate in retail industry,
getting over the principal tools considered so far. That is a significant recognition because it
shows that retailers can do innovation through relationship with customers, shopping
experience and technology: elements that stay out the classic retail mix and that do not
characterize a strategic or operative innovation.
However, Cardinali (2009: 8) discusses this theory pointing out that looking at it, there is a
tendency to think that innovation is transverse and that it performs at the same level on different
businesses, ignoring the various roles that it can reach at each sector (food vs no food).
As a matter of fact, Dupuis (2002) defines commerce like the innovation place,
emphasizing the role of distribution and retail innovation in French, and he divides retail
innovation in four different types, using the concept of architecture of innovation.
These four kinds are concept innovation (which refers to front office), flow innovation (which
refers to back office), organizational innovation and relationship innovation.
The merit of this theory, according to Cardinali (2009: 9), is dividing innovation in a different
classification which tends to focalizing the detachment among product, process and
organizational innovation in addition to underscore the importance of the relational aspect.
This point could be considered an upgrade of what Pine and Gilmore (1999) have said
when it comes to shopping experience. Indeed, the two authors drive the experiential concept
to its maximal high saying: all the things that allow to improve shopping experience, could be
considered innovation.
This framework gathered from the concept of experiential economy, which, according to
Cardinali (1999) it is hard to apply to retail industry when it comes to fast moving goods,
because it is more concern with luxury and other kind of goods, far from grocery sector.
Relatively salient themes are pointed out by Reynolds et al. (2007) after a sum of 63
interviews taken with senior and executive managers involve in the retail industry, during a
period of time that lies between 2005 and 2006. The purpose of the english authors was
understanding how format innovation process occur within the retail firms, after having
understood the internal/external influences which lead to innovation, as well as the key drivers
49
of these innovations and eventually consequences obtained but the development and
implementation of them.
The result has confirmed the distinction which exist between longer term strategic and shorter
term operational innovation in retailing (Hrstov and Reynolds, 2005).
As a matter of fact, Reynolds et al. (2007) shows that retail innovation can be divided into two
kind that are strategic and operational innovation.
Strategic innovation is guided by a strategic planning process and it could be radical in
terms of new retail models or new channels to market; or incremental, improving the existing
business model (e.g.: introducing new sub-brands). It is seen as high cost/high impact
investments with longer term time horizon possibly beyond one annual planning cycle. From
the organizational point of view it is more likely to be carried out in multidisciplinary teams
which combine functional areas, IT systems, market researchers and suppliers.
While operational innovation is predominantly continuous and incremental and its cost
is relatively low because it is developed through experimentation (i.e., do-learn-do instead of
learn-do-learn). It is characterized by short cycles that last from 3 to 18 months and they are
often subsumed within functional areas and functional budgets. And eventually, there are many
cases in which an operational innovation is not longer seen different as a good business
development practice.
From this differentiation, it comes that there are many points which are opposites
among theme, and to do that it could be helpful summarize the distinctive characteristics of
these two kind of retail innovation.
In the end, an interesting insight can be extracted from the paper of Reynolds et al.
(2007: 658) when it comes to conclude their research. As a matter of fact, they argue that there
are dangers in over-formalizing the format development process, as commentators and
academic conceptualizations have tended to do. This because on the one hand some retail
formats emerge, evolve and die much more quickly than, for example, developer or shopping
center industry can respond to create, refurbish or reconstruct supporting infrastructure; and
on the other hand some retailers and consumer service firms argue that the constraint on
competition and innovation in retail formats from conservatism in building, letting and
management policies may to an extension be beneficial in that it excludes tenants whose
formats are not tried, tested and recognized.

50
In other word, Reynolds et al. (2007) are making a call to academics in order to develop a
model for retail innovation that consider all these implies and that is actual with the need of
modern retailers in a dynamic and high competition environment.
Retracing the different developments achieve in the last thirty years, and the
conceptualizations that has been written by scholars to give frameworks and definitions to
describe retail innovation, it seems clear that the first theories which focused only on format
innovation has been not longer enough to explain the path of evolution.
Rather than, different scholars have underlined the important to divide innovation in different
parts, trying to give a categorization of them, helping retailers to think and implements in order
to compete and innovate.

Figure 5. Strategic and Operational Innovation


source: elaboration on Raynolds et al., 2007


In spite of everything regardless, Cardinali (2009: 15) argues that when it comes to the
maturity phase of the retail life cycle (Davidson et al., 1976), price-competition is replaced by
non-price competition and retailers have to differentiate their brand, finding distinctive
elements that gain to build relationship and loyalty with customers.
In other words, the author shows that in this contest characterized by maturity, retailers are not
developing innovation through new formats or new stores, but they are evolving their outlets
with a continuing flow of innovation, that lies to respect brand promise and mission to the
customers through the management of retail mix tools, soft attributes and interior design, and
Strategic Innovation Operational Innovation
Management strategical planned continuous and incremental
Cost high low
Time long term: over one year short term: between 3 and 18 months
Organization multidisciplinary team functional area
51
creating strong relationship with clients (one to one marketing) or offering services which tend
to overcome commercial boundaries.
To explain that, Cardinali (2009: 17-30) has define the Pyramid of innovation.
52
2.3 The Pyramid of Innovation


According to Cardinali (2009: 17) the present scenario has shift from the one in which retail
innovation refers only to format or concept innovation.
As a matter of fact, with the born of distribution marketing, even retailers has started to take
distance from their original pure commercial and trade role, conveying to a brand policy where
innovation has been translated in a continuing evolution to maintain brands promise to
customers.
It is a peculiarity of the modernization of the distribution channels: in other words,
when all the possible formats has been started up and both demand and supply have recognized
which are the best practices to succeed in a specific market, and the confidence of distribution
thanks to data and knowledge of the customers has unsettled the supply chain equilibria,
retailers start to focus on their own brands, developing innovation in order to differentiate and
maintain their position in the customers mind.
To achieve this, and to recognize, define and classify innovation into modern and evolved
markets, Cardinali (2009: 17) sustains that the old classification of primary and secondary
innovation developed (Lugli, 1976) needs to be revisited in order to apply a specific framework
that fits these modern times.
Therefore it seems wise to argue that Cardinalis (2009: 18-30) Pyramid of Innovation
could be considered a fitted framework to describe and interpret retail innovation. So, this
section will be dedicated to the explanation of it, in order to understand why it can be
considered applicable to the present scenario.
Pyramid of Innovation represents the framework that divides primary innovation, secondary
innovation and tertiary innovation. As each pyramid, its shape starts with a narrow width at the
top, where primary innovation lies, and it is due to the fact that this kind of innovation is not
common, but rather than is very rare (Lugli, 1976). Getting down from the top, the pyramid
enlarges its width, and with it, secondary and tertiary innovation are more common to see in the
market.



53
Figure 6. The Pyramid of Innovation


source: Cardinali, 2005


The three levels of innovation are distinguishable by strategic variables that generate
innovation and by the content and intensity of the innovating process. In other words, they are
different from each others because their different impact on processes and business
organizations.
However, when it comes to divide which tools lies to the different kind of innovations,
structural parameters and macro-range strategies (diversification and introduction of new
departments) qualify primary and secondary innovation. They are called hard parameters and
they define the structural and organizational characteristics of a distribution format or
distribution concept. Looking at Reynolds et al. (2007) it can be considered strategic
innovation, and acting on this, retailers obtain really new products.
On the other hand, in store marketing tools, which refer to tertiary innovation, aim to
give image and identity to retail brands. Differently from the firsts, these are as known as soft
variables because they influence performance and management parameters, without affecting
on structure and organization. They are composed by store design, merchandising,
communication, technology core services and extra-core services.
To underscore the importance of each level of the pyramid, it seems right to define
each level, in order to have a complete view on what can be considered innovation and at which
level it lies.
54
primary innovation
secondary innovation
tertiary innovation
The definition of primary innovation is the same used in literature, that is (Lugli,
1976): the appearance of a new distribution format obtained by the supply of one or more new
services which did not be present in pre existent distribution formats.
According to traditional vision, the new distribution format leads on the market practicing
inferior price policy, causing discontinuity and structural assets modification effects and
competitive dynamics and principally acting on range or principal tools of the traditional retail
mix.
According to this view, supermarkets, hypermarkets, discounts are examples of primary
innovation, because they have had relevant effects on competitive dynamics, they have entered
in the market with aggressive price policy and they have affected the entire supply chain.
Despite it, the new vision of primary innovation introduced by Cardinali (2009: 21)
has introduced relevant upgrades to the old one, noticing that:
the price position of the new format can be higher than the pre existent formats;
the new format could addressed to market niches, and so, it has less effects on structural and
competitive dynamics;
they operate on strategic tools that overcome boundaries of traditional competition.
As a matter of fact, when the market is mature, retailers have to innovate relying on
diversification in different sectors, that means acting on business areas that are far from the
core ones. Examples are in retail formats dedicate to restoration as the result of the
introduction of stores which match grocery with Ho.Re.Ca., offering a completely new formats;
or better, the address of weak needs in order to give point of sales that respect, according to
assortment and structure, particular needs, transforming selling outlets in aggregation and
socialization points, going far from the initial business.
These features are going against the traditional approach to primary innovation (Lugli,
1998) where is said that demand segmentation based on socio-demographic variables is not
relevant to retailers strategic and operative marketing. Indeed it was recognized that
innovation process in distribution industry cannot by lead by those factors, because retailers
are used to consider targets and not to select the client targets to satisfy. However, this vision
seems to be no longer applicable because nowadays more and more retailers are getting used to
innovating addressing specify socio-demographic targets.
55
After the primary one, it is the time to address secondary innovation: it is defined as
the appearance of a new concept that combine different services already existed in previous
channels in a new way, without altering the core business of the company.
As a matter of fact, it is caused by acting on the range of products at a macro level, without
dealing with structural parameters. Differently from the primary one, it consists in an upgrade
or modification of departments which already exist in the different stores, and so, it generates
innovation without altering the principal business.
Therefore secondary innovation represents the answer to a wide demand of commercial
services which is characterized by a deeper segmentation. At this level retailers do not added
new services but they combine preexistent ones to satisfy new demands.
At this level each company build an own strategy of differentiation, and the larger aim is to have
different concepts to guide the retail mix (range, prices, promotions, exhibition space) (Lugli,
1998).
The real innovative contribute of Cardinalis theory is the definition of a tertiary
innovation.
According to the author, it represents the hide face of retailer branding policy, and that
means that due to the fact that store is as different from retailer brand as product is from
industrial brand, retailers has to innovate continuously their products in order to respect the
brand values and mission.
So, according to the meaning of retailer branding for the costumer, that is the idea which
customer develop after the shopping experience (Lugli, 1998), it has to be preserved and kept
equal through the time. This is only possible putting in action continuing evolution to the
shopping experience in order to give identity to the different retailers.
This kind of innovation is deal by a retailer only when it has achieved an independent marketing
role, emancipating from the manufacture industry and become able to crate its image, its
position and manage the different tools of operative and strategic marketing.
As tertiary innovation, it represents the answer to the evolution of demographic,
lifestyle and social-cultural values. To achieve that, retailers have to look for strength strategical
partnerships in order to build high barriers to imitation and offer high quality services, which
can compete with specialists of that sector.
So, to achieve at a competitive advantage, Cardinali (2009: 26) suggests that retailers should
be very careful to design and manage the decisional processes and the different relationships
56
with external companies. These two aspect are crucial for the success of the implementation of
the innovation and its persistent in the time.
However, despite everything regardless, there are two ending considerations that
Cardinal (2009: 28-29) points out on her theory.
The first considers the fact that the boundaries between the different levels of innovation are
often very opaque, and so, it is not rare to find different attribution or valuation at the same
innovation. Nevertheless each innovation is estimated according to its innovative contribution,
there are some kind of actions that could lead as a tertiary as a secondary innovation, depending
on the moment you analyze them.
The second though, instead, is about the strength relationship that could exist among
the three levels, and so, it is opportunity to think that is even possible to rotate the pyramid in
order to have tertiary innovation as the engine and the cause of a successive secondary and or
primary innovation.
As it has been seen until now, academic studies are going deeply into specific part of
innovation, levying from the first theoretical and macro approaches and analyzing micro-
aspects of it. This is due to the fact that commercial distribution seems to achieve in many
cases, its maturity phase, so the kind of innovation is more likely to be continuous and
incremental, rather than radical, as academics and markets were used to seen.


57

58
3 A new Framework for Retail
Innovation


3.1 Continuing Innovation

Retail innovation could be defined as that process which aims to evolve the modern distribution
system in order to answer to different needs, be competitive and generate value (independently
from the industry: that means it can be adapted to fast costumer packaged goods to fashion or
electronic goods, for example), according to different drivers which lead the changing path.
According to Cardinali (2009: 31), the drivers of commercial innovation can be listed under
three macro variables, which are: environment, demand and supply.
Environment factors are external elements and they consist in the law contest and its
evolution, the macro-economic scenario and technology.
Looking at these three variables, it is clear that a part of retail innovation depends on the
changes of the law system, and it is particularly evident when deregulation comes in order to
remove law barriers of the separated selling of different merchandising classes, so as to
promote free market across different industries, to incentive and stimulate cross selling and
new concept of product and service (and product and service) bounding.
Also the macro-economic scenario weighs on how retailers innovate. It seems reasonable
because they have to adapt their selling systems to changes that affect the different economies
and which influence customers behavior and needs.
The third point of this first group of innovation drivers is technology: despite its nature of
imitable variable when it comes to commercial industry, its innovation has always leaded to
improve efficient and effectiveness of commercial processes, inspiring new methods of goods
and services distribution.
The factors based on demand, instead, look at customer and its evolution in terms of
consumer's behavior, lifestyle and values.
As a matter of fact, society's changes affect the way people deal with sale institutions and
interpret consume and the role of the act of shop according to their values.
59
So, it is shown (Fabris, 2003; GFK Eurisko, 2008) that with the new millennium, people has
been switching from a goods centric to a service centric world of needs, in order to interpret
and satisfy new desires of time saving, and ready to use products, which have already stimulated
a switch of the expenditure composition of the families of modern and western countries (e.g.
Italy), moving from a good to a service prevalence in terms of total percentage of consumption
(Cardinali on ISTAT data, 2009: 47).
The last group of innovation drivers lies on supply, and it is referred to the different variables
which stand around competition, store erosion and productivity, trade marketing and store
brand marketing. According to Cardinali (2009) these drivers come from different kind of
competition on the on hand and an internal evolution on the other hand.
All these factors has brought retail to a maturity level, where innovation can be lead
operating on strategic or operational innovation (Raynolds et al., 2007), or on primary,
secondary or tertiary stage of innovation (Cardinali, 2009).
These two concepts respond to two different stages of innovation, (Cardinali tend to group
primary and secondary stages when it comes to innovation variables - Cardinali, 2009: 19)
which using a technological approach, could be related to a certain configuration of the
industrial concept of disruptive and incremental innovation.
In fact, primary and secondary innovation, or strategic one, aims to develop new store
formats and new store concepts designed to create new distribution formula, rather than
improve the existent ones (nevertheless it is difficult that they put apart the existent ones).
Discounts, e-commerce, mail order, concept store, urban hypermarkets are some of the
multitude of results gained from this kind of innovation.
However, while disruptive innovation is a typical approach to describe innovation of Western
economies (The Economist, 2011), when a certain system arrives to a maturity stage, it could
be more effective innovating through incremental innovation.
In fact, according to the words said by a discount retailer CEOs interview (Reynolds et al.,
2007), every retail format has a shelf life, unless you are continually investing.
This argumentation shows that in this scenario retailers should innovate constantly, and that
means through operative components in order to develop a continuing innovation (Cardinali,
2009: 1) in order to answer proactively and reactively to the market changes driven by the
different factors already illustrated.
60
Recently William H. Saito (2011), Founder and CEO at InTecur, K.K., debating about
disruptive and incremental innovation, has pointed out the relevance of incremental innovation
in business in present days, quoting the Toyotas case: all of this grew out of Toyota's
characteristically gradual, strategic process of innovation. No pressure for disruptive
technologies, just a firm belief that 10,000 small improvements are just as effective as one
radical new innovation. As a matter of facts, he argues that, nevertheless an industry or a
country need both incremental and disruptive innovation, incremental innovation is like
evolution: it may move slowly, but it may also produce what appear to be radically new, even
disruptive events.
These considerations are helpful to understand the importance of the tertiary and operative
innovation when it comes to retail industry, but it is necessary to do another step forward so as
to understand the approach needed to analyze, interpret, design and implement this kind of
innovation.
The next conceptual step lies on matching the need of a continuing innovation of
retail industry (Reynolds et al., 2007: 653) with the consideration that this kind of innovation
is typical of service innovation, rather than product one (Reynolds et al., 2007: 649).
For this reason, when it comes to tertiary, operative, incremental or continuous innovation, it is
more appropriate to adopt a service dominant logic prospective in order to understand and
design this kind of innovation, rather than a good-centric one.
So, to do that, it is necessary to change retailers and academics approach to this form of
innovation using an appropriate framework taken by the service literature.
One of the best ways to do this change of view is conceptualizing the different components of
the retail mix, source of tertiary innovation, under the Service-dominant logic developed by
Vargo and Lusch (2007) analyzing how each foundational premise could be adapted to retail
industry and its sources of innovation.


61
3.2 The Service-dominant logic dressed up with
retail innovation

In this section it will give the retail interpretation of the ten foundational premises which has
been defined by Vargo and Lush (2007) in order to illustrate the Service-dominant logic and
the reasons behind its adoption in the present and future scenario in order to have a strong
framework to interpret and discover facts and opportunities.
The first FP says that service (defined as the application of knowledge and skills) is the
fundamental basis of exchange. This means that when it comes to retail industry, it is necessary
to understand what knowledge and skills are, what they represent and how innovate them, in
order to adapt the general concept to the industry and to adapt the service logic to retail
innovation.
According to the fact that retailer is defined as an intermediary, knowledge has a dual meaning
and it depends on the side from which it has been looked at the supply chain. As a matter of fact,
the value gained by knowledge change if the player on which retailer is dealing with is the
manufacturer or the consumer. Therefore, that means that retailers have two sources of
knowledge which are respectively producers and customers, and both of them are as
supplier as client.
This is an important statement and consideration which show that the role of retailer is building
a deep knowledge of producers and costumers, in order to adapt the different value chains from
the mount, to the heterogeneous needs of the valley and develop information for the R&D of
the mount, listening the voice and watching the behavior of the valley. This means that the real
objects of the selling practice which characterized the retailer are not the goods on the shelves,
but the range chosen of them and the way they are sold, which embedded the knowledge gather
about producers and customers.
The application of this concept with proper skills (identified as the efficiency in
distribution, and the proper use of the retail mix components) gives a high source of power to
retailer, that it has to defend and increase, innovating on these two fronts.
This aspect brings the idea that every retail innovation has to be leaded by listening at both
producers and costumers, and that it has to bring up with it an improvement of the present
stage of knowledge and skills, that means, improve service for its clients.
62
Related to this first main concept, there are other two FPs, which say: indirect
exchange masks the fundamental basis of exchange and goods are a distribution mechanism
for service provision. According to Vargo and Lush (2007) these aspects emphasize the fact
that service (the fundamental basis of exchange) is often provided through complex
combination of goods, money or institutions.
Looking at goods, when it comes to retail industry, they are identified as commercial
products: a combination of basic services that lies to satisfying customers needs and they
are classified in store formats and store concepts (Lugli, Pellegrini, 2009).
According to the FP of Vargo and Lush (2007) and the definition of commercial product given
by Lugli and Pellegrini (2009) it is natural to consider them as a capsule where knowledge and
skills of the retailer are indirectly transferred to consumers embedding them inside each
commercial product.
This means that when a customer comes into a retailer, it does not buy the industrial products,
but the services proposed by the retailer, and so, when it comes to retail innovation, it has to
look at it as service innovation, because it is only the continuous innovation of singular basic
service (which formed the commercial product) that is able to generate a worthy innovation for
the customer.
Consequently, this has to lead the retailer through a series of questions in order to
identify what there is inside the products sold, meant as commercial goods.
This is a crucial aspect, because it is only understanding which are the purposes of each
product that retailer can innovate (after having differentiate). Therefore is fundamental to
analyze at first each commercial product (store format, store channel) of the retailer: what is its
main mission, which are the main needs that it goes to satisfy? After that, it has to go deeper
into the analysis to study them with a micro marketing approach: what does every good inside
every segment and category means for the customer? Is the layout coherent with the purpose of
that store format? Does it meet the customer shopping needs?
Matching the needs of the clients and linking them to the values contained in each product, the
retailer can find different source of innovation modifying the range and different the
components of its offer according to demand drivers, and being coherent with its mission.
Going ahead with the adaptation of the FPs of the Service-dominant logic to retail
industry, it is necessary to understand how knowledge (operant resources) can be indicated as
the fundamental source of competitive advantage.
63
This aspect can be mostly found into retailers practices when it comes to CRM and loyalty
experiences. As a matter of fact, retailers has been developing systems of data analysis in order
to understand not only the shopping behavior of the customer, but the consumption behavior
as well, typical of manufactured companies (Cardinali, 2009), in order to developed a deeper
knowledge of their clients.
Thanks to surveys, focus groups and panels, retailers have been understanding the importance
of knowing the different clients, in order to develop a policy of micro-marketing to satisfy all
the different needs of their customers.
This aspect is also important when it comes to the knowledge on manufacturers: as a matter of
fact, it has been pointed out that due to its nature of intermediate, retailer has to deal with the
two tails of the supply chain, and so, a financial and correct analysis and knowledge of the
different manufacturers (which cannot be defined as unique suppliers) can lead to a competitive
advantage.
In other words, this FP can be summarized in the fact that for a retailer, the knowledge of their
suppliers or clients it is an important source of competitive advantage, because thanks to it, it
has the opportunity to develop innovation based on real facts and analysis on the main actors
with it is going to deal, and not only on prediction or macro trends.
In this case, the conceptual change of prospective lies behind the fact that starting from a deep
observation of their own clients, retailers can develop a unique knowledge from which design
appropriate innovation in order to differentiate itself according to their customers needs. In a
second moment, this first observations can be assumed as a sample of the entire target of the
retailer, and so the results can be generalized, discovering macro grand from weak signals,
and not vice-versa: from local to global, rather than from global to local.
A real example of this practice can be found in Sainsburys practice: the british retailer has
developed a re-design of the entire channel system, through the analysis of customers
shopping and consuming behaviors. It has identified different shopping missions and based on
them, it has designed three different store formats consistent with customers behaviors.
Subsequently, the next FP indicates that: all economies are service economies and it
is clear that retiling is a service economy, because of its definition and its main aspects.
However, this concept is interesting because it gives the opportunity to consider the fact that
despite retailers strategy is on cost leadership or differentiation, the hearth of it is always
service. In other words, in spite of discounts mission supplying goods at the lowest prices,
64
while premium stores focus on differentiation and quality, the central point of exchange and
than, of innovation, is always service. As a matter of fact, when a discount (or another cost
leadership strategy store) sell products at the lowest price, it is offering the service of being so
efficient to guarantee a price leadership. On the other hand, premium retailers, which are at the
antipodes, embedded the service concept more understandable because they communicate it,
and because they focus on accessories services.
However, despite the type of service that a retailer is focusing on, it has necessary to recognize
that all retail industry is a service economy.
Analyzed these aspects, it is time to address a different topic, which shows customer as
co-creator of value, and the subsequently aspect which argues that enterprise cannot deliver
value, but only offer value propositions. These two aspects (related with the precedents) bring
the idea that: a service-centered view is inherently customer oriented and relational.
It has been already noted how CRM is important for the creation of a competitive advantage for
retailers, and now it is important to focus even more on customers, finding out new journey and
developing different technology (including the internet) in order to develop new frontiers in
the relationship between retailer and costumer (Bommel et al., 2014).
The central concept of this section is the value.
According on what seen in the service chapter, is important to remember that value cannot be
created by one actor, but it is the result of a combination of practices which lead to a co-
creation of value.
As a matter of fact, for retailers is important to understand that the management of the different
retail mix components, through which it can operative innovate (Cardinali, 2009; Reynolds et
al., 2007) has to be done in collaboration with customers. This is an inherent consideration
which derives from the incremental nature of the continuos innovation, where retailer creates
value in order to satisfy customers needs step by step, adapting the components of the retail
mix to the path of its clients.
Using a metaphor, the retailer has to behave like a snake: it has to change it skin in function of
the customers needs in order to survive, co-creating value to adapt to the changes driven by the
different variables above-mentioned.
In other words, the proposal of a new service design, the re-configuration of a store
process, the addition of a new product line, the arrangement of the layout and the other
operations that retailers can put in action in order to innovate, have to be develop with
65
customer, in order to design the project that aims to generate the highest value for retailer,
consumer and manufacturers: which means, for the entire supply chain.
In order to be operative and not only conceptual, this assumption can be implement through
the practice of the desegregation of a specific brand or product line into different functions.
When it comes to visual merchandising, for example, it is used to organize the different goods
for merchandising criteria (both food and non food). This practice has different points in favor
as much disadvantages (it gives a clear definition of merchandising categories, but it is not
design for consumption or use functions). To innovate about this aspect retailers could design
a different organization of goods, according to costumers needs, in order to give a better
configuration to them, developing a multi touching strategies for manufacturers which will see
their products display in different moment of the customers shopping journey.
According to that, an easy re-conceputalization of the visual merchandising and the product
layout can benefit both costumers and manufacturers on the one hand, and the retailer on the
other hand, because it will develop practices that differentiate it from the competitors, but most
of all, that generate value for the entire supply chain, promoting loyalty from both sides in short
and long term as well.
In the following part of the Service-dominant logic Vargo and Lush (2008) argue: all
social and economic actors are resource integrators. This means that the context of value
creation is networks of networks and when it comes to retail and retail innovation, this aspect is
emphasized by the fact that the management of the different departments presented in a
specific store is leaded by different competences and skills, integrated under the same roof.
So, the combination of innovative resources to manage the different part and different
services delivery by retailers are a way to improve the range of specialized resources in order to
manage each section at its best, developing knowledge and so, competitive advantage through
innovation.
An example of this aspect can be found in the category management practice, when retailers
and manufacturers cooperate in order to design the best planogram to co-create value for the
customers according to the different specialized skills and resources that each player put on the
field.
Finally, the last FP is about the value and how it is always uniquely and
phenomenologically determined by the beneficiary.
66
When it comes to retail, this is strictly connected with the shopping experience: in facts after
having identified the different targets, each retailer should design an appropriate experience
coherent with its values, unique for customers, in order to create value that satisfy the different
needs, giving the higher level of value possible to those customers served by it.
Concluded this section, it is necessary to look over the academical and conceptual issues in
order to extract implications which can be helpful for both scholars and retailers and whoever
join this industry.
67
3.2.1 Implies for retailers and scholars


Declining the most recent and complete theory of service to retail and retail innovation is a
starting point to address this topic through a different framework. This model tend to satisfy
better than the existing one both the study, and the support of modern retail innovation
because it is based on service, which innovation is continuing for definition (Reynolds et al.,
2007: 649), and because it gives different FPs, that act as lens through which retailers can look
at the retail mix components, in order to create value innovating.
Based on the fact that in a modern, developed and mature distribution system, where
competition is high and changes are more quick than ever (Cardinali, 2009; Reynolds et al.
2007), retailers has to be ready to change day by day, it is necessary to give them a support to
conceptualize, understand and create innovation. This kind of innovation is achievable through
a continuing innovation of the existent and defined store formats and store concepts, in order
to adapt its retail mix components to customers needs and changes, satisfying its mission and
its values, and so, most of the time there is not time to formalize proper innovation with
traditional models, but it is needed a new framework.
When it comes to service innovation, according to Miles (2000) the innovation process is
likely to be a series of related innovation processes, undertaken in a while the system of
innovating agents. So, adopting a logic of service innovation it is more easy to put in action an
overturning of the pyramid of innovation (Cardinali, 2009). This will allow the different
retailers to focalize themselves much more on continuing customer driven service innovation
(Oke, 2007), and think also new store concepts and store formats thanks to the generalization
of local aspects understanding by the development of a high knowledge of customers and
manufacturers.
Looking at the implications that could be extracted from this paper, they can be divided
in three main aspects, which derive from the assumption that operative and incremental retail
innovation, considered continuous, has to be analyzed from a service-dominant point of view,
despite what done so far. This change of prospective given by the application of the Vargo and
Luschs framework (Vargo, Lusch, 2007) points out three main concepts that could be
consider an inherent recap of what discuss until now.
68
First of all, due to the fact that service is defined as a combination of knowledge and
skills, when it comes to retailers, service innovation could be achieved through knowledge
and skills innovation.
This aspect is important because it states this kind of innovation inside the framework of
knowledge economy, and so it makes adaptable a series of concepts and literature that is having
a certain interest among academics and not only, contributing to the emerging of these topics
of research from Cinderella status, from being neglected and marginal, to achieving wide
recognition as being worthy of serious study (Miles, 2000).
In other words, according to the fact that retailer has two source of knowledge which are
respectively producers and customers, and both of them are as supplier as client, it has to
develop a deep knowledge of them in order to be able to innovate and, of course, make this
knowledge become drive of innovation, according to its strategies.
This means that according to Miles (2000) the move from studying individual firms and sectors
in isolation to linking the study of services innovation to the problematics of innovation
networks and systems needs a holistic view in order to both submit innovation under the path of
customers and manufacturers, and lead it through an educational innovation in order to
maximize on the one hand the efficiency of the supply chain, and on the other hand the
effectiveness of the value generated through it.
The second aspect lies behind the assumption that value comes from the co-creation
of it between company and consumer.
In order to understand better this observation, the concept of consumer has to be extend to
both the sides of the supply chain, in order to have a complete and holistic point of view,
considering both manufacturers and costumers as consumer of retails services, due to different
reasons discussed elsewhere.
With the opportune proportions, it worths to note that value created through innovation
cannot be created only by retailers and their assumptions, because of its idiosyncratic,
experiential and contextual nature, but it has to be considered as the inherent outcome of the
collaboration of the different players, in order to develop a win win win game (triple because
there are three players). This aim can be obtain if only companies started to co-operate with a
long run view, making their choices on the net present value, however the continuos and
operative nature of this kind of innovation.
69
Finally looking retailer as resource integrators gives the prospective that innovation
can be leaded by the integration of different resources in order to manage the present
categories with a specialistic and effective approach and the consolidation of different
businesses that allows to manage new areas or develop the existing one with a cross category
approach, bringing a horizontal innovation on them.
This means that retailers have to integrate different skills if they want to be competitive on their
core business on the one side (differentiation brought from other sectors and specialities) and
with other players in an inter-format and inter-sector competition on the other side.

70
3.3 Conclusions


According to the different theories and frameworks shown in both chapter one and two, it is
logical to argue that retail innovation could and should be studied with a service-dominant logic
approach.
This aspect has been shown in this paper understanding that a part of retail innovation can be
defined continuous, as it has been made when it comes to service innovation.
Thus, if service-dominant logic has been able to describe and interpret retail innovation,
retailers and academics should look at it through service innovation studies.
This point opens a new field of possible research which should put in action in order to
investigate how to deal with service innovation when it comes to retailing and its continuos
innovation and more what could be the effective implications of this approach on retailers,
looking at them with an empirical approach, which could lead at new metrics of innovation
measurement in order to classify and describe service innovation.
All these aspects are a clear subsequent of what conceptualized with this paper, but before
starting to analyze them it is necessary a switch of the point of view used by academics and
retailers to address retail innovation, at a concept level.


71

72
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