Prepared by : Dr. Pooja Sharma Presented by : Education & Information Network

Presented by : Prepared by Dr.Pooja Sharma


Unit 2 Retail Theories & Strategy:
Theories The

of Retail Development,

concept of Life cycle in Retail Strategy

Presented by : Prepared by Dr.Pooja Sharma


for centuries most of merchandise was sold in marketplace or by peddlers. The peddlers who provided people with the basic goods and necessities could not be self : Prepared by Dr.Pooja Sharma 3   . And long distance transportation. Earlier markets were dependent on local sources for supplies of perishable foods because journeys were far too. In prehistoric times the peddler travelled long distance to bring products to locations which were in short supply. Presented by www.The Evolution of Retail Format  The origin of retail are as old as trade itself.InfoFanz.

InfoFanz.Pooja Sharma 4 .com : Prepared by Dr. Presented by www. 2. was set up in Paris. The development of rail roads and telegraphs which largely affected the growth of retail trade. In 1852 Bon Marche.  By the year 1897.  Bon Marche revolutionized retail at time by relying on volume rather than high mark up.the store sold more than $30 million worth of goods per year. to make money.Evolution of retail formats in different times:  Social Developments and their impact:  The development of trading has been intimately associated with social developments over the ages. Two important developments of the 18th century – 1. the first departmental store .

was Stewart‟s in New York. The middle income consumers increased and mass transportation become a way of life Mass manufacturing made it possible to manufacturing goods in large quantities. The late 1800‟s saw the rise of the so called 5 and 10 cent stores . to serve the needs of the : Prepared by Dr. which was followed by Macy‟s post civil war.     . The Industrial revolution: The industrial revolution call for dramatic changes on the retail front. The increase in urbanization lead to the emergence of shops. The first department store which opened in US . which emerged to serve the needs of the poorer classes. Presented by www.Pooja Sharma 5  2.

InfoFanz.3. The development of supermarkets and convenience stores: The emergence of the supermarkets first saw in 1930‟s.Pooja Sharma 6 . comparing it with others and then taking a decision on buying. first hypermarket that was developed by Carrefour in France in 1963.   4. Self service as a concept started in 1916 when Clarence Saunders started the first self service store. The new formats gave the customer the choice of picking up a product. Presented by : Prepared by Dr.   The emergence of self service: Retail evolve in many ways over the 20th century.

Presented by : Prepared by Dr. Com opened its doors to Worldwide market on the Web.Pooja Sharma 4. The Rise of the Web: The world of retail changed again in 1995.4. The 70s were witness to the use of technology in the retail sector with the introduction of the Barcode. malls & formats: As the needs of the consumers grew and changed it was visible the emergence of commodity specialized mass merchandisers in the 1970s.   7 .InfoFanz. With the growth of the world wide web . when Amazon.   Speciality stores. both retailers and consumers can find suppliers and products from anywhere in the world.

InfoFanz. These changes are brought by ever changing customer requirement. The application of each theory varies from market to market . falling borders. new technologies and by entrepreneurs. Presented by www. The retail scenario keeps changing continuously. depending on the level of maturity and the socio-economic conditions in that market.Theories of Retail Development Retail Development from the theoretical perspective:  No single theory can be universally applicable or acceptable.Pooja Sharma 8  .com : Prepared by Dr. economic development of the nation .

Pooja Sharma 9 .where change follows a pattern and phase can have definite identifiable attributes associated with : Prepared by Dr. Theories of retail development can broadly be classified as: Environmental: where a change in retail is attributed to the change in the environment in which the retailers operate. 1. Conflictual: where the competition or conflict between two opposite types of retailers. 3. 2.InfoFanz. Cyclical.  Growth in retail is a result of understanding market signals and responding to opportunities that arise in a dynamic manner. leads to a new format being developed. Presented by www.

InfoFanz. success or decline of different forms of retail enterprises is many a times attributed to the business environment.” Retail institution are economic entities and retailers confront an environment which is made up of customers. competitors and changing : Prepared by Dr.   Presented by www.1.Pooja Sharma 10 .  Environmental theory Darwin's theory of natural selection has been popularized by the phrase” survival of the fittest. So the birth.

economic.   The Ability to adapt to change. Those retail institutes that are keenly aware of their operating environment and which react without delay. Thus Following the Darwinian approach of survival of fittest. gain from the changes. ‘‘successfully “is at the core of this theory Presented by www. those retailers that successfully adapt technological.Pooja Sharma 11 .com : Prepared by Dr.InfoFanz. demographic and legal changes are the ones that are most likely to grow and proper.

com : Prepared by Dr. This phase is known as „trading phase‟.2. This in turn leave room for others to enter and repeat the process. offering a greater range or acquiring more expensive facilities they lose the focus. (on which they entered in the market).Pooja Sharma 12    . As they prosper . they develop their business.  Cyclical Theory The most well know theory of retail evolution is the retail wheel of retailing theory. This theory suggests that retail innovators often first appear as low price cost operators with a low cost structure and low profit margin requirements.InfoFanz. offering some real advantages. Presented by www. They then become vulnerable to new discounters and lower cost structure as they are now Mature retailers.

InfoFanz. and mass merchandise went through this cycles Mature retailer Top heavy Declining ROI Innovative retailer Low status and price Minimum service Poor facilities Limited product offering Traditional retailer Elaborate facilities Higher rent More locations Higher prices Extended product offerings T Trading up phase Presented by www. : Prepared by Dr. The wheel keeps on turning and department stores.Pooja Sharma 13 .

it leads to the development of more formats.3. Presented by : Prepared by Dr.Pooja Sharma   14 . instead .e. i. blending of two opposite to creates a new format. Retail innovation does not necessarily reduce the number of formats available to the consumer. This can be applied to development in retailing like. Conflict theory (dialectic Process)  Conflict always exit between operators of similar formats or within broad retail categories. Retailing involves through a dialectic process.InfoFanz.

The antithesis is a challenge to the Thesis. Synthesis: There is a blending of the Thesis and antithesis. (department store. This “synthesis” for the next round of evolution.InfoFanz. discount store).Pooja Sharma 15 .com : Prepared by Dr. The result position between the thesis and antithesis. Antithesis: A position opposed to the thesis develops over a period of time . Supermarkets and hypermarkets flourish.A. Thesis: Individual retailers as corner shops all across the country. B. Presented by www. C. : Prepared by Dr.Illustration Antithesis Thesis Discount Store Department Store Discount Department Store Presented by www.Pooja Sharma 16 .

This is commonly termed as the “Retail Life Cycle” Attributes and strategies changes as institutions mature. maturity and : Prepared by Dr. development.Pooja Sharma 17    . This is because retail organization pass through identifiable stages of innovation.InfoFanz. The retail life cycle is a theory about the changes through time of the retailing outlets Presented by www.The Concept of Life Cycle in Retail  The concept of product life cycle as explained by Philip Kotler is applicable to retail organization.

it improves the convenience or create other advantages for the final customers. the rate of growth is fairly rapid and the management fine-tunes its strategy through experimentation.InfoFanz. Presented by : Prepared by Dr. which differ sharply from those offered by other retailers.A. depends on the organization. Because it is new concept .  Innovation: A new organization is born.Pooja Sharma 18    . At this stage the level of profitability re moderate and this stage can last up to five years. This is the stage of Innovation. In Innovation organization have very few competitors.

com : Prepared by Dr. At this stage since growth is imperative. the investment levelis also high as is the profitability. Presented by www. This stage last from 5-8 years.Pooja Sharma 19    .  As organization moves to stage two of growth . a few competitors emerge.  Accelerated Growth: The retail organization faces rapid increase in sales.B. As company has been in the market for a while it is now in a position to pre-empt the market by establishing a position of leadership.InfoFanz.which is the stage of development.

C. This is the time when the retail organization needs to rethink its strategy and reposition itself in the market. the rate of growth slows down and profits also start declining. Presented by www.Pooja Sharma 20     . A change may occur not only in the format but also in the merchandise mix : Prepared by Dr. but competitive pressures are felt acutely from newer forms of retailing that tend to arise.InfoFanz. Maturity:  The organizational this stages still grows. Gradually as marketers become more competitive and direct competition increases. Thus growth rate tends to decreases.

The rate of growth is negative.  Decline: The retail organization looses its competitive edge and there is a : Prepared by Dr. profitability declines further and overheads are high. At this stage organization needs to decide is it is still going to continue in the market.InfoFanz.Pooja Sharma 21 .   Presented by www.D.

InfoFanz.The Concept of Life Cycle in Retail SALES Maturity Decline Growth Innovation Profit TIME Presented by www.Pooja Sharma 22 .com : Prepared by Dr.

 The retail business in India has only recently seen the emergence of organized.   Presented by www. cosmetics and perfumes and home fashion. Hence it is difficult to identify a retail organization which has passed through all the four stages of the retail life : Prepared by Dr. imitation. And traditionally most of the retail business in India was constituted of small owner. That time they also offer loyalty programmes in place. Initially when shoppers stop opened its first outlet in Mumbai in 1991 they offers apparel.InfoFanz. which did not offers by others.managed businesses.Pooja Sharma 23 . corporate activity.

 Presented by www. : Prepared by Dr. Westside.Pooja Sharma 24 . The store enjoyed an enviable position for sometime and later the change in customer expectations and increases competition in the form of other department stores like.InfoFanz. like Speciality store. Later competition gives lots of other angles also . Lifestyle etc. Music store etc. book store.

Louis Philippe. Van Heusen Franchise: examples Mc Donald.InfoFanz. Dominoes etc.Classification of Retail Formats Form of Ownership Independent retailer: Example only one retail outlet Premsons. Wills Sports. etc. Leased departments: airport.apna bazar 1. • • • • • Presented by www. Leased one Consumer co-operatives: kendriya : Prepared by Dr. Benzer etc. pizza hut. Chain retailer: examples.Pooja Sharma 25 . malls Multiplexes.

InfoFanz.Pooja Sharma 26 . • Basis of the Merchandise offered Convenience stores Supermarkets Hypermarket • • Presented by : Prepared by Dr.

Pooja Sharma 27 .com : Prepared by Dr.InfoFanz.Classification of Retail Formats Classification of Retail Stores Store Based Retailing Non-Store Retailing Form of Ownership Independent retailer Chain retailer Franchise Leased departments Consumer co-operatives Merchandise offered Convenience stores Supermarkets Hypermarkets Speciality stores Departmental stores Off price retailers Factory outlets Catalogue showrooms Direct selling Mail order Tele marketing Automated Vending Presented by www.

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