THEORIES OF RETAIL DEVELOPMENT

PRESENTED BY:
EMMANUAL JOSE
Retail Development From The Theoretical Perspective:

 No single theory can be universally applicable or acceptable. The

application of each theory varies from market to market , depending on
the level of maturity and the socio-economic conditions in that market.
 The retail scenario keeps changing continuously. These changes are
brought by ever changing customer requirement, economic development
of the nation , falling borders, new technologies and by entrepreneurs.
 Growth in retail is a result of understanding market signals and
responding to opportunities that arise in a dynamic manner.
THEORIES
 Theories of retail development can broadly be classified into three:
 Environmental -where a change in retail is attributed to the change in the
environment in which the retailers operate.
 Cyclical - where change follows a pattern and phase can have definite
identifiable attributes associated with them. {wheel of retailing ,accordion
theory, retail life cycle theory }
 Conflictual - where the competition or conflict between two opposite
types of retailers, leads to a new format being developed.
1) ENVIRONMENTAL THEORY

 Darwin's theory of natural selection has been popularized by the phrase

“ survival of the fittest.”
 Retail institution are economic entities and retailers confront an
environment which is made up of : customers, competitors and
changing technology.
 So the birth, success or decline of different forms of retail enterprises is
many a times attributed to the business environment.
 Those retail institutes that are keenly aware of their operating
environment and which react without delay, gain from the changes.
 Thus Following the Darwinian approach of survival of fittest, those
retailers that successfully adapt technological, economic, demographic
and legal changes are the ones that are most likely to grow and proper.
 The Ability to adapt to change, ‘‘successfully “is at the core of this
theory .
2) CYCLICAL THEORY

 Cyclical theories mainly includes two theories :

1. Wheel of retailing
2. Accordion theory
A) WHEEL OF RETAILING
 Wheel represents phases through which some types of Retailers pass:
 Retailers enter by attracting customers – low price, low service .
 Expand market – More expensive merchandise, More Trading up
services, open more convenient locations. process increases costs & price
of their merchandise, creating opportunities for new low price retailers to
enter e.g. Discount stores & category specialists.
 Finally they mature as high cost high price retailers who become
vulnerable to new entrants-inability to adapt.
 Some Retailers don’t begin as low price, low service entrants, e.g.
Upscale fashion specialty stores.
B ) ACCORDION THEORY
 In rural markets, Retailers sell many categories under one roof: shoes,
cosmetics, foods, cloth, medicines. However the assortment is shallow
and customers have limited choice.
 Starting with general stores - neighboring localities .Slowly switching to
specialist stores - like gifts, restaurants, entertainment at a certain distance
 These specialist retailers when mature start adding variety and become
general stores.
 Some become category killers – is a retailer that carries such a large
amount of merchandise in a single category at such good prices that it
makes it impossible for the customers to walk out without purchasing
what they need, thus killing the competition.
 . It is also referred to as the general-specific-general theory. Retail
accordion theory is a theory of retail institutional change that suggests
that retail institutions go from outlets with wide assortments to
specialized narrow line store merchants and then back again to the more
general wide assortment institution
3) CONFLICT THEORY

 Conflict always exit between operators of similar formats or within broad

retail categories.
 Retail innovation does not necessarily reduce the number of formats
available to the consumer, instead , it leads to the development of more
formats.
 Retailing involves through a dialectic process, i.e. blending of two
opposite to creates a new format. This can be applied to development in
retailing like;
a) Thesis: Individual retailers as corner shops all across the country.
b) Antithesis: A position opposed to the thesis develops over a period of
time . (department store, discount store). The antithesis is a challenge
to the Thesis.
c) Synthesis: There is a blending of the Thesis and antithesis. The result
position between the thesis and antithesis. Supermarkets and
hypermarkets flourish. This “synthesis” for the next round of
evolution.
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