Page 1 of 9

"THE DYNAMICS OF RETAIL INSTITUTIONS": MORE SUPPORT FOR THE EMPIRICAL GENERALIZATION OF THE "WHEEL OF RETAILING" Marko Grunhagen, University of Nebraska-Lincoln Robert A. Mittelstaedt, University of Nebraska-Lincoln ABSTRACT In this paper, the status of the "Wheel of Retailing" as a previously weak empirical generalization is strengthened through the establishment of convergent validity. "The Dynamics of Retail Institutions" (Die Dynamik der Betriebsformen im Handel) by Nieschlag (1954) is a concept which originated and has found widespread acclamation in the German speaking scholastic institutions of Western Europe. Nieschlag's (1954) research arrives at the same observable regularity as the "Wheel of Retailing" pattern, yet provides additional causal explanations, and appears to have been discovered independently from the classic US research on the "Wheel of Retailing". The benefit of a foreign research stream to provide operational replicability of US research is emphasized. INTRODUCTION The notion of the "Wheel of Retailing" has captured marketing scholars' attention since its first description by Malcolm P. McNair (1931) for most of this century until today (e.g., Brown 1990). On the one hand, the wheel has been criticized for its vagueness (Gripsrud 1986) and lack of clarity (Savitt 1988). On the other hand, it has been acclaimed for its pedagogic value (Dickinson 1988), its ability to unite Western and Oriental philosophic perspectives (for an in-depth discussion see Brown 1990), and its symbolic value as one of the few conceptualizations that marketing as a discipline has originated by itself (Sheth, Gardner, and Garrett 1988). Its most profound criticism, yet, has been the contention that it lacks the criteria for a formal theory (e.g., Hirschman and Stampfl 1980, Hunt 1991). First this paper will reiterate, in a short literature review, a variety of arguments depicting the "Wheel of Retailing" as a weak empirical generalization. Then, an attempt will be made to strengthen this status through the introduction of the notion of "The Dynamics of Retail Institutions" (Nieschlag 1954). Over decades, North American marketing researchers were hesitant to incorporate particularly those foreign literature streams into their body of scientific knowledge, which are not published in English. Nieschlag's (1954) concept, which has achieved widespread acclamation in the German speaking scholastic institutions of Western Europe (e.g., Dichtl 1980, Moser 1974, Muller-Hagedorn 1985, 1993, Tietz 1983), has remained virtually unknown among North American marketing academicians. His research not only arrives at the same observable regularity as the "Wheel of Retailing" pattern, but even goes beyond McNair's (1931, 1958) and Hollander's (1960) description by providing causal explanations. The introduction of Nieschlag's (1954) research is meant to provide a source of convergent validation of the "Wheel of Retailing" notion, ultimately reinforcing its status as an empirical generalization.

http://www.sbaer.uca.edu/research/1998/SMA/98sma119.txt

5/6/2004

moreover. p.edu/research/1998/SMA/98sma119. hence an empirical regularity. 146). p. Hunt (1991) postulates that theories "contain systematically related sets of statements in order to increase the scientific understanding of phenomena. Brown (1990) determines that "a substantial number of retailing institutions in the United States and other developed countries do appear to have evolved in the manner described by the wheel. the compatibility of the wheel notion with the evolution of retail institutions over more than sixty years since its first mentioning in 1931 appears to be justification enough to exclude the possibility of "chance".its frequently and regularly observed empirical content. p. To scientifically understand the occurrence of a phenomenon requires more than simply being able to explain and predict it using isolated lawlike generalizations. we must be able to show how the statements used to explain and predict a phenomenon are incorporated into the total body of scientific knowledge" (Hunt 1991. 113). p. Brown (1990) points out that "despite the wheel's heuristic significance and the voluminous literature that it has generated. Hirschman and Stampfl (1980) support this notion by stating that the wheel lacks validation. The wheel has not been integrated into any systematic scientific framework beyond its generalized observability. He continues that "the supporting 'evidence' [for the wheel]. 1958) notion of the wheel is considered the first one of its kind to describe a frequently observed pattern of retail institutions' development. McNair's (1931. 146). Hirschman and Stampfl (1980) point out that the "Wheel of Retailing" is inadequately specified as to causal linkages. 72).Page 2 of 9 LITERATURE REVIEW McNair's (1931. 1958) discovered the wheel pattern by simply observing the retail industry evolution at his time. is often little more than casual observation or idle speculation" (Brown 1990.uca. Also. 1958) careful observation of the described development with chain store retailers as well as with the emerging department store segment at the same time supports the contention to abolish any suspicion of an accidental or singular phenomenon. McNair (1931. The "Wheel of Retailing" describes the regular developmental pattern of retail institutions. They even contend that it has been useful as a descriptor in the past. p. An empirical regularity does not qualify as a lawlike statement until it is systematically integrated into a coherent scientific structure or framework" (Hunt 1991. 152). These contentions support the one main reason for which the wheel has been repeatedly acclaimed and consistently utilized as a metaphor of retail institutions' development -. "but cannot serve as our conceptual framework for the future" (Hirschman and Stampfl 1980.txt 5/6/2004 . Further. a variety of sources dealing with the "Wheel of Retailing" over decades have concluded that it http://www. that "a simple empirical regularity (even a well-confirmed one) is not a lawlike generalization. to be insufficiently important to warrant institutional status. Hunt (1991) points out.sbaer. hence failing to "meet the criteria for formal theory" (Hirschman and Stampfl 1980. Consequently." And Gist (1988) deems most of the wheel's exceptions. However. the concept still remains unproven" (Brown 1990. such as vending machines or branch department stores. 72). p.

sbaer. Yet. and Mittelstaedt (1979) refer to the kind of replication study which demonstrates "that a particular method will produce similar results in altered circumstances" as "operational replication".txt 5/6/2004 . a German marketing scholar who taught at the University of Cologne during the time. Yet. Consequently. preferably by different researchers and ideally using different methods. the wheel gravely lacks empirical validation." The metaphor of the wheel certainly fulfills the requirement of a symbolic depiction. can also benefit from research done and published in non-English speaking parts of the world to find support for their own discoveries. Nieschlag was a student of Julius Hirsch and Rudolf Seyffert between 1925 and 1929 in Berlin and Cologne. Mittelstaedt and Zorn (1983) term the relationship between an "observation of the same phenomena" and "different measures and methods of establishing relationships" an "operational replication". graphic. Brown (1990) quotes Bucklin (1983). addressing "issues that are not central to the wheel theory" (Brown 1990.S. it has not been exposed to a great deal of empirical testing.edu/research/1998/SMA/98sma119.uca. Barwise (1995) points out that "we will give more credibility to an EG [empirical generalization] which has been thoroughly and systematically tested. "THE DYNAMICS OF RETAIL INSTITUTIONS" Since North American research findings in marketing represent to a large extent the basis of marketing knowledge not just in the U.S. The following insight into a foreign research stream serves as an example on how marketing academicians in the U. p. this is exactly what needs to be shown for the "Wheel of Retailing" . or symbolic methods. scholastic institutions. Franz.Page 3 of 9 merely represents a weakly established empirical generalization. 146). Goldman (1975). Martenson (1981) and Savitt (1984) as "noteworthy exceptions" of empirical tests of the wheel. Accordingly." As pointed out in the previous section. contrary to Barwise's (1995) postulate. marketing research abroad is largely dependent on the substantialization and manifestation of marketing theory at U. After accepting appointments http://www.its robustness based on a different researcher's operational replication. REPLICABILITY Bass (1995) defines an empirical generalization as "a pattern or regularity that repeats over different circumstances and that can be described simply by mathematical. "The Dynamics of Retail Institutions" (Die Dynamik der Betriebsformen im Handel) were discovered in 1954 by Robert Nieschlag. Brown (1990) also criticizes their marginal and "unstable foundations". but also globally. He completed his dissertation in 1953 at the University of Cologne after occupying a number of leading positions in German corporations.S. They attribute the merit of this form of generalization for the research community to the fact that it shows the robustness of the original researcher's results. Hence. Madden. yet by no means exhibits the corroborative empirical support or the integration into a coherent stream of marketing research to justify a status of law or even a theory. The following section will introduce "The Dynamics of Retail Institutions" to pursue this purpose.

he states explicitly that he will focus foremost on the United States (Nieschlag 1954. New retailers enter the market as lowprice competitors. service oriented competitors. Nieschlag's publication (1954) exhibits his strong interest in the history of marketing institutions and the development of new forms of retailing. Introduction and Growth The first phase of the development of a retail institution is characterized through a pioneering effort.Page 4 of 9 in Cologne and Munster. He researched the origin and development of the French "grand magasin". and (c) they focus on restricted assortments and store facilities. Consequently. This second phase of "trading up" becomes a consequence of increased competitive pressure in the initial low-price segment. and the history of mail order companies. Second.edu/research/1998/SMA/98sma119. (a) the pioneers fear to lose their attractiveness due to a rather small target market that http://www. Maturity and Assimilation Despite of the success which lets pioneer retailers thrive throughout the early stage of their existence. (b) they provide very limited service offerings. (a) they benefit from lower-cost sources/suppliers than their competitors.uca. Nieschlag contends that the development of the German retailing industry immediately following World War II could not serve as an appropriate basis to characterize a generalizable pattern of evolution. the expansion of the (then new) form of "uniform price stores" had been severely restricted by the Nazi regime. Nieschlag concludes that he mainly has to use foreign countries' retail industry developments as the basis for his generalization of an evolutionary pattern. he became a full professor at the University of Munich in 1957. They had feared it as the most radical form of change in retailing. serviceintensive store formats.txt 5/6/2004 . p. as well as of the pressure "from above" through higher priced. For this purpose. nofrills approach. and (2) maturity and assimilation. an assimilation trend towards the higher priced retail segment can be observed. This "sandwiched" position "forces" (Nieschlag 1954) the previous pioneers toward the renewed search for a distinct market position. the new retail format succeeds in the short run. voluntary chains and super markets in the U. yet more convenient.sbaer. cooperatives in food retailing. Emphasizing a low-cost. using an "active price policy" (Nieschlag 1954). which was not in accordance with their policy of forcing every part of society into line. He distinguishes two phases in the development of retail institutions. where he taught until his retirement in 1970 (Muller-Hagedorn 1985). Germany's political isolation after its defeat precluded the country's immediate integration into a global retail environment. the emergence of the "Einheitspreisgeschaft" (uniform price store) in Germany. This is triggered by the promising perspective that their approach will render them a distinct market position compared to existing higher-priced. (1) introduction and growth. Nieschlag (1954) names three reasons for the observed change in the pioneers' strategy. He gives two reasons for his conviction: First. 5). Nieschlag states three reasons for the pioneers' success with the new concept compared to higher priced institutions. hence cutting costs.S.

Yet as a result of these efforts costs almost automatically increase. the initial thrust is a gradual upgrade of facilities and services. Beckman. However. Nieschlag was very familiar with the American literature http://www. 1958) and Hollander (1960) describe three stages. and Davidson 1952. Hunt's (1991) attempt in this regard to supplement the wheel through the theory of differential advantage is to be commended. Nieschlag's (1954) analysis of the evolutionary pattern exhibits causal characteristics that had not been considered by McNair (1931. however. "the assimilation to existing higher priced retailers" (Nieschlag 1954).Page 5 of 9 responds to the low-price approach. both sources depict the same general pattern of evolution. and Alderson 1949. Muller-Hagedorn 1993). in return. McNair (1931. while offering these services at a lower cost than the higher priced competitors.sbaer. At various points in his article he points out the need for the pioneer retailer to appeal to the consumer by setting himself apart from competitors on the same price level.. While Nieschlag (1954) only distinguishes between two phases in the development process. as well as by outperforming higher priced stores on a non-price basis. Neither Nieschlag's (1954) literature section nor the footnotes in his paper indicate any knowledge of McNair's (1931) early notion. various sources in the literature have criticized their lack of reasoning or causal explanation (e. Hirschman and Stampfl 1980.edu/research/1998/SMA/98sma119. Hence. results in price increases. This is supported by the fact that none of the leading marketing (Alexander. Nieschlag apparently had never read McNair's (1931) first article. 1954) and Hollander (1960) simply develop the evolutionary pattern. and that have only very rarely been successfully combined (for an in-depth review of Southwest Airlines' success story see Smith and Kling 1996). and the opening of the low-price market for new competitors (Nieschlag 1954. A COMPARISON Comparing McNair's (1931. appears to display a deeper analysis of why the observed development actually takes place. Maynard. and (c) even a moderate desired expansion of the pioneers' assortment might only be successful if they respond to suppliers' demands for enhanced service offerings to accompany their products. The goal is to provide enhanced amenities and services compared to the pioneer retailer's low-end rivals. This. Nieschlag's (1954) reasoning almost forty years earlier aims in the same direction. Apart from this rather arbitrary formal separation within a continuous development.txt 5/6/2004 . This is even more surprising when considering the fact that Nieschlag's (1954) paper was published before McNair's (1958) second article and Hollander's (1960) classic paper. Phillips and Duncan 1948) and retailing textbooks (Duncan and Phillips 1948) up to the year of Nieschlag's (1954) discovery contain even a note on McNair's early (1931) article. Converse and Huegy 1940. Hence. Surface. Thus. 1958) or Hollander (1960). (b) new competition emerges in the low-price segment based on the pioneers' observable and imitable success. we see an attempt to apply the principles of a strategic advantage that Porter (1980) defined as cost-leadership versus differentiation-leadership. While McNair (1931.g. 1958) and Hollander's (1960) conceptualization of the "Wheel of Retailing" with Nieschlag's (1954) observations on "The Dynamics of Retail Institutions" indicates a very high degree of congruence between the two models. Nieschlag (1954).uca. Hunt 1991) in the notion of the wheel.

Hence.. since it was McNair's second (1958) article which actually coined the previous observed regularity the "Wheel of Retailing". then as today Germany's leading daily national newspaper. http://www. Next Steps forward in Retailing. and simultaneously classifying it in a mere side remark as an "independently derived formulation" (Brown 1987. The discrepancy between the structural systematizations into different stages of the evolutionary process.000 Retailers. while his first Harvard Business Review article in 1931 did not really receive a whole lot of attention then. Hirschman and Stampfl 1980). We are assuming methodological differences between Nieschlag's and McNair's independent discoveries ..and yet. had studied retailing before a different cultural and evolutionary background -. and does not either today. and the lack of reasoning in McNair's (1931) paper on the one side and the causal linkage in Nieschlag's (1954) publication on the other side provide additional indications of an independent discovery of the same observable regularity in the United States' evolution of retail institutions by Nieschlag. Brown (1937).sbaer. This congruence provides strong support for the robustness of McNair's (1931. 1952 in the Frankfurter Allgemeine Zeitung. Gabler and Percy S. It seems apparent that Nieschlag never came across McNair's (1931) early description of the wheel pattern. "operational replicability" as postulated by Madden.txt 5/6/2004 . which is indicated through quotations in his 1954 paper: Corbaley. titled "What is a Shopping Center? A New Form of American Retailing " (Was ist ein Shopping Center? Eine neue Form des amerikanischen Einzelhandels. Assuming no deliberate and intentional attempt by Nieschlag to disguise actual knowledge of McNair's (1931) original observation which led to the notion of the "Wheel of Retailing". Filene. The Evolution of Food Distribution in Voluntaries and Cooperatives. his notion of "The Dynamics of Retail Institutions" appears to have been discovered independently.Page 6 of 9 on retailing since the 1930s. and Mittelstaedt (1979) and Mittelstaedt and Zorn (1983) has been established. Werner K. Brown 1990. (1936).g. 10). In fact. Group Selling by 100. This notion is supported by Brown (1987). In addition.either one lived on a different continent was rooted in different educational and research traditions.uca. Franz. even today most of the references that deal with the "Wheel of Retailing" don't even mention the earlier (1931) original reference (e.edu/research/1998/SMA/98sma119. Edward A. New York. Gordon C. 1958) and Hollander's (1960) weakly established empirical generalization. Nieschlag himself authored a paper on December 4. the only marketing academician mentioning Nieschlag's (1954) discovery during the period between 1977 and 1996 according to the Social Science Citation Index. both still observed the same phenomenon at the same time based on the same statistical population (the retailing industry in the United States). the marketing scholar and historian in Germany. New York. p.). This certainly appears to be very likely.

536. (1988) that it "should be nurtured and developed. Yet. the value of the wheel for marketers goes back to the beginning of its existence as an independent academic field.uca. Barwise. Brown. G29-G35.Page 7 of 9 In addition. Theodore N. Beckman. The Athenaeum Press. Brown. Frank M. Stephen (1987). 21 (6). and that has not been borrowed from other disciplines. Principles of Marketing." Marketing Science. Marketing.txt 5/6/2004 . Maynard. 14 (3). Davidson (1952). Ginn and Company. "Empirical Generalizations and Marketing Science: A Personal View. "Good Empirical Generalizations.. G6-G19. and William R. this paper does not only provide support for the empirical generalizability of the "Wheel of Retailing". as Brown (1990) puts it. The only reference to Nieschlag's (1954) article beyond Brown's (1987) earlier cited publication was found to be in the "Urban Studies" literature (SSCI 1992)." The current paper is certainly a step to support its validity in the realm of empirical generalizations in marketing. Ralph S. the wheel "needs to be road-tested more often" in order to achieve an even higher status in the marketing literature. the status of the "Wheel of Retailing" as a previously weak empirical generalization has been strengthened through its operational replication in the form of "The Dynamics of Retail Institutions" by Nieschlag (1954). D'Amico (1983) provocatively concluded that it is "time for the wheel of retailing to roll off into the sunset. Simultaneously. Harold H. The "Wheel of Retailing" is considered to be one of the few original concepts that marketing as a discipline has originated. REFERENCES Alexander. Past and http://www.sbaer." The authors concur with Sheth and al. "Institutional Change in Retailing: A Review ans Synthesis. Nieschlag's (1954) article has only once before according to the Social Science Citation Index (SSCI) 1977-1996 been introduced to the American marketing literature. but simultaneously introduces a previously neglected.edu/research/1998/SMA/98sma119.. and to embed it into a wider scientific body of knowledge in order to lift the wheel to the status of a lawlike generalization or even a scientific law. and Wroe Alderson (1949). (1995). Hence." Journal of Retailing. New York: The Ronald Press Company. 14 (3). Patrick (1995)." European Journal of Marketing. 66 (2). Stephen (1990)." Marketing Science. the benefit of incorporating a foreign research stream into North American marketing theory has been indicated. Savitt (1989) even finds the wheel to be "the most popular topic area in the entire marketing literature". Bass. The next step in the agenda of the "road-testers" should be to find corroborative empirical support. 143-149. "The Wheel of Retailing: Future. Surface. Frank M. Consequently. CONCLUDING REMARKS In this paper. foreign research stream to the American marketing community.

Critical Issues in the Philosophy of Marketing Science. 3. 25 (7). eds. and C. and R. Lamb. Bucklin and J. Carbondale. "Trends in Large-Scale Retailing. New York: Prentice Hall. IL: Irwin.sbaer. Stampfl and E. "Market Structure. A. Erwin (1980)." International Journal of Physical Distribution and Materials Management. and Expected Competitor Reactions in Retailing. Research in Marketing. eds. Nevett and R. "Discussants Comments. C. "Patterns of Change in Retail institutions in the United States with Special Attention to the Traditional Department Store. Madden. and Harvey W. Hollander. Brown. (1986)." Journal of Marketing." in Competitive Structure in Retail Markets. Huegy (1940). Stanley C. Michael (1983).. Elizabeth C. "Lessons from Retailers' Price Experiences in the 1950s. German and Austrian Furniture Markets. Hirschman. Cincinnati. Chicago. A. Modern Marketing Theory. J.). (1983). OH: South-Western Publishing. "The Replicability of Research in Marketing: Reported Content and Author Cooperation. Gothenburg. Dickinson. R. Heath. IL: American Marketing Association. (1971). Chicago. G. Gripsrud. Charles Stanley." in Conceptual and Theoretical Developments in Marketing. (1960). Hollander. IL: American Marketing Association. Ferrell. Goldman. P. "The Role of Trading Up in the Development of the Retailing System. eds. Hunt. (1975). (1981). Innovations in Multi-national Retailing: Ikea on the Swedish. C. Delbert J. Malcolm P. T. R. "Retail Research: Problems. The Elements of Marketing. Fullerton. R. Louis P. Dichtl. 153-168. (1931). "Marketing Eminenz. Greenwich. 13 (5/6). IL: Southern Marketing Association. Hirschman. Perceived Competition. Swiss. 251-271. Stampfl (1980)." Journal of Marketing." in Historical Perspectives in Marketing: Essays in Honor of Stanley C. CT: JAI Press. McNair. Lexington.uca. Gist. D. R. R. eds. 0. Phillips (1948).txt 5/6/2004 ." in Marketing: Theories and Concepts of an Era of Change.edu/research/1998/SMA/98sma119. (1988). Germany: University of Gothenburg. Carman (eds. Rinehart and Winston. 39 (January). Marketing and Society: A Conceptual Introduction. (1991). 68-77. Mittelstaedt (1979). Department of Business. 37-42. 6-7. Potentials and Priorities. MA: D. 177-192. "The Wheel of Retailing." http://www." in: L. New York: Holt. Retailing Principles and Methods. and Robert A. Duncan. Lori Sharp Franz. Chicago. Shelby. Summey et al.Page 8 of 9 Bucklin. W. Martenson. Paul D. M." Absatzwirtschaft. Converse. Volume 8. and Charles F. The Department Store Perspective. S. 54-62. D'Amico.

Free Press. 23 (Winter). Zorn (1983). School of Management. Charles F. Smith. "Handels marketing. Kling (1996). Philadelphia. R. David M. 10 (1). Lothar (1993). Robert Nieschlag. PA: Institute for Scientific Information. Marketing Theory: Evolution and Evaluation. Strukturwandlungen in der Bundesrepublik Deutschland von 1970-1995. 65 (3). Muller-Hagedorn. 326-355. 18 (6/7). Robert (1954). Malcolm P. B. (1988). (1983). M. IL: Irwin. Zurich. Auflage. "The 'Wheel of Retailing' and Retail Product Management" European Journal of Marketing. New York: The Savitt." Working Paper. Phillips. Konsument und Einzelhandel. and Thomas S. 43-54. Garrett (1988). Social Science Citation Index (1977-1996). (1984). "Building Sustainable Competitive Advantage: The Southwest Story.txt 5/6/2004 .Page 9 of 9 Harvard Business Review. "Looking Back To See Ahead: Writing the History of American Retailing. Eine Untersuchung der Entstehungsursachen und Entwicklungsdeterminanten. Dr. Jagdish. "Die Dynamik der Betriebsformen im Handel. Geburtstag von Prof. "Econometric Replication: Lessons from the Experimental Sciences. 72-80. and James A. Sheth. PA: University of Pittsburg Press." in Competitive Distribution in a Free High-Level Economy and Its Implications for the University. Frankfurt a. Lothar (1985). "Die Dynamik der Betriebsformen. Schriftenreihe Nr. and Delbert J. Mittelstaedt. and Dennis E. Gardner. Savitt. Muller-Hagedorn. N. Neue Betriebsformen im Einzelhandel. Robert A." Kohlhammer Edition Marketing. "Significant Trends and Developments in the Post-War Period.edu/research/1998/SMA/98sma119. New York: John Wiley & Sons. R. M. "Comment: 'The Wheel' of the Wheel of Retailing." Rheinisch-Westfalisches Institut fur Wirtschaftsforschung." Journal of Retailing. Stuttgart-Berlin-Koln. Smith. Pittsburg. Porter. McNair. 7 (February). Dieter (1974). Nieschlag. 30-39. http://www. (1985). Zum 80. Essen. Competitive Advantage. Savitt. Michael E." International Journal of Retailing. 2.. Frankfurt a. Syracuse University. (1958). Marketing Principles and Methods. 21-26. Homewood. 3 (1). Duncan (1948). Tietz. A.uca. (1989). 9-14." Quarterly Journal of Business and Economics." Marketing ZFP..sbaer. R. Ken A. ed. Moser. 38-40.

Sign up to vote on this title
UsefulNot useful