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Retail- Theories

Retail- Theories

Retail- Theories
Retail- Theories
Retail- Theories

The Evolution of Retail Format

The Evolution of Retail Format • The origin of retail are as old as trade itself,
The Evolution of Retail Format • The origin of retail are as old as trade itself,

The origin of retail are as old as trade itself, for centuries most of merchandise was sold in marketplace or by peddlers.

Earlier markets were dependent on local sources for supplies of perishable foods because journeys were far too. And long distance transportation.

The peddlers who provided people with the basic goods and necessities could not be self sufficient. In prehistoric times the peddler travelled long distance to bring products to locations which were in short supply.

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Evolution of retail formats in different times

Evolution of retail formats in different times 1. Social Developments and their impact :  The
Evolution of retail formats in different times 1. Social Developments and their impact :  The

1. Social Developments and their impact:

  • The development of trading has been intimately associated with social developments over the ages. Two important developments of the 18 th century

    • 1. The development of rail roads and telegraphs which largely affected the growth of retail trade.

    • 2. In 1852 Bon Marche, the first departmental store , was set up in Paris.

      • Bon Marche revolutionized retail at time by relying on volume rather than high mark up, to make money.

      • By the year 1897,the store sold more than $30 million worth of goods per year.

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 The first department store which opened in US , was Stewart’s in New York, which
 The first department store which opened in US , was Stewart’s in New York, which
  • The first department store which opened in US , was Stewart’s in New York, which was followed by Macy’s post civil war.

  • The late 1800’s saw the rise of the so called 5 and 10 cent stores , which emerged to serve the needs of the poorer classes.

2. The Industrial revolution:

  • The industrial revolution call for dramatic changes on the retail front.

  • The increase in urbanization lead to the emergence of shops, to serve the needs of the locals.

  • The middle income consumers increased and mass transportation become a way of life

  • Mass manufacturing made it possible to manufacturing goods in large quantities.

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3. The emergence of self service:  Retail evolve in many ways over the 20th century.
3. The emergence of self service:  Retail evolve in many ways over the 20th century.
  • 3. The emergence of self service:

    • Retail evolve in many ways over the 20th century.

    • Self service as a concept started in 1916 when Clarence Saunders started the first self service store.

  • 4. The development of supermarkets and convenience

  • stores:

    • The emergence of the supermarkets first saw in 1930’s. first hypermarket that was developed by Carrefour in France in

    1963.

    • The new formats gave the customer the choice of picking up a product, comparing it with others and then taking a decision on buying.

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    5. Speciality stores, malls & formats:  As the needs of the consumers grew and changed
    5. Speciality stores, malls & formats:  As the needs of the consumers grew and changed
    • 5. Speciality stores, malls & formats:

      • As the needs of the consumers grew and changed it was visible the emergence of commodity specialized mass merchandisers in the

    1970s.

    • The 70s were witness to the use of technology in the retail sector with the introduction of the Barcode.

      • 6. The Rise of the Web:

        • The world of retail changed again in 1995, when Amazon. Com opened its doors to Worldwide market on the Web.

        • With the growth of the world wide web , both retailers and consumers can find suppliers and products from anywhere in the world.

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    Theories of Retail Development

    Theories of Retail Development Retail Development from the theoretical perspective:  No single theory can be
    Theories of Retail Development Retail Development from the theoretical perspective:  No single theory can be

    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.

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    Classification

    Classification Theories of retail development can broadly be classified as: 1. Environmental : where a change
    Classification Theories of retail development can broadly be classified as: 1. Environmental : where a change

    Theories of retail development can broadly be classified as:

    • 1. Environmental: where a change in retail is attributed to the change in the environment in which the retailers operate.

    • 2. Cyclical- where change follows a pattern and phase can have definite identifiable attributes associated with them.

    • 3. Conflictual: where the competition or conflict between two opposite types of retailers, leads to a new format being developed.

    Environmental theory

    Environmental theory  Darwin's theory of natural selection has been popularized by the phrase” survival of
    Environmental theory  Darwin's theory of natural selection has been popularized by the phrase” survival of
    • 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.

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     Those retail institutes that are keenly aware of their operating environment and which react without
     Those retail institutes that are keenly aware of their operating environment and which react without
    • 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

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    Cyclical Theory

    Cyclical Theory  The most well know theory of retail evolution is the retail wheel of
    Cyclical Theory  The most well know theory of retail evolution is the retail wheel of
    • 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, offering some real advantages.

    • As they prosper , they develop their business, offering a greater range or acquiring more expensive facilities they lose the focus. (on which they entered in the market). This phase is known as ‘trading phase’. This in turn leave room for others to enter and repeat the process.

    • They then become vulnerable to new discounters and lower cost structure as they are now Mature retailers.

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    The wheel keeps on turning and department stores, supermarkets, and mass merchandise went through this cycles

    The wheel keeps on turning and department stores, supermarkets, and mass merchandise went through this cycles
    The wheel keeps on turning and department stores, supermarkets, and mass merchandise went through this cycles
    Innovative retailer Innovative retailer Mature retailer Mature retailer Low status and price Low status and price
    Innovative retailer
    Innovative retailer
    Mature retailer
    Mature retailer
    Low status and price
    Low status and price
    Top heavy
    Top heavy
    Minimum service
    Minimum service
    Poor facilities
    Poor facilities
    Declining ROI
    Declining ROI
    Limited product offering
    Limited product offering
    Traditional retailer
    Traditional retailer
    Elaborate facilities
    Elaborate facilities
    Higher rent
    Higher rent
    More locations
    More locations
    Higher prices
    Higher prices
    Extended product offerings
    Extended product offerings
    T
    Trading up phase

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    Conflict theory

    Conflict theory  Conflict always exit between operators of similar formats or within broad retail categories.
    Conflict theory  Conflict always exit between operators of similar formats or within broad retail categories.
    • 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.

     The store enjoyed an enviable position for sometime and later the change in customer expectations
     The store enjoyed an enviable position for sometime and later the change in customer expectations
    • 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, Globus, Westside, Lifestyle etc.

    • Later competition gives lots of other angles also , like Specialty store, book store, Music store etc.

    • Initially when shoppers stop opened its first outlet in Mumbai in 1991 they offers apparel, imitation, cosmetics

    and perfumes and home fashion. That time they also offer loyalty programmes in place, which did not offers by others.

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