DTEL (Department for Technology Enhanced Learning)

The Centre for Technology enabled Teaching & Learning , DMIMS, India

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Teaching Innovation - Entrepreneurial - Global
Management Studies
 Meghe Group of Institutions

Department
for
Technology Enhanced Learning
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RETAIL MANAGEMENT

Unit – 1
Introduction: Retail Management

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 Contents – lect 5

• Theories of Retail Development

• Cyclic Theories

– Wheel of Retailing

– Accordian Theory

Environmental Theory
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 Cyclic Theories

Wheel of Retailing

• Stage 1:Low Price, Low Service, limited

product offerings.
• Stage 2: Improve merchandise offering,
better service, higher prices
• Stage 3: Conservatism, declining ROI,
increased competition

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• According to a better-known theory of retailing – wheel of retailing
proposed by Malcomb McNair (Figure 3.1), new retailers often
enter the marketplace with low prices, margins, and status. The low
prices are usually the result of some innovative cost-cutting
procedures and soon attract competitors. With the passage of time,
these businesses strive to broaden their customer base and
increase sales. Their operations and facilities increase and become
more expensive. They may move to better up-market locations,
start carrying higher-quality products, or add services and ultimately
emerge as a high cost-price- service retailer. By this time newer
competitors as low-price, low-margin, low-status emerge and these
competitors to follow the same evolutionary process. The wheel
keeps on turning and department stores, supermarkets, and mass
merchandisers went through this cycle.

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 Accordian Theory

Evolution of retail institutions from general,

broad- based outlets with wide assortments, to
narrow- based institutions carrying specialised
assortments, and back to general, broad-based
assortments. Synonymous with general-specific-
general theory.

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• The accordion theory of retailing suggests that
retailers initially enter a market as a general retailer
and then with experience they focus down on
particular groups. Over time they begin to diversify
their offer in order to grow, but again would revert to
specialization. Thus retail accordion is based on
cyclical functioning in variety and adjustment.
Hollander (1966) proposed the Retail Accordion
theory, which explained retail evolution as a cyclical
trend in terms of the number of merchandise
categories (i.e., product assortment).
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• In this theory, at the beginning of operation, a retail institution
carries a broad assortment of merchandise (i.e., various types
of products or product classifications) but does not carry a
deep assortment (i.e., various styles within one product
classification). At this early stage, the retail institution is a
general store. As time passes, the retail institution becomes
specialized by carrying a limited line of merchandise with a
deep assortment. At this point, the retail institution is a
specialty store. At some point, every retail institution returns to
the inventory profile of the old operation with a broad
assortment of many lines of merchandise. The number of lines
(i.e., broad vs. narrow) and the depth of inventory (i.e., shallow
vs. deep) expand and contract over time.
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• Hollander used general stores, drug stores, supermarkets,
department stores, and discount stores in the United States as
samples of analysis for the theory. He explained historical
changes of a merchandise assortment in these retail institution
types, and noted that each evolved by following the steps of
the Retail Accordion theory. Stern and El-Ansary (1977)
proposed a graphic model of Retail Accordion theory with
breadth of merchandise line assortment changing across time.
In the model, general stores, department stores and shopping
centers, as examples of institution types with broad
merchandise lines, have alternated over time with specialty
stores and boutiques, which represent institution types with
narrow merchandise lines.
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 Environmental Theory

• The original idea of the Environmental theory came from

Darwin’s Natural Selection theory. The Natural Selection
theory proposes that a species can survive only when it best
adapts to environmental changes (Brown). Gist replaced the
“natural species” in the Natural Selection theory with a “retail
institution”, and he proposed that only a retail institution,
which is most effectively adapted to environmental changes,
could survive (i.e., Adjustment theory of evolution). The
Environmental theory explains how variables in the
environment affect retail evolution; however, it does not
explain patterns of change or changes over extended time,
as do the two Notes previous primary theories

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• The basic notion of the natural selection theory is that retailers
that successfully adapt to changing lifestyles of the consumers
and other environments will survive the longest. According to
this theory, formats best able to adapt are most likely to
survive e.g., current supermarket trends and department store
trends are attempts to adapt and survive; stores that originally
resisted the Internet channel, are now benefiting from it. The
organizations must adapt in response to environmental
changes. They should evolve in response to customer needs
e.g. longer store hours, ability to shop online and relevant
technology such as logistics efficiencies and competition in
which the firm has to maintain competitiveness in the face of
new and more sophisticated competitors.
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 SAQ’S

a) With the help of a suitable diagram, explain

The Wheel of Retailing?

b) Explain the Accordian Theory of Retailing?

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 LAQ’S

Explain the Cyclic Theories of Retailing.

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 Summary

• Explained the various cyclic theories of

Retailing.

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 Books Referred

• A Sivakumar, Retail Marketing

• P Mcgoldrick, Retail Marketing
• Barry Berman/ Joel R Evans/ Mini Mathur, Retail
Management

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• THANK YOU

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