Retail Institution

Session : 3 Prof: Yasmin

Introduction
Store format plays a crucial role in attracting and satisfying target customers The diversity and changing nature of the society Retailing is a dynamic marketing activity: cope with competition, changing consumer demand. Various studies have been carried out to understand the changes taking place

Theories of Institutional Change

Wheel of retailing

Dialectic process
Retail accordion Natural selection

Wheel of Retailing
A better known theory of retailing wheel of retailing proposed by Maclcomb McNair says,

1.

New retailers often enter the market place 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.

2.

Wheel of Retailing ctnd

3. 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 too follow the same evolutionary process. The wheel keeps on turning and department stories, supermarkets, and mass merchandise went through this cycles.

4.

5.

Malcom P McNairs Wheel of Retailing

New Retailer enters: low status, low profit margin, low price store format Move up to: good market locations and stock premium products to differentiate themselves Mature to: High cost, high price retailers

Malcom P McNairs Wheel of Retailing

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Trading up phase

Traditional Retailer

Traditional Retailer New Retail Mature Retailer

Wheel of Retailing
Kirana stores were replaced by chain stores like Apna bazaar and FoodWorld (new entrant), which, in turn, faced severe competition from supermarkets and hypermarkets

Wheel of Retailing
Some would argue that McDonalds has become a victim of the wheel of retailing. When McDonalds started out, it served a select menu. Over the years, the McDonalds product offering has expanded to the inclusion of playgrounds, thus opening the way for new, low-cost fast-food providers, such as Checkers.

Dialectic process

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Dialectic Process or Melting Pot theory is another form of Retailing concept. In this two institutional forms with different advantages modify their formats till they develop a format that combines the advantages of both formats.

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Dialectic process(contd)
In terms of retail institutions, the dialectic model implies that retailers mutually adapt in the face of competition from opposites. When they are challenged by any competitor with differential advantage, an established institution will adopt strategies & tactics in the direction of that advantage, thereby negating some of the innovators attraction.

Dialectic process(contd

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In this movement there is a mutual adaptationwhere two retailer gradually move together in terms of
Offerings Facilities Supplementary services Prices

Thus they form a synthesis. The firm earns profit due to Economy of Scale. Has new technology to impart & thus gains competitive advantage.

The Dialectic process

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Department store High margin Low turnover , high Price , full price, Downtown location

Discount store Low margin High turn over Low price Self service Low rent location

Discount department store Average margin Average turnover Modest price Suburban location Model facilities

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Evolution of Retail Competition

Retail Accordion Describes how retail institutions evolve from outlets that offer wide assortments to specialized stores and continue repeatedly through the pattern.

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The Retail accordion theory

Wide variety retailers

General store

Departmental general catalo super market

Hyper market

SHOES Specialty store Specialty catalog Bakery

Boutique

Limited variety retailers

The Retail Accordion

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