Retail Innovation

Journal of Retailing 87S (1, 2011) S53S66
Retailing Innovations in a Globalizing Retail Market Environment

Werner Reinartz a, , Benedict Dellaert b,1 , Manfred Krafft c,2 , V. Kumar d,3 , Rajan Varadarajan e,4
a
Department of Retailing and Customer Management, University of Cologne, Albertus-Magnus-Platz 1, 50923 Cologne, Germany
b Department of Business Economics, Erasmus University Rotterdam, Postbus 1738, 3000 DR, Rotterdam, The Netherlands
c Department of Marketing, University of Mnster, Am Stadtgraben 13-15, 48143 Mnster, Germany
d J. Mack Robinson School of Business, Georgia State University, Atlanta, GA 30303-3989, United States
e Department of Marketing, Texas A&M University, TAMU 4112, College Station, TX 77843-4112, United States
Abstract
In recent years, the combination of economic growth and population growth in emerging markets and less developed markets has accelerated
the progression of globalization of retailing and globalization by retailers. The challenges faced by global and globalizing retailers (retailers who
currently have or intend to establish a market presence in mature markets, emerging markets and less developed markets) can be more daunting
compared to those faced by firms in other industries such as automobiles, steel, and computers. Retailing innovations that are responsive to the
characteristics of distinctive national markets and broader aggregations of markets such as mature, emerging and less developed markets are
critical to the success of global and globalizing retailers. Against this backdrop, this paper focuses on retailing innovations in the context of a
globalizing retailing environment. It attempts to shed insights into the characteristics of retailing innovations conducive to superior performance
in distinctive national markets and across broader aggregations of markets. Towards this end, we first examine the environmental conditions of
markets in different development stages, namely mature, emerging and less developed markets, and explore consumer based, industry based, and
legal/regulatory based challenges faced by globalizing retailers in these markets. Second, we show how these challenges can be transformed into
opportunities with retailing innovations. We conclude with a roadmap for future research and present propositions on future development with
respect to retailing innovations in these markets.
2011 New York University. Published by Elsevier Inc. All rights reserved.
Keywords: Retailing; Mature markets; Emerging markets; Innovation; Globalization
Introduction
Over the past several decades, modern retailing has become
increasingly global in scope. The term globalization of retailing
encompasses many interrelated developments such as (1) major
retailers based on mature markets establishing a market presence
in countries in different stages of economic development, (2) the
supply chain undergirding the operations of retailers becoming
increasingly global in scope, and (3) the diffusion of retailing
innovations in various parts of the world. By and large, the retail
market environment in numerous countries worldwide has been
Corresponding author. Tel.: +49 221 470 5751.

E-mail addresses: werner.reinartz@uni-koeln.de (W. Reinartz),
dellaert@ese.eur.nl (B. Dellaert), 28makr@wiwi.uni-muenster.de (M. Krafft),
vk@gsu.edu (V. Kumar), varadarajan@tamu.edu (R. Varadarajan).
1 Tel.: +31 10 4081353.
2 Tel.: +49 251 83 25025.
3 Tel.: +1 404 413 7590.
4 Tel.: +1 979 845 5809.
subject to the influence of globalization forces. The influence

of these globalization forces is evident with regard to various
aspects of retailing such as the retailing supply chain, product
assortment, store format, and branding.
Alongside these changes, retailers that operate in a global
retail market environment are also confronted with the fact that
the structure of retail markets in various countries is commensurate with its stage of development. While in most western
markets, retailers face challenges typical for mature markets,
in emerging markets such as the BRIC- (Brazil, Russia, India,
China) nations and other country markets with similar characteristics growing at and/or are projected to grow at significantly
higher rates, they face a different set of challenges. Likewise,
less developed markets such as many countries in Africa exhibit
their own distinctive dynamic from the standpoint of retailing.
While countries and markets across the globe show considerable heterogeneity in terms of the development stage and
associated structural and supply chain characteristics one
can broadly distinguish between three subgroups of retail markets: (1) mature markets such as in Western Europe and North
0022-4359/$ see front matter 2011 New York University. Published by Elsevier Inc. All rights reserved.
doi:10.1016/j.jretai.2011.04.009
S54
W. Reinartz et al. / Journal of Retailing 87S (1, 2011) S53S66
America, (2) emerging markets such as in Asia, Central and

South America and Eastern Europe, and (3) less developed
markets such as in Africa and some parts of Asia and South
America.
Against this backdrop, the study focuses on retailing innovations in a globalizing retail market environment. The globalizing
retailing environment comprised of differentially developed
retail markets presents a number of challenges to both established retailers operating in multiple markets as well as local
incumbents and presents interesting questions to researchers
(Minten, Randrianariso, and Swinnen 2009). For instance, what
might be viewed as a retailing innovation by customers in an
emerging or less developed retail market environment may or
may not be viewed as such by customers in a mature retail market
(Peres, Muller, and Mahajan 2010). If this phenomenon is driven
by the diffusion of concepts and ideas across markets this is not
the major focus of our approach. Rather, our focus is on innovations per se (and not on diffusion of innovations across markets).
Thus, we investigate innovation challenges that are specific for
each of the three different global retail market subgroups. Examples of major dimensions of innovations in retailing that we
incorporate are: retail formats, branding, assortment, process
innovations, customer experience, information technology, new
media, handling of payment and order fulfillment. The following
vignettes shed insights into the above issue and other challenges
as well as opportunities associated with studying innovations in
retailing in a globalizing environment.
Retailing innovations in mature markets challenges and
opportunities
In mature markets such as North America, both the infrastructure for physical distribution of products and consumer
purchasing power are largely in place. More often, the retailing
innovation challenge in such markets is to replace goods, services, and experiences that are currently being consumed with
innovative new goods, services and experiences as a path for
growth. The rationale being, most basic needs of consumers
are being more than adequately met and hence, retailers need
to focus on how they can fulfill the higher-order needs of consumers (Lusch, Vargo, and OBrien 2007; Pine and Gilmore
1998) and thereby grow. In other words, retailers have to think
about how they can create superior value for consumers through
innovations that go beyond satisfying basic needs. One example of a firm that does this quite successfully is Build-A-Bear,
a retailing franchise based in the United States. The St. Louisbased company allows customers to create their own customized
stuffed animals. Since its founding in 1997, the company has
grown to $468m (2008) in revenue and operates 410 stores in
the US and in other countries. Build-A-Bear offers customers an
interactive make your own stuffed animal retail-entertainment
experience. It thus combines customization of the product to
individual consumers desires with the concept of entertainment
and experience. In a market environment in which consumers
are flooded with (exchangeable) physical products, the above
retailing innovation, by providing customers with an entertaining experience while at the same time enabling them to co-create
their own unique product bestows the firm with a competitive

differentiation advantage.
Retailing innovations in emerging markets challenges and
opportunities
A major challenge faced by globalizing retailers based in
mature markets in their attempts to sell to customers in emerging markets (particularly, to potential customers residing in
rural areas) is the absence of a well developed and functioning
retailing distribution network, mass media, transportation, and
storage infrastructure (Goldman, Ramaswami, and Krider 2002;
Samiee 1993). One approach to addressing these challenges is
to increase the number of distributors in rural areas by helping
people to start their own small store. Project Shakti, launched in
2000 as a partnership of Hindustan Unilever in India with nongovernmental organizations, banks and the Indian government,
entailed enlisting women residing in villages to become directto-consumer sales distributors for Unilevers products such as
laundry detergent, bath soap, toothpaste and shampoo. The company provides training in areas such as selling and bookkeeping
to help rural residents become micro-entrepreneurs. After an
initial investment in stock, usually through a loan from selfhelp groups or micro-finance banks facilitated by Hindustan
Unilever, most Shakti entrepreneurs net a monthly profit of
7001000 rupees (US$1522). This, coupled with the earnings
of a spouse working in the fields, typically doubles the household
income. By the end of 2007, there were more than 45,000 Shakti
entrepreneurs covering three million homes in over 100,000
villages in India. In other words, Project Shakti has enabled Hindustan Unilever to distribute its product offerings to millions of
customers in rural India. Understandably, this is a retailing system innovation initiated by a manufacturer rather than a retailer.
Nevertheless, it sheds insights into the kinds of retailing innovations that retailers may have to come up with in order to make
inroads into rural markets in emerging and less developed markets. The retailing innovation does not entail a business operating
from a standalone retail outlet, but from the home of a female
micro-entrepreneur. Similar approaches have been applied by
other big manufacturing companies. For example, Procter &
Gamble has started to work with so-called mom and pop shops
to overcome the distribution challenge in emerging markets by
offering their products in small package sizes to fit on crowded
shelves and by using a network of local representatives to keep
the shops stocked (Economist April 17, 2010).
Retailing innovations in less developed markets
challenges and opportunities
In less developed markets, retailing innovations often entail
being responsive to specific local conditions (Goldman 1974;
Kaynak and Cavusgil 1982; Minten 2008). For instance, a broad
cross-section of consumers in a number of less developed countries in Africa do not have bank accounts due to the combined
effect of their low income levels and a sparse network of bank
branches and ATMs. However, mobile phone service providers
have made considerable inroads and ownership of mobile phones
is on the rise. This environmental condition has provided the

impetus for retailing innovations such as use of mobile phones
to facilitate retail transactions. Case in point is M-Pesa (M for
mobile, pesa in Swahili means money), a mobile-phone based
money transfer service that was developed by Vodafone and
sponsored by the UK-based Department for International Development. M-Pesa enables retail payments via mobile phone in
lieu of physical currency at participating retail outlets, and even
money transfer between individuals. Here again, we have an
illustration of a retailing innovation but initiated by a mobile
phone service provider and not a traditional retailer, but nevertheless seems to be having a transformative effect on the retailing
landscape.
In general, our discussion highlights the relevance of a
contingency perspective for studying innovations in retailing
(Alexander, Shaw, and Curth 2005; Goldman, Krider, and
Ramaswami 1999; Goldman, Ramaswami, and Krider 2002;
Minten 2008). The focus of our paper is on retailing innovations that are responsive to the stage of development of specific
markets, and focuses on the following research questions:
How should innovation in a global retail market environment
be conceptualized?
What are some major environmental challenges faced by
retailers competing in mature markets, emerging markets and
less developed markets?
Which innovation challenges do these environmental challenges predicate?
How can retailers address these innovation challenges effectively and thereby transform them into opportunities?
In order to address these questions, we first conceptualize the
components of the retailing innovation agenda by the stage of
development of markets across the globe. Towards this end, we
identify specific innovation challenges which are linked to the
environmental conditions. Next, we explore how these innovation challenges can be addressed effectively. Finally, we develop
a set of research implications and questions for future research.
Also, it is important to note that for the most part we do not
investigate the (related) topic of diffusion of innovations across
regions. In this paper, our focus is on innovations in retailing
from the perspective of innovations geared to specific markets
and not merely the adoption of specific aspects of retailing practice in a country market that originated elsewhere. For example,
a number of retailing processes, technologies, formats, etc., that
were initially rolled out in a particular country or a region (a
cluster of countries) tend to be subsequently launched in other
countries.
Global market types and retailing innovation processes:
conceptualization of the dimensions
In his influential article on the Wheel of Retailing, Hollander
(1960) pointed out that new types of retailing follow evolutionary paths, and discussed the possibility of a natural law of
retailing in the evolution of innovations in retailing. Although
focused exclusively on retail formats, his work was one of
S55
the first to systematically address innovations in retailing. But

despite the fact that innovations in retailing have been investigated frequently over the years, to the best of our knowledge,
there is a dearth of literature that provides a comprehensive
overview of aspects of innovations in retailing, especially in the
context of environmental factors that retailers are confronted
with in the global arena in which they operate.
Global market types
As noted earlier, with regard to the study of issues relating
to the retailing innovations in a globalizing retail market environment, the market context in which the innovation takes place
must be borne in mind. Retailing is a business that entails the
firm interacting with the customers it serves on an ongoing basis.
Customers attitudes and behaviors both influence and are influenced by the actions of competing retailers in a marketplace.
Additionally, whether a good, service, process, business model
or organizational structure is considered as novel also depends
on its degree of newness to both the consumers and the firm
(Hauser and Urban 1977). In other words, what is seen as an
innovation in one region may already be a common practice in
some other parts of the world. However, as pointed out earlier,
our focus is on innovations per se and not diffusion of innovations. With respect to context, we broadly distinguish between
three types of markets based on their stage of development
mature, emerging, and less developed markets.
Most of the extant literature on retailing and retailing innovations is in the context of developed or mature markets (Goldman,
Ramaswami, and Krider 2002; Kacker 1988). Geographically,
most of North America, Western Europe and parts of Asia
constitute mature markets. However, selected urban districts in
emerging markets also belong in this group (e.g., cities such as
Hong Kong and Shanghai, and city states such as Singapore).
Emerging markets refer to countries and regions experiencing
substantial and rapid economic growth and industrialization that
are likely to emerge in the future as mature markets (Gielens and
Dekimpe 2007). For purposes of this paper, emerging economies
refer to regions of the world experiencing rapid informationalization under conditions of limited or partial industrialization
(Center for Knowledge Societies 2008). In other words, consumers in these markets are informed about and exposed to
goods and services from mature markets, while still conforming to certain traditional habits, attitudes, and structures. Rapid
urbanization is one of the reasons for the increased interest
among retailers based in mature markets in emerging markets.
The BRIC countries are widely viewed as the largest emerging markets. Other important emerging markets include Mexico,
Poland, South Africa, South Korea, and Turkey. The total population of these emerging countries considerably exceeds the
population of developed countries, making these regions particularly attractive for mature market-based retailers and retailing
innovations that are responsive to the distinctive characteristics
of these markets.
While we exclude least developed countries (i.e., regions
suffering from extreme poverty and lacking political as well
as social stability) from the scope of our paper, we do address
S56
innovations in retailing in the context of less developed countries, sometimes referred to as the base of the pyramid country
markets (Anderson and Markides 2007; Goldman 1981). These
economies are characterized by low per-capita income, not being
fully industrialized, and lacking a sophisticated legal or financial
systems. Whereas in a global context, less developed countries
tend to be generally viewed as base of the pyramid markets,
countries in emerging markets are also characterized by the presence of a sizeable base of the pyramid market segment, besides
more affluent market segments.
In an attempt to highlight the potential for retailing innovations in mature, emerging and less developed markets, we draw
attention to Schumpeter (1943, p. 10) who described drivers of
innovations as follows [. . .] the fundamental impulse that sets
and keeps the capitalist engine in motion comes from the new
consumers goods, the new methods of production or transportation, the new markets, the new forces of industrial organization
that capital enterprise creates. Though Schumpeter did not
explicitly consider the retailing context, his general proposition that consumer based, industry based and market based
contexts affect the success and failure of innovations closely
corresponds with the major environmental factors examined in
this paper. Additionally, contingency theory is helpful in recognizing environmental characteristics that influence innovations,
such as environmental stability, complexity, diversity, and hostility (Galbraith and Nathanson 1978). Both, classic studies
(e.g., Lawrence and Lorsch 1969; Mintzberg 1979), as well as
more recent studies (e.g. Atuahene-Gima 2007; Burgess and
Steenkamp 2006; Tellis, Prabhu, and Chandy 2009) provide
empirical credence for the role of environmental context as a
major driver of organizational design in general, and innovations
in particular.
A review of relevant literature and discussions with industry
experts suggest three broad categories of environmental factors
consumer based, industry based, and legal and regulatory based
present major innovation related challenges and opportunities
to retailers:
Consumer based challenges refer to innovation challenges
and opportunities related to differences in the characteristics of customers in the mature, emerging and less developed
markets. The fact that the success of an innovation is dependent on its ability to address the current needs of customers
better than existing offerings, or address the latent needs of
customers, highlights the importance of involving customers
in developing innovations. Many companies have recognized
that getting customers engaged in innovation processes is a
crucial step (Verhoef, Reinartz, and Krafft 2010).
Industry based challenges refer to innovation challenges and
opportunities related to differences in the nature of competition, technology and suppliers in mature, emerging and
less developed markets. The industry context, particularly
the intensity of competition in a market and supply chain
management, has been identified as a major driver of success
versus failure in innovation management (Ganesan et al. 2009;
Scholefield 1993). Similarly, technological developments are
at the very heart of innovations, and have been identified as
a major force behind innovations in retailing (Verhoef et al.

2010).
Legal and regulatory based challenges refer to innovation
challenges and opportunities related to differences in governance and regulations in the different markets. As discussed
in writings on national innovation systems (Nelson 1993) and
the competitive advantage of nations (Porter 1990), regulatory constraints and the stability or volatility of political and
legal systems strongly affect innovativeness and R&D performance. The role of the legal environment has also been
recognized by governments, particularly those which view
innovativeness as a major objective. For example, in order to
learn more about major conditions for innovation to flourish,
the European Union conducts an annual review of innovation performance of all EU member countries. Based on this
review, a scoreboard assessing the innovation performance of
all EU member countries is made. This scoreboard serves as
a benchmark and to identify barriers to innovation in the legal
systems of individual countries.
These environmental factors drive retailers efforts to better serve their customers in different types of markets through
innovations and thereby enhance their performance.
In the next section, we focus on retailing innovations in
the context of market types (mature, emerging and less developed) and environmental challenges (consumer based, industry
based, and legal and regulatory based) in each of these markets. This is preceded by a brief overview of major dimensions
of innovations in retailing explored in extant literature retail
formats, branding, assortment, process innovations, customer
experience, information technology, new media, handling of
payment and order fulfillment as major dimensions of retailing
innovations.
Retail formats have been investigated as an important dimension of innovations in retailing. Among others, formats such as
supermarkets were considered as innovations when they were
first introduced in markets that are currently viewed as mature
retail markets. Thus, the development of new retail formats based
on the circumstances especially in emerging markets and less
developed markets represents a promising source of retailing
innovations.
The importance of branding as a dimension of retailing innovation encompassing store brands and private labels has been
discussed in literature (Steenkamp and Dekimpe 1997). Retailers strategic decisions such as single versus multiple private
label brand names, their positioning, and differentiation within
and across market environments is subsumed under branding as
a dimension of innovations in retailing (Ailawadi and Keller
2004). Notwithstanding some overlap with retail format and
branding, specifics of assortment such as variety, stock ownership and speed of replenishment have also been identified as
potential ways for a retailer to differentiate itself from competitors (Davidson, Bates, and Bass 1976, p. 91).
Process innovations such as market research and supply chain
management also constitute potential avenues for retailers to
achieving a competitive advantage. For example, new forms
of collaboration between manufacturers and retailers in sup-
ply chain management such as efficient consumer response

(ECR) and category management represent major innovations
in retailing pioneered by companies such as Walmart in the US
and Metro in Europe (Huchzermeier and Iyer 2010). Furthermore, new forms of market research and marketing intelligence
generation such as UPC scanner data based, customer loyalty
program based and customer experience management based
activities (Burke 2010) represent innovations in retailing. Other
important dimensions of retailing innovation include those in
the realm of customer experience, such as innovations based
on store atmosphere, expertise and knowledge of front-end
staff, information technology and new media enabled retailing innovations (Mathwick, Malhotra, and Rigdon 2001; Pine
and Gilmore 1998), and the handling of payment (Avlonitis and
Papastathopoulou 2000).
Finally, retail goods and services have to be delivered. While
consumers in mature markets are faced with problems such
as lack of time, lack of parking space in cities, and ensuring
that items purchased over the Internet are delivered in a timely
manner, consumers in less developed countries often lack any
means of transportation. In both cases, innovations constitute
less expensive and/or timely ways of order fulllment.
S57
Innovation challenges predicated by environmental

challenges
In this section, we examine the relevance of various retail
environment factors (consumer based challenges, industry
based challenges, and legal/regulatory based challenges) to
retailing innovations in different types of markets. Tables 13
provide illustrative examples of retail challenges and innovation
opportunities across the three types of markets in the context
of consumer, industry and legal/regulatory based challenges.
Historically, retail firms have innovated in their home country
(typically in markets that one might currently characterize as
mature markets) and then rolled out these innovations in other
countries. Increasingly however, the growth of emerging market economies such as India and China has forced retailers to
modify their innovation strategies in order to be responsive to
the unique challenges posed and opportunities presented by
these markets. In the broader context of innovation literature,
this has spurred debate and discussion on trickle-down versus
trickle-up innovation (trickle-up or reverse innovations refer
to successful innovations developed in emerging markets by
multinational enterprises being subsequently launched in mature
Table 1
Innovations in retailing in mature markets.
Mature markets
Environmental climate
Innovation challenge
Potential dimensions of
retailing innovation
Examples
Consumer based challenges
Changing demographics
IT-integrated life styles
Lower mobility and
income
Heterogeneity in taste
Individualization
Generation upload
Ageing
Local affordable availability
Customizationpersonalization
Best-Buy listening in
online
J. Crew personal
shopper
Build-A-Bear, Nike
mass customization
Legal/regulatory based challenges
Sustainability related
issues
Dynamics of economics
in regional clusters
Reducing environmental
footprint
Partnering with public
development
Real-time listening (MR

process)
Multi-channel integration
Product design (private
labels), supply chain (access)
Co-creation development
and supportive online
purchase environments
Green innovations
Economic sustainability
Low barriers to entry

Expansion of store
brands
Vertical competition
Defending market position

Developing dynamic
capabilities to respond to new
challenges
Non-imitable innovations
First-mover advantage
Adaptability
Suppliers
Outsourcing and
off-shoring
Disintermediation
Vertical integration by
producers
Developing joint innovations

with partners
Coordinating supply chain
information
Technology
E-commerce
M-commerce
Social media networks
Radio frequency
identification (RFID)
Integrating technology in
product offerings
Improving process efficiency
with new technology
Global sourcing and

alliances
Multichannel routes to
market
Process coordination across
multiple partners
Integration between online
and in-store sales and
shopping experiences
Real-time data and new
data warehouse tools
Design of new shopping
experiences (online and
in-store)
Rue-lala unique
discounts
Disney-Partnering
Zara high speed
supply
Walmart global
partnering
Apple, Adidas, Nike
manufacturer stores
Industry based challenges

Competition
Sainsburys electric
vans
Walmart eco-ratings
Sears multi channel

communications
Metro RFID
innovation center
Apple concept stores
S58
Table 2
Innovations in retailing in emerging markets.
Emerging markets

Competition
Examples
Rising middle income

class
Increasing urbanization,
Mega-Cities
Younger class of
population
Higher density of
population
Liberalized government
regulations
Inter-state rules and
regulations
Stability in governments
constantly changing
government policies
Spreading good/service
offerings across a continuous
distribution of income levels
Offering variations in package
sizes to cater to the younger class
Aligning brands and customers
Tiered pricing structure

catering to various income
levels
Value packs and services to
the various market segments
Storing the right product in
the right store at the right time
Airtel (India) assorted

pricing structure
Beijing Xidan
Department store (China)
strategic product
placement
Negotiating local content

requirement clauses
Competing in an environment
of differences in official/business
language and frequent changes in
policies
Strategic partnerships and

alliances with local players
Localized packaging
vendors
Business agility in adapting
to changing policies
Walmart and Bharti

India
Huiyuan Juice and Coca
Cola (failed acquisition)
China
Globus (India)
increased responsiveness
Large companies
diversifying into retail
industry
Presence of a large
unorganized retail sector
International companies
entering the markets
Creating competitive advantage

through thorough data collection
and mining
Creating unique brand identity
to differentiate from the smaller
and more disorganized retail units
Gathering more comprehensive
market intelligence reports
Streamlining supply chain
Optimizing distribution
networks
Outsourcing to other markets
Encourage local
endorsements to create sense
of belonging with the
consumer segment
Focused research to study
core, organized and
unorganized players
Pepsi, Coca Cola

Tesco, Carrefour
Foschini Chain, South
Africa
Organize supply based on

market (rural, urban, etc.)
Backward integration of
business processes
Rethinking and applying IT for

Business Intelligence
Focusing on cashless
transactions and mobile
technology
Customize CRM and SCM

solutions to fit local business
processes
Reliance Petroleum Ltd.

India
Tesco and Samsung
(Homeplus supermarkets)
South Korea
Reliance Retail (SAP
Implementation) India
Suppliers
Poor transportation
infrastructure
Limited access to
supplier network
Technology
Limited applications of
IT
Lower penetration of
credit cards
Leapfrogging
generations of technology,
relatively high interest in
technology
markets in which they compete) (Immelt, Govindarajan, and

Trimble 2009).
Mature markets
Consumer based innovation challenges
Many of the innovation challenges faced by retailers in
mature markets are customer-centric in the sense that they
require designing retail processes and products to better match
(shifting) customer needs (Shah et al. 2006). A first cluster of
consumer based challenges in mature markets relates to changing demographics and life-style driven consumer requirements,
such as those of an increasing proportion of elderly citizens in
markets such as Western Europe and Japan. This trend implies
retailing innovations that are responsive to the mobility and
shopping needs of this cluster. For example, consumers may
wish to have easy access to both health and leisure facilities,
and perhaps even residential service offerings (Lumpkin and
Hunt 1989). Retailers have opportunities for innovations in these
areas by integrating different goods and services and adapting

retail processes to meet the needs of older people closer to their
homes. With respect to product development, further exploiting
heterogeneity in tastes also offers opportunities for innovation.
Full personalization or customization of products and retail processes is an extreme example of leveraging such heterogeneity.
For example, online apparel retailers such as Lands End have
successfully nurtured customer loyalty by offering customized
clothing options (Piccoli, Bas, and Ives 2003).
A second cluster of consumer based challenges involves the
touch-point of information technology (IT) and consumer needs.
Mobile and online information technology make consumers
more and more flexible in terms of where and how they wish
to access retailer information and where and how to purchase
products (Kleijnen, de Ruyter, and Wetzels 2007; Lyons 2009).
In addition, IT-enabled tailored (e.g., location specific) retail
information and offerings are increasingly becoming the norm
(e.g., Nikolov and Shukla 2009). Furthermore, IT allows consumers to interact closely with one another which in turn calls
S59
Table 3
Innovations in retailing in less developed markets.
Less developed markets
Examples
High disparity in
income levels
Increasing inflation
rates
Lack of basic amenities
Pricing tiers for each

segment
Corporate social
responsibility
PetroJam, Jamaica
Starbucks
Unstable governments
Lack of central
economic focus
International debtor
Positioning and developing

goods and services for distinct
income levels
Providing subsidies by
partnering with foreign
companies to mitigate the limited
consumer spending power
Tailoring offerings to suit local
environment
Leveraging subsidies available
from developed nations
Tailor formats across

markets
Passing subsidies to
customers through lower
pricing
Oriental Weavers Co.

Fertilizer Retail in West
Africa
Entering into multiple market

territories in the region
simultaneously
Gathering comprehensive
market intelligence
Enable strategic business

partnerships through larger
retail chains
Focus research on
individual market dynamics
Nakumatt
Supermarkets, Kenya
Investing in supply chain

Integrating backward and
partnering with suppliers
Building trust in
vendorsupplier relationships
Enabling small ticket payments
Enabling alternative modes of
payment
Stockpile inventory and

develop own supply network
Leverage on availability of
real-estate
Fast Retailing Co with

Grameen Bank
Payment by mobile phone
M-Pesa, Kenya

Competition
Suppliers
Technology
Cartelization of retail
industry
Decentralized and
unorganized retailing
environment
Many very small
retailers
Lack of infrastructure
Poor distribution
networks
Bad credit structure
Banking/currency
infrastructure
non-existent
Consumers without
bank accounts
for retailers to monitor consumer-to-consumer communications

and respond to the market intelligence generated. These environmental trends pose important innovation challenges to retailers
and create potential opportunities for innovations in terms of:
(a) developing IT applications such as real-time listening, cocreation tools (Piccoli, Bass, and Ives 2003), (b) supportive
online purchase environments (Xiao and Benbasat 2007), and (c)
location based information services (e.g., applying RFID technology) (Gaukler, Seifert, and Hausman 2007). Additionally,
the integration of multiple channels involving IT and non-IT
enabled environments is another area of innovation opportunity
(Verhoef, Neslin, and Vroomen 2007).
Competition between retailers in mature markets tends to be
relatively intense. Relatively low levels of government protectionism and a strong legal system, high-level market information
and a strong physical infrastructure often leads to competition
between global retail chains in these markets. In addition to
the verticalization of manufacturers, sourcing of products is
also relatively flexible because many suppliers are available.
Thus, retailers innovation opportunities are mainly dependent
on their ability to design flexible supply chains that can effectively respond to changes in competitive market conditions (e.g.
Zara) or to develop new non-imitable products (Ganesan et al.

2009). Retailers in mature markets also increasingly extend into
the direction of new non-traditional services such as healthcare
(Malvey and Fottler 2006) and financial products (Alexander and
Pollard 2000). This challenges them to compete in new markets
characterized by new demands, product-market boundaries, and
regulations.
Retailers in mature markets face a number of legal and
regulation based challenges. In particular, it is likely that governments in mature markets will increasingly place demands on
the environmental sustainability of retail processes and products. For example, the U.S. Environmental Protection Agency
sets limits on cadmium in toy jewelry, owing to the metals
health hazard implications. This has resulted in retailers such
as Dress Barn Inc. and Claires Boutiques Inc. recalling necklaces, earrings and bracelets after finding the products contained
cadmium.5 Thus, designing sustainable products and processes
constitutes an opportunity for innovations in retailing. For exam-
5 Bloomberg News (August 31, 2010), EPA to limit cadmium in jewelry if

consumer agency fails to act, http://www.dailyherald.com/story/?id=404767.
S60
ple, Sainsburys, a UK retailer, recently introduced electric urban

home-shopping delivery vans to promote greener retail operations. In a broader sense, retailers may also be able to partner with
local governments in finding regional solutions to develop innovative ways to promote sustainable local growth in a dynamic
and open world economy (Porter 1998).
Emerging markets
Despite recent economic advances, the average consumer
in emerging markets tends to be price sensitive (Dawar and
Chattopadhyay 2002). However, the economic growth in emerging markets is also creating a growing, relatively wealthy
middle class. This creates locally attractive retail markets, which
has lured major international retailers such as Carrefour and
Walmart into these regions. This effect is strongest in the
metropolitan areas with their large population density. Given the
greater price sensitivity coupled with the wide income disparity
among individuals and households in emerging markets, retailers are faced with the challenge of effectively targeting different
customer groups (market segments) within these national markets (Burgess 2003). Given this difficult task to simultaneously
serve consumers at the bottom, in the middle and at the top of
the income pyramid, companies might focus on those consumers
that become more affluent and thus move up the income pyramid.
An innovation that retailers have been successful with in emerging markets is a tiered pricing structure that caters to various
market segments. For example, the Beijing Xidan Department
Store uses a configuration that is tiered in its design structure,
and caters to consumers of various income segments. The premium and more expensive brands are located on the higher floors
of the store, and the less expensive brands on the lower floors.
Innovations in product size variations can be more effective
in emerging markets than in mature markets. Such innovations by retailers often entail product adaptations commensurate
with the relatively lower income, lack of storage facilities, and
different purchase habits of customers in these markets. Case
in point is product adaptations in response to more frequent
purchases, but in smaller quantities by customers in emerging
markets (for example, kirana outlets or small grocery stores
in India).
Emerging markets also have grown to be relatively high on
technology innovativeness, as a consequence of skipping one or
more generations of technology and the associated sunk infrastructure costs. In the last decades, erstwhile technology-related
barriers have gradually receded with the growth of globalization
and the increasing interest of multinational companies.6
The changing consumer preferences also have a great impact
on retailers innovation strategies. Consumer preferences are
often affected by changing trends in other (developed) countries. For instance, in the 1990s, India saw a sudden spurt in
western influence on clothing. Consumers were rapidly shift-
6 OECD (2000), Innovation and the Environment: Sustainable Development.

Paris, France: OECD Publications.
ing their preferences from the traditional attire to more modern

apparel (such as jeans and t-shirts). Globus, a popular clothing retailer in India, underwent a complete transformation in a
very short time in order to adjust to this change in consumer
preferences.
A major obstacle that retail firms face when attempting to
enter emerging markets is the competition from local players.
Overcoming this hurdle can take years when the host country
brands are supported by the local government. Additionally, the
retailing structure in emerging markets is characterized by a
relatively large unorganized sector and many retailers are of
small scale and unregistered. In South America, large retailers face stiff competition from the smaller players. Such small
retailers have been shown to have greater resilience against the
larger retailing chains (Humphrey 2007), a phenomenon which
threatens the existence of retail chains in emerging economies
because it is more difficult to gain large market shares in these
markets.
The reason for this dominance of smaller retailers is twofold.
First, the sheer number of smaller businesses in emerging countries is much larger than the number of retail chains that have
a presence in these countries. Second, consumers (in emerging economies) often tend to rely on local produce which is
stocked in the smaller retail stores rather than in those operated by chains, a phenomenon which is becoming more and
more common (Gilmour and Gale 2002). As a result, modern retail chains only account for one third of consumer goods
sales in China and only one fifth in India (Economist April 17,
2010). This creates opportunities for retailers in these markets
to innovate in optimal shelf space usage, product assortment,
and marketing expenditures to accommodate local produce as
well.
The next link in the retail chain is constituted by the supply and distribution networks. In order to ensure profitability,
firms must have access to a reliable supplier network. In the
case of emerging economies, retailers faced with a number of
challenges in establishing reliable supplier networks have innovated in different ways. Some retailers have created their own
supplier networks. For example, TOPS, a leading food retailer
in Thailand, invested in the development of an exclusive freshproduce supply chain and distribution center in order to create
a shorter and more streamlined supply network in the country
(Hagen 2002).
Retailing in emerging markets is generally more heavily
influenced by the host countrys government than in mature
markets. For example, Brazils substandard growth in the 1980s
spurred the government to introduce heavy structural reforms,
especially in the retailing sector. The reforms included trade liberalization and opening of markets. Henisz and Zelner (2010)
observe the importance of politics and governmental regulation
in emerging economies and prescribe a direct political approach
to investing in emerging markets. In the case of India, the trade
liberalization reforms of 1991 have proven to be a boon to
large scale retailers. The country has seen unprecedented growth

in the fields of retailing, manufacturing, production and agriculture. In 2006, the Government of India opened the retail
industry to the world by allowing up to 51% foreign direct investment (FDI) through the single-brand retail route. Following
this change in the retailing climate, FDI inflows between April
2000 and April 2010 in single-brand retail trading stood at USD
194.69 million, according to the Department of Industrial Policy
and Promotion (DIPP), Government of India. These inflows are
expected to drive retail growth in India, primarily from the rural
markets.
Takada and Jain (1991) also found that the legal system and
governmental issues play a major role in the innovation process.
Therefore, firms usually develop long term relationships with
host countries in order to negotiate better agreements regarding land, labor and taxes. A major challenge that retailers face
when investing in emerging economies is changes in policy in
the aftermath of changes in the countrys leadership. Retailers
have employed a range of innovative strategies in the face of
legal and regulatory challenges. Although entering into strategic alliances with domestic firms is a pervasive practice in the
manufacturing sector, it is relatively less pervasive in the retailing context. Since existing FDI regulations in India do not permit
foreign retailers with multiple brands, Walmarts joint venture
with Bharti Enterprises in India is an example of retailers using
innovative strategies to overcome regulatory challenges. Joint
ventures as a mode of entry into emerging markets by retailers
based in mature markets enables them to leverage the capabilities of the domestic alliance partner to manage relations with the
local government as well as to offer product assortments better
suited to local market conditions.
Less developed markets are often characterized by low
domestic production and high inflationary pressure, resulting
in lower per capita income. Further, the distribution of wealth in
less developed markets tends to be more heavily skewed towards
the extremities than in emerging markets, implying even starker
distinctions in income levels (Bagchi 1982). Some retailers have
responded to this environmental condition by creating product
offerings catering specifically to either one of these segments
(Anderson and Markides 2007). For instance, retailers aim to
serve the relatively small affluent segment of the population by
offering premium priced products and/or the relatively large
poorer segment of the population with lower priced product
offerings. Also, the banking sector in these markets tends to be
comparatively rudimentary. Many consumers do not have bank
accounts or credit cards. Therefore, most transactions entail the
use of currency. This can have an adverse impact on retailers in
numerous ways. First, without a financial system to back them
up, retailers cannot comfortably credit consumer transactions
for future sales. Second, the total size of the sale is always limited by the amount of money the consumer is currently carrying.
Further, both consumers and retailers are potential victims of
frequent burglaries due to the breakdown of law and order. In
S61
order to address these consumer based challenges, retailers in

less developed markets are increasingly resorting to technological innovations that enable cashless transactions, even in the
absence of bank accounts (see the M-Pesa example in an earlier
section of the paper).
In less developed markets, the poor infrastructure and lack
of basic amenities imply that retail outlets need to be located
close to where consumers live. Therefore, typically many small
retailers operate close to the consumers homes and as a consequence a large share of the competition in retail markets in
these areas is relatively unorganized and diffused. An additional
implication of the poor infrastructure facilities is that it creates a supply chain bottleneck. Transport and communication
facilities in less developed markets severely limit the savings
in inventory costs and the effectiveness of sales that retailers
operating in more developed mature markets are able to achieve
through just-in-time delivery. Retailers in these markets have
innovated by stockpiling inventory through large warehouses
that can store relatively more products than is typically the case
in more developed economies. Thus, where innovations in retail
supply chain management in saturated markets have typically
focused on keeping stocks as low as possible, in less developed
markets the direction of innovation may be reversed. Retailers
for example may choose to extensively stock inventory to be
able to maintain a continuous supply of products at their retail
facings.
On the supplier front, retailers often face poor, disjointed
distribution networks in less developed markets. Since the number of firms in each stratum is very limited, retailers have little
say in dealer preferences and distributor agreements. Retailers
in some areas have therefore invested in backward integration,
producing a number of the goods they sell either themselves or
through franchises. For example, Fast Retailing Co. from Japan
is working with Grameen Bank group in Bangladesh to provide
clothes priced at around $1. To do so, the firm is planning to use
locally procured materials and local production, as well as to
mobilize women receiving small loans from the Grameen Bank
to build up a sales network. This is another innovation that is
illustrative of differences between mature and less developed
markets.
Innovations in just-in-time retail delivery strategies and supplier partnerships that have emerged in mature markets may not
be suitable for the less reliable market conditions in less developed markets. This has pressured retailers in these markets to
innovate by bringing supplier tasks within their own operations
allowing them to create a more stable basis to meet consumer
demand.
The market-level dynamics in less developed markets provide a contrast relative to mature and emerging markets. Due
to the political, economic, infrastructural and consumer level
complexities in these environments and reduced possibilities
for economic law enforcement, producers may form cartels and
territories among themselves, giving rise to a self-blocking
monopolistic system of producers (Clarke and Evenett 2003;
Connor 2007). Additionally, the legal systems in these markets
S62
do not always have stringent anti-trust laws. Entering these markets entails retailers having to break through cartel barriers. New
entrants have for example resorted to opening retail outlets in
the form of large chains that are well spread throughout a region
of dominance, thereby simultaneously employing all members
of a competing cartel.
In less developed markets characterized by frequent changes
in governments, the political system is generally less conducive
to making investments in the infrastructure, public distribution
systems, etc. The governments in some less developed markets
have placed strong restrictions on international trade. Foreign
subsidies to retailers from developed countries and NGOs offering goods and services in these markets have sometimes enabled
them to overcome the barriers of closed markets. In these cases,
retailers have been able to establish a presence by passing on
these subsidies to the consumers (Anderson and Billou 2007).
For example, producers and retailers of agricultural products
such as seeds and fertilizers enjoy both domestic and international subsidies in West Africa.
With the lack of basic amenities such as food and healthcare,
the socio-political climate in less developed nations significantly
weakens the financial system and trade in these regions is largely
driven by trust and personal relationships. Retailers in these markets are, therefore faced with a paradoxical situation of having
to make heavy investments in an environment with a high risk
of value destruction due to policy changes of the ruling governments. As a result, retailers such as the Oriental Weavers
Company in Egypt have innovated by resorting to personal and
direct selling efforts when marketing their products. Personal
selling has the advantage of low fixed costs in terms of longterm assets such as physical retail outlets, while simultaneously
creating a fabric of trust with consumers through face-to-face
transactions. The high cost of human resources in developed
nations limits the degree to which organizations in these markets can invest in direct personal selling techniques. Firms in
less developed markets have leveraged on the availability of
less expensive human labor to train and deploy a large direct
sales force.
Implications for future research
Mature markets
A key characteristic of mature retail markets is the (over)
abundant availability of data regarding customers. Depending
on context and firm activities, these data comprise the gamut
of behavior, demographics, attitudes, marketing resource allocation all at an individual level. For example, Walmart handles
more than 1 million customer transactions every hour, accumulating data totaling more than 2.5 petabytes the equivalent
of 167 times the number of books in Americas Library of
Congress. Accordingly, the challenge that most retailers face
is not the lack of access to specific data but rather the inability
to transform available data into decision-relevant information
and insights. Illustrative of a firms information technology
capabilities as a basis for innovations in retailing processes is

Nordstroms seamless integration of inventory on specific products at the retailers web warehouse with inventory of the same
products at each of its bricks-and-mortar stores. Thus, when a
consumer shops online for a particular item and the firm is out
of stock at its web warehouse, the system checks whether the
product is available at any of its physical stores. If that is the
case, the transaction is completed and the product shipped from
the store which has the product available in stock. Following
the successful integration of the inventory of various SKUs at
individual stores with the inventory of the SKUs at the online
store, the firms inventory turnover is reported to have touched
a five-year high in 2009. As a consequence of such IT enabled,
enhanced process capabilities, Nordstrom is reported to have
achieved a significant increase in the percentage of customers
who bought merchandise after searching for an item at its online
store (Clifford 2010).
The implication for retailers is developing new data analysis
capabilities. Data analytics capabilities driven analysis of vast
amounts of data have the potential to provide insights to retailers
into opportunities for retailing innovation. Innovation therefore
needs to take place at the organizational level as well as at the
functional level. At the organizational level, building up a strong
analytical and customer insight function is the key (AtuaheneGima 2002). At the functional level, firms need to implement
competencies with respect to the relevant data sources such as
scanner panel data, multichannel data, card program data, online
data and data from RFID tracking devices (e.g., Manchanda et
al. 2006; Urban and Hauser 2004).
Whereas many retailers even in mature economies have
been focusing on maximizing supply chain efficiencies, competing successfully on strong customer understanding has been
more of an exception than the norm. Consequently, innovation in
this domain has both exploitative as well as exploratory characteristics (Benner and Tushman 2002). Exploitative in the sense
that many of the associated activities build on existing technological trajectories and involve improvements in existing activities,
and exploratory in the sense that certain activities use new hitherto non-existing types of data and potentially might lead to
business models that focus on different product-market domains.
Examples of new data refer to many online and social network
contexts.
Related research questions are: How can retailers take
advantage of consumer-to-consumer (C2C) communication and
observations of their behavior in online social networks (e.g., if
they become fans of a company profile on Facebook)? Examples of new business models refer to retail formats that leverage
long-tails (Anderson 2004) or new Internet based formats such
as group buying or private sales (Grewal and Levy 2009).
From a research perspective, a question that arises is how
retailers can take advantage of the long-tail not only in the
online environment but also in the offline, while recognizing
that the long-tail effect is uneven across product categories
(Elberse 2008).
Another area of potential research is reexamining the directionality of cross-national leadlag effects with respect to
diffusion of innovation. While it is considered to be the rule that
innovations usually are developed and applied first in mature

markets and then transferred to emerging and less developed
country markets, as discussed in earlier sections of this paper,
some of the most recent and novel innovations in retailing are
being developed and applied first in either emerging or less
developed country markets. A likely driver of this trend is the
growing interest among major retailers in countries with the
highest growth rates and/or future growth potential. Interestingly, preliminary evidence suggests that successful innovations
from less developed countries (such as M-pesa) are later adopted
in mature markets. In other words, traditional views of lead
and lag countries in the diffusion of innovations now warrant
reexamination in the evolving global retail market environment.
In addition, it also calls for new models in international diffusion and adoption of retailing innovations. Such models, rather
than assuming that innovations cascade down from headquarters in developed countries initially to emerging country
markets and subsequently to less-developed country markets,
must allow for bi-directional dispersions of innovations (Kumar
and Krishnan 2002). Emerging literature on reverse innovation
(Immelt et al. 2009) also point to the need for research along
these lines. There is thus also a need for empirical insights
into how innovations in retailing occur and disperse across
countries.
Emerging markets
As noted earlier, emerging markets such as India and China
are characterized by large segments of the population that fall
under different income groups. This presents a challenge as well
as an opportunity for retailers to serve customers spanning multiple layers of the income pyramid. Case in point, Prahalad (2006),
in a seminal article titled, The Innovation Sandbox, identified
four criteria that innovations for the base of the pyramid markets
must meet in order to be successful (i.e., have a major impact in
serving the base of the pyramid markets). The innovation must:
(1) result in a good or service of world-class quality, (2) achieve
a significant price reduction at least 90 percent off the cost of
a comparable good or service in the West, (3) be scalable be
able to be produced, marketed, and used in many locales and
circumstances, and (4) be affordable to potential customers at
the bottom of the economic pyramid people with the lowest
levels of income in any given society.
While these criteria for innovations for the base of pyramid
markets are pertinent to goods and services, the exemplars on
low cost retailing innovations in the health care services sector in
India (Narayana Hrudayalaya Cardiac Care Center, Aravind Eye
Care, and the Jaipur Foot) highlighted by Prahalad are insightful
from the standpoint of avenues for future research. In an article
focused on Aravind Eye Care, Rubin (2001) draws attention to
the hospitals success at substantially lowering costs in every
area of its service through various product and process innovations. For instance, he notes that while it costs hospitals in
the United States about $1650 to perform a cataract operation,
the cost at Aravind Eye Care is about $10. Among the innovations that have enabled Aravind to achieve such substantial
cost reductions is putting two or more patients in an operat-
S63
ing room at the same time. Although in some countries this

may not be permitted, according to the article, Aravind has not
experienced any problems with infections by doing so. The size
of the market for affordable health care services in emerging
markets and less developed markets points to research focusing on innovations in the delivery of health care services under
the broader rubric of services retailing (retailing of intangiblesdominant products) as an important avenue for future
research.
Yet another example of a service retailing innovation in India
is the HP i-community Mobile Photo Studio Project that enables
female entrepreneurs to leverage HPs high-resolution digital
photography and printing services in ways that are new and
impactful in rural areas. By providing on-the-spot processing
to rural residents at a modest price, with equipment leased from
HP and consumables purchased at market rate from HP, many of
the entrepreneurs are reported to have been able to double their
monthly family income. In a sense, Hindustan Levers Project
Shakti initiative in India and HPs i-community Mobile Photo
Studio Project defy the concept of retailing innovation to the
extent that there is neither a physical location nor a web address
at which customers transact with the retailer.
Teece (1986, p. 287) describes a regime of appropriability as
the environmental factors, excluding firm and market structure
related factors, that govern an innovators ability to capture the
profits generated by an innovation. He distinguishes between
two key dimensions of appropriability the nature of the technology (product, process, tacit, and codified) and the efficacy of
legal mechanisms of protection (patents, copyrights, and trade
secrets). Teece notes that when imitation is easy, markets do not
work well, and profits from innovation may accrue to owners
of certain complementary assets, rather than to developers of
the intellectual property. This, as he points out, highlights the
need for the innovating firm to establish a prior position in these
complementary assets. On the one hand, this issue is particularly pertinent in the context of innovations in retailing in light
of the low barriers to entry into the retailing sector and ease of
imitation of a number of retailing innovations (e.g. store format,
product assortment, and price points). On the other hand, it is also
conceivable that under certain environmental and organizational
contexts, the innovating firm may be more inclined to facilitate
emulation of its innovation through imitation by other organizations that are either its direct competitors or non-competitors.
This is likely to be the case with retailing innovations designed
to reach the base of the pyramid markets. Facilitating imitation
of an innovation rather than erecting deterrents is likely to be the
norm when a retailing innovation, whether in the goods or services sectors designed to reach the base of the pyramid markets is
a cooperative venture involving both for-profit and not-for-profit
organizations.
These considerations point to the following as research questions that merit inquiry: (1) How do (how can) retailers protect
their retailing innovations from being appropriated? (2) How do
(how can) pioneers of retailing innovations in emerging markets
and less developed markets that are primarily targeted at the base
of the pyramid markets facilitate diffusion of such innovations
for the larger benefit of customers in these markets?
S64

One central innovation challenge to retailers in less developed
markets is to design product and supply chain strategies to service the population groups that differ at a very basic level in terms
of income, accessibility, and preferences. Sizeable segments of
the population have very low incomes and many of them are
hard to reach through the available distribution and communication channels (e.g., those living in low income rural areas).
Other segments are somewhat easier to reach but still require
completely different dedicated distribution and communication
for example through many small local stores (e.g., low income
urban populations). At the same time there is also a segment
of consumers who have a very high income (e.g., the highest
income urban population) and expectations comparable to the
expectations of consumers in mature markets, who can be targeted with marketing communications similar to those employed
in mature markets and a small number of high-end stores.
Future research to develop a better understanding of the
different segments can be particularly promising in providing
guidance for future retailing innovations. In particular such
research could address questions such as the following: (1) What
are some critical distinguishing and targetable features of the different segments in less developed markets that tie in with clearly
different behaviors and needs?, (2) How are these behaviors and
needs of the different segments likely to shift over time as the
economy of a less developed market develops?, and (3) What
retail strategy components can be used to address each of the
different behaviors and needs?
The insights from answers to these questions can also guide
the understanding of the competitive retail structures in less
developed markets, where perhaps not all retailers may choose
to compete for a share of the market in every one of the market segments. Thus, an additional promising avenue for future
research is to analytically and empirically study the competitive
implications of wide dispersion in respect of price sensitivity
and location based accessibility in less developed markets. For
example, are there conditions under which the existing large
number of very small, locationally separated retailers is sustainable, or is consolidation an inevitable consequence as the
economic structures of these markets develop?
While research by Ahlert, Blut and Evanschitzky (2010)
sheds some light into this question, there is a need for more
analyses of time-series data from different countries to better
understand the dynamics of the retail industry structure in less
developed markets. The organizational and environmental contingencies under which retailers should tailor differently branded
chains to reach different population segments versus develop one
common retail brand to reach all population segments (income
groups) constitutes an avenue for future research.
From a more public policy-oriented research perspective,
there is a need for research focusing on critical factors that facilitate access to the retail process for the poorest segments of the
population. For example, if subsidized offers are targeted at the
poorest segments in the market, will this hinder innovation in the
market targeted at these segments, and adversely impact retail
accessibility in the long run? Such market responses to subsi-
dized retailing could potentially also be highly context/country

dependent, which further points to potential avenues for future
research into the process of innovation for retailing in less developed countries.
More generally, research questions grounded in mid-range
theories that recognize and explicate the moderating effects of
organizational and environmental contingencies on the relationship between retailing innovation and performance constitute
an avenue for future research. Illustrative of the relevance of
organizational and environmental contingencies is the following: retailing innovations of Type A (multiple store formats
versus single store format), pursued by retailers of Type B (nondomestic retail entrant from mature market versus entrenched
domestic retailer), under market structure conditions of Type C
(mature market versus emerging market versus less developed
market), will lead to performance of Type D (superior versus
poor performance).
Conclusion
As the scope of retailing further expands and more retail
firms globalize, they face new challenges. Innovations in retailing are an imperative in order to transform these challenges into
opportunities and successfully compete, particularly in mature
markets and less developed markets. Against this backdrop, in
this paper, we explore (1) consumer based, (2) industry based,
and (3) legal/regulatory based challenges and opportunities that
mature markets, emerging markets and less developed markets
present to retailers and the associated innovation challenges.
References
Ahlert, Dieter, Markus Blut and Heiner Evanschitzky (2010), Current Status
and Future Evolution of Retail Formats, in Retailing in the 21st Century
Current and Future Trends, Krafft Manfred and Mantrala Murali K., eds
(2nd ed.). Berlin: Springer, 33756.
Ailawadi, Kusum L. and Kevin Lane Keller (2004), Understanding Retail
Branding: Conceptual Insights and Research Priorities, Journal of Retailing, 80 (4), 33142.
Alexander, Andrew and Jane Pollard (2000), Banks, Grocers and the Changing Retailing of Financial Services in Britain, Journal of Retailing and
Consumer Services, 7 (3), 1374.
Alexander, Andrew, Gareth Shaw and Louise Curth (2005), Promoting Retail
Innovation: Knowledge Flows During the Emergence of Self-Service and
Supermarket Retailing in Britain, Environment and Planning A, 37 (5),
80521.
Anderson, Chris (2004), The Long Tail. The Future of Entertainment is in
the Millions of Niche Markets at the Shallow End of the Bitstream,
(accessed June 25, 2010), [available at http://www.wired.com/wired/archive/
12.10/tail.html].
Anderson, Jamie and Niels Billou (2007), Serving the Worlds Poor: Innovation
at the Base of the Economic Pyramid, Journal of Business Strategy, 28 (2),
1421.
Anderson, Jamie and Costas Markides (2007), Strategic Innovation at the Base
of the Pyramid, MIT Sloan Management Review, 49 (1), 838.
Atuahene-Gima, Kwaku (2002), The Social Capital of the Top Marketing Team,
Inter-firm Market Learning Capability, and Business Performance: A Test
of a Mediating Model, Working Paper, Marketing Science Institute.
(2007), Resolving the Capability Rigidity Paradox in New Product Innovation, Journal of Marketing, 69 (4),
6183.

Avlonitis, George J. and Paulina Papastathopoulou (2000), Marketing Communications and Product Performance: Innovative vs. Non-innovative New
Retail Financial Products, International Journal of Bank Marketing, 18 (1),
2741.
Bagchi, Amiya K. (1982), The Political Economy of Underdevelopment, Cambridge, England: University Press.
Benner, Mary J. and Michael Tushman (2002), Process Management and Technological Innovation: A Longitudinal Study of the Photography and Paint
Industries, Administrative Science Quarterly, 47 (4), 67670.
Burgess, Steven Michael (2003), Within-Country Diversity: Is It the Key to
South Africas Prosperity in a Changing World?, International Journal of
Advertising, 22 (2), 15782.
Burgess, Steven M. and Jan-Benedict E.M Steenkamp (2006), Marketing
Renaissance: How Research in Emerging Markets Advances Marketing Science and Practice, International Journal of Research in Marketing, 23 (4),
33756.
Burke, Raymond R. (2010), The Third Wave of Marketing Intelligence,
in Retailing in the 21st Century Current and Future Trends, Krafft
Manfred and Mantrala Murali K., eds (2nd ed.). Berlin: Springer,
15971.
Center for Knowledge Societies (2008), The Emerging Economy Report, Bangalore, (accessed June 25, 2010), [available at http://www.cks.in/].
Clarke, Julian L. and Simon J. Evenett (2003), Deterrent Effects of National
Anticartel Laws: Evidence from International Vitamins Cartel, Antitrust
Bulletin, 48 (3), 689726.
Clifford, Stephanie (2010), Nordstrom Links Online Inventory to Real World,
New York Times, August,
Connor, John M. (2007), Price-Fixing Overcharges: Legal and Economic Evidence, Research in Law and Economics, 22, 59153.
Davidson, William R., Albert D. Bates and Stephen J. Bass (1976), The Retail
Life Cycle, Harvard Business Review, 55 (6), 8996.
Dawar, Niraj and Amitava Chattopadhyay (2002), Rethinking Marketing Programs for Emerging Markets, Long Range Planning, 35 (5), 45774.
Economist (2010), Easier Said Than Done: Emerging-Market Consumers are
Hard to Reach, The Economist, April, 78. Special report.
Elberse, Anita (2008), Should You Invest in the Long Tail?, Harvard Business
Review, 86 (7/8), 8896.
Galbraith, Jay R. and Daniel A. Nathanson (1978), Strategy Implementation:
The Role of Structure and Process, St. Paul, MN: West.
Ganesan, Shankar, Morris George, Sandy Jap, Robert W. Palmatier and Barton Weitz (2009), Supply Chain Management and Retailer Performance:
Emerging Trends, Issues, and Implications for Research and Practice, Journal of Retailing, 85 (1), 849.
Gaukler, Gary M., Ralf W. Seifert and Warren H. Hausman (2007), Item-Level
RFID in the Retail Supply Chain, Production and Operations Management,
16 (1), 6576.
Gielens, Katrijn and Marnik G. Dekimpe (2007), The Entry Strategy of
Retail Firms into Transition Economies, Journal of Marketing, April (71),
196212.
Gilmour, Brad and Fred Gale (2002), Transportation and Distribution: Will Bottlenecks Be Eliminated? in Chinas Food and Agriculture: Issues for the 21st
Century, Gale Fred ed. Washington, DC: Economic Research Service, US
Department of Agriculture, 2430.
Goldman, Arieh (1974), Growth of Large Food Stores in Developing Countries, Journal of Retailing, 50 (2), 506.
(1981), Transfer of a Retailing Technology into the Less
Developed Countries: The Supermarket Case, Journal of Retailing, 57 (2),
529.
Goldman, Arieh, Robert Krider and Seshan Ramaswami (1999), The Persistent
Competitive Advantage of Traditional Food Retailers in Asia: Wet Markets
Continued Dominance in Hong Kong, Journal of Macromarketing, 19 (2),
12639.
Goldman, Arieh, S. Ramaswami and Robert E. Krider (2002), Barriers to the
Advancement of Modern Food Retail Formats: Theory and Measurement,
Journal of Retailing, 78 (4), 28195.
Grewal, Dhruv and Michael Levy (2009), Emerging Issues in Retailing
Research, Journal of Retailing, 84 (5), 5226.
S65
Hagen, James M. (2002), Causes and Consequences of Food Retailing Innovation in Developing Countries: Supermarkets in Vietnam, Working Paper,
Cornell University, NY.
Hauser, John R. and Glen L. Urban (1977), A Normative Methodology for
Modeling Consumer Response to Innovation, Operations Research, 25 (4),
57961.
Henisz, Witold J. and Bennet A. Zelner (2010), The Hidden Risks in Emerging
Markets, Harvard Business Review, April, 8896.
Hollander, Stanley C. (1960), The Wheel of Retailing, Journal of Marketing,
25 (1), 3742.
Huchzermeier, Arnd and Ananth V. Iyer (2010), Supply Chain Management
in a Promotional Environment, in Retailing in the 21st Century Current
and Future Trends, Krafft Manfred and Mantrala Murali K., eds (2nd ed.).
Berlin: Springer, 37392.
Humphrey, John (2007), The Supermarket Revolution in Developing Countries: Tidal Wave or Tough Competitive Struggle?, Journal of Economic
Geography, 7 (4), 43350.
Immelt, Jeffrey R., Vijay Govindarajan and Chris Trimble (2009), How GE is
Disrupting Itself, Harvard Business Review, 87 (10), 5665.
Kacker, Madhav (1988), International Flow of Retailing Know-How: Bridging
the Technology Gap in Distribution, Journal of Retailing, 64 (1), 4167.
Kaynak, Erdener S. and Tamer Cavusgil (1982), The Evolution of Food Retailing Systems: Contrasting the Experience of Developed and Developing
Countries, Journal of the Academy of Marketing Science, 10 (3), 2496.
Kleijnen, Mirella, Ko de Ruyter and Martin Wetzels (2007), An Assessment
of Value Creation in Mobile Service Delivery and the Moderating Role of
Time Consciousness, Journal of Retailing, 83 (1), 3346.
Kumar, V. and Trichy V. Krishnan (2002), Multinational Diffusion Models:
Evolution Towards a New Framework, Marketing Science, 21 (3), 31830.
Lawrence, Paul R. and Jay W. Lorsch (1969), Organization and Environment:
Managing Differentiation and Integration, Homewood, IL: Irwin.
Lumpkin, James R. and James B. Hunt (1989), Mobility as an Influence on
Retail Patronage Behavior of the Elderly: Testing Conventional Wisdom,
Journal of the Academy of Marketing Science, 17 (1), 112.
Lusch, Robert F., Stephen L. Vargo and Matthew OBrien (2007), Competing Through Service: Insights from Service-Dominant Logic, Journal of
Retailing, 83 (1), 518.
Lyons, Glenn (2009), The Reshaping of Activities and Mobility Through New
Technologies, Journal of Transport Geography, 17, 812.
Malvey, Donna and Myron D. Fottler (2006), The Retail Revolution in Health
Care: Who Will Win and Who Will Lose?, Health Care Management
Review, 31 (3), 1687.
Manchanda, Puneet, Jean-Pierre Dub, Khim Y. Goh and Pradeep K Chintagunta
(2006), The Effect of Banner Advertising on Internet Purchasing, Journal
of Marketing Research, 43 (1), 98108.
Mathwick, Charla, Naresh K. Malhotra and Edward Rigdon (2001), Experiential Value: Conceptualization, Measurement and Application in the Catalog
and Internet Shopping Environment, Journal of Retailing, 77 (1), 3956.
Minten, Bart (2008), The Food Retail Revolution in Poor Countries: Is It Coming or Is It Over?, Economic Development and Cultural Change, July (56),
76789.
Minten, Bart, Lalaina Randrianariso and Johan F.M. Swinnen (2009), Global
Retail Chains and Poor Farmers: Evidence from Madagascar, World Development, 37 (11), 172841.
Mintzberg, Henry (1979), The Structuring of Organizations, Englewood Cliffs,
NJ: Prentice-Hall.
National Innovation Systems, Nelson R.R., ed. Oxford: Oxford University Press
1993.
Nikolov, Asen and Kavita Shukla (2009), Mobile Marketing Symposium, Conference Summary, Boston: Massachusetts.
Peres, Renana, Eitan Muller and Vijay Mahajan (2010), Innovation Diffusion and New Product Growth Models: A Critical Review and Research
Directions, International Journal of Research in Marketing, 27 (2), 91106.
Piccoli, Gabriele, Bill Bas and Blake Ives (2003), Custom-Made Apparel at
Lands End, MIS Quarterly Executive, 2, 7485.
Pine, B.Joseph II and James H. Gilmore (1998), Welcome to the Experience
Economy, Harvard Business Review, 76 (4), 97105.
S66
Porter, Michael E. (1990), The Competitive Advantage of Nations, London:

Macmillan.
(1998), Clusters and the New Economics of Competition, Harvard Business Review, NovemberDecember, 7790.
Prahalad, C.K. (2006), The Innovation Sandbox, Strategy+Business, 44, 110.
Rubin, H. (2001), Aravind Eye Hospital: The Perfect Vision of Dr. V.,
(accessed June 25, 2010), [available at http://www.fastcompany.com/
magazine/43/drv.html].
Samiee, Saeed (1993), Retailing and Channel Considerations in Developing Countries: A Review and Research Propositions, Journal of Business
Research, 27 (2), 10329.
Scholefield, J.H. (1993), The Development of a R&D Planning Model at ICI,
R&D Management, 23 (4), 203.
Schumpeter, J. (1943), Capitalism, Socialism, and Democracy, London: Allen
& Unwin.
Shah, Denish, Roland T. Rust, A. Parasuraman, Richard Staelin and George S.
Day (2006), The Path to Customer Centricity, Journal of Service Research,
9 (2), 11324.
Steenkamp, Jan Benedict E.M. and Marnik G. Dekimpe (1997), The Increasing
Power of Store Brands: Building Loyalty and Market Share, Long Range
Planning, 30 (6), 91730.
Takada, Hirokazu and Dipak Jain (1991), Cross-National Analysis of Diffusion of Consumer Durable Goods in Pacific Rim Countries, Journal of
Marketing, 55 (2), 4854.
Teece, David J. (1986), Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy, Research
Policy, 15 (6), 285306.
Tellis, Gerard J., Jaideep C. Prabhu and Rajesh K. Chandy (2009), Radical
Innovation Across Nations: The Preeminence of Corporate Culture, Journal
of Marketing, 73 (1), 323.
Urban, Glen L. and John R. Hauser (2004), Listening In to Find and Explore
New Combinations of Customer Needs, Journal of Marketing, 68 (2),
7287.
Verhoef, Peter C., Scott A. Neslin and Bjrn Vroomen (2007), Multichannel Customer Management: Understanding the Research-Shopper
Phenomenon, International Journal of Research in Marketing, 24 (2),
12948.
Verhoef, Peter C., Werner Reinartz and Manfred Krafft (2010a), Customer
Engagement as a New Perspective in Customer Management, Journal of
Service Research, 13 (3), 24752.
Verhoef, Peter C., R. Venkatesan, Leigh McAllister, Edward C. Malthouse, Manfred Krafft and Shankar Ganesan (2010b), CRM in Data Rich Multichannel
Retailing Environments: A Review and Future Research Directions, Journal
of Interactive Marketing, 24 (2), 12137.
Xiao, Bo and Izak Benbasat (2007), E-Commerce Product Recommendation Agents: Use, Characteristics, and Impact, MIS Quarterly, 31 (1),
137209.

Retail Innovation

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Retail Innovation

Transféré par

Droits d'auteur :

Formats disponibles

Journal of Retailing 87S (1, 2011) S53S66

Retailing Innovations in a Globalizing Retail Market Environment

Corresponding author. Tel.: +49 221 470 5751.

subject to the influence of globalization forces. The influence

W. Reinartz et al. / Journal of Retailing 87S (1, 2011) S53S66

America, (2) emerging markets such as in Asia, Central and

their own unique product bestows the firm with a competitive

W. Reinartz et al. / Journal of Retailing 87S (1, 2011) S53S66

is on the rise. This environmental condition has provided the

the first to systematically address innovations in retailing. But

W. Reinartz et al. / Journal of Retailing 87S (1, 2011) S53S66

a major force behind innovations in retailing (Verhoef et al.

W. Reinartz et al. / Journal of Retailing 87S (1, 2011) S53S66

ply chain management such as efficient consumer response

Innovation challenges predicated by environmental

Consumer based challenges

Legal/regulatory based challenges

Real-time listening (MR

Low barriers to entry

Defending market position

Developing joint innovations

Global sourcing and

Industry based challenges

Sears multi channel

W. Reinartz et al. / Journal of Retailing 87S (1, 2011) S53S66

Consumer based challenges

Legal/regulatory based challenges

Industry based challenges

Rising middle income

Tiered pricing structure

Airtel (India) assorted

Negotiating local content

Strategic partnerships and

Walmart and Bharti

Creating competitive advantage

Pepsi, Coca Cola

Organize supply based on

Rethinking and applying IT for

Customize CRM and SCM

Reliance Petroleum Ltd.

markets in which they compete) (Immelt, Govindarajan, and

areas by integrating different goods and services and adapting

W. Reinartz et al. / Journal of Retailing 87S (1, 2011) S53S66

Consumer based challenges

Pricing tiers for each

Legal/regulatory based challenges

Positioning and developing

Tailor formats across

Oriental Weavers Co.

Entering into multiple market

Enable strategic business

Investing in supply chain

Stockpile inventory and

Fast Retailing Co with

Payment by mobile phone

Industry based challenges

for retailers to monitor consumer-to-consumer communications

Zara) or to develop new non-imitable products (Ganesan et al.

5 Bloomberg News (August 31, 2010), EPA to limit cadmium in jewelry if

W. Reinartz et al. / Journal of Retailing 87S (1, 2011) S53S66

ple, Sainsburys, a UK retailer, recently introduced electric urban

6 OECD (2000), Innovation and the Environment: Sustainable Development.

ing their preferences from the traditional attire to more modern