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Innovation in Retailing

Article  in  Creativity and Innovation Management · October 2006

DOI: 10.1111/j.1467-8691.1992.tb00060.x

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230 CREATlVlTY A N D INNOVATION MANAGEMENT

Innovation in Retailing
Gary Davies

A suggestion by Pellegrini is used to equate innovation in the retail process to ”technology

push” and product innovation to “market pull” within the mainstream literature on inno-
vation. A model is proposed that recognizes the objective of retail innovation as market
differentiation. Innovation is seen as possible on the two dimensions of product and process
or on both simultaneously. The use of the model is illustrated by applying it to the British
food retailing sector. This suggests that a decline in a retailer’s fortunes results from imitative
or innovative competitive actions, and that repeated product innovations should be
considered to retain the requisite level of differentiation.

T he economic function of retailing is to

make goods that are in demand available
when and where customers wish to buy, and
in the quantity and combination they desire1.
Retailing is inherently competitive in nature,
with many businesses vieing for the shopper’s
patronage and discretionary expenditure.
There are few barriers to entry to new re-
tailers with an innovative proposition to
attract and retain the shopper.
Cyclical models of retail innovation
Various models have been proposed that
endeavour to explain the changing fortunes
of retailers in maintaining a profitable busi-
ness, and how older formats come to be re-
placed by the new. McNair (1958) suggested
that all new retailing concepts are low cost
and low price in nature. Over time the retailer
”trades up” by enhancing its service,
ambience and type of merchandise. This
eventually makes the retailer vulnerable to a
Accordion model of newer form of retailing operating with lower
retail innovation costs and selling prices. McNair’s concept (or
the “wheel of retailing” as it is often termed)
has provoked much debate (Hollander,
1960), (Brown, 1988). Nevertheless Knee and
Walters (1985) show how the wheel model
helps explain the replacement of the grocer
1. In economic terms, to by the supermarket, the supermarket by the
provide the shopper with superstore and the superstore by the hyper-
the utility of place. market in continental Europe. In Britain
2. Retailers of groceries
with a relatively small where there are few hypermarkets there is a
range of products on sale, current debate as to whether limited range
many at discount prices. discounters2 (such as KwikSave, Aldi and
Netto) will displace the superstores (operated
by the likes of Sainsbury, Tesco and Asda),
which have themselves traded up over the
years.
Davidson et al. (1976) criticized the wheel
of retailing concept as a model for retail inno-
vation as being overly focused on cost. Instead
they proposed a four-stage life cycle model
(identical to the product life cycle featured in
product marketing). The first stage of the
cycle concerns the innovation itself, whose
advantage in the market derives from some
”unique feature” such as “distinctive product
assortment, ease of shopping, locational ad-
vantages or even different advertising and
promotional methods”. The innovation at-
tracts larger numbers of customers but
eventually the format appears tired and sales
fall as it becomes vulnerable to more novel
businesses.
Hollander (1966) had earlier suggested a
different conceptual framework to explain
retail innovation based entirely on the width
of product assortment. His notion, of a “retail
accordion”, was that, “Domination by
general line, wide-assortment retailers alter-
nates with domination by specialized, narrow-
line merchants”. Hollander provided evidence
for his theory by reference to innovation in
retailing in the first half of this century, but
the same process can be observed more re-
cently. In the 1980s a number of “focused”
retailers emerged to challenge British variety
and Department stores by specializing in one
product area. Examples include Sock Shop,
Knickerbox and Tie Rack. While the accor-
dion model does not quite fit the reality of

Volume 1 Number 4 December 1992

INNOVATION IN RETAILING
these innovations (in that many have not
survived into the 1990s) there has been an ob-
servable ebb and flow in policy on merchan-
dise width in the retail sector. Debenhams
for example, once a department store that
carried a wide range of product type, now
focuses far more on fashion. Woolworth re-
focused its merchandise policy during the
1980s to concentrate on a limited number of
product areas, abandoning much of its
variety store origins. At the same time other
stores have broadened their range, the most
obvious examples being the grocery retailers
mentioned earlier who subsumed first the
butcher and the baker then the delicatessen,
the fishmonger, the off licence and now even
the florist in the grocery "superstore".
The grocery superstore was the fastest
growing format in its sector in the 1980s,
while in the '90s the narrower range discount
format of KwikSave and others appears to be
gaining ground. Interestingly both the wheel
of retailing theory and the retail accordion
theory predict the success of these low cost,
more highly focused grocery discounters,
given the actions of their competitors in
moving upmarket and in broadening their
ranges. That said none of the three theories
provides a totally convincing nor foolproof
1.6
1.5
1.4
1.3
1.2
1.1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
Figure I: Marks and Spencer sales, as a percentage of consumer expenditure
231
way of analysing retail innovation, McNair
emphasizes price advantage, Hollander
assortment breadth and Davidson et al. a
number of sources of uniqueness. The three
models have in common the notion of a cycle,
an inevitability of rise followed by fall in the
success of a retail format. The implication of
all three cyclical models is that to survive
over the very long term a retailer should not
pursue a course upmarket nor continue to
broaden its product range. At least it would
be advisable to retain the ability to retrench,
to "reduce" its merchandise range and cut its
costs so as to fend off the lower cost or more
focused insurgent.
Figure 1 presents data on Marks and
Spencer. While retailing as a whole has lost
share of total consumer expenditure (we are
spending more on housing and services such
as holidays), M&S has a sustained record of
increasing its share of consumer expenditure.
M&S has moved steadily upmarket from its
early days as a penny bazaar via a variety
chain format to become regarded as a Depart-
ment Store (Davies and Brooks, 1989). Its
product range has broadened. The cyclical
models would predict that M&S is heading
for a downturn in its fortunes or should have
already entered a decline phase. That it has
Volume 1 Number 4 December 1992
232
3. The top six grocery
multiples hold 75 percent
of their market while the
top four off-licence chains
hold 57 percent of theirs
(Corporate Intelligence,
1992).
4. Marks and Spencer buys
twenty percent of all UK
clothing production for
example (M&S, 1990).
Volume 1 Number 4 December 1992
CREATlVllY A N D INNOVATION MANAGEMENT
not entered a sustained down cycle in over
100 years of retailing suggests various possi-
bilities. It may be an exception to the general
rule; or we may have an indication that cycles
can be far longer than generally predicted; or
we may consider that cycle theories are im-
perfect. As there are other longstanding re-
tailers, including Sainsbury in food, Boots in
pharmacy, WH Smith in newsagency, station-
ery and allied areas, with a similar record to
that of M&S, it appears that the last of the
three is the most likely explanation.
One reason why cyclical models are im-
perfect is that they were derived in a context
of a retail sector that was largely reactive to a
supply chain dominated by manufacturers or
wholesalers, who marketed branded merchan-
dise direct to consumers. The retail sector
had to stock certain products to guarantee
shoppers would visit their stores and they
had limited options (price promotion, per-
sonal service, location or range), with which
to compete.
The new retail environment
The cyclical theories were developed largely
in an American context and between 1958
2ol
SW
-3 eN
>” 10 A
8
01
0’ l b o; 3L 4b o:
% Share Multiples and Coops
Data from Private Label June
Source: (1988) and Nielsen Report (1 988)
Davies (1990)
Figure 2: Own label penetration and multiplelco-operative market share in European grocery retailing
and 1976. The current British retail market
differs from this environment in many re-
spects. Department stores are far more im-
portant in America and tend to retail branded
goods. There are few truly national chains
and the negotiating power of even the largest
retailers within the supply chain is con-
strained by legislation that has had no
parallel in Britain since the 1960s.
Retailing in the United Kingdom is highly
concentrated. Multiples hold over half of all
sales (Davies and Harris, 1990). In certain
sectors concentration levels are very high3.
The purchasing power of the modern British
multiple retailer is immense4. One conse-
quence of retailer power has been a growth in
market share for products not necessarily
made by the retailer but sold under its own
name or a name it controls (own-label prod-
ucts). Figure 2 shows the relationship in
European food retailing between the market
share held by large retailers and the pene-
tration of own-label sales.
One criticism of own-label products is that
they are imitative rather than innovative in
nature and compromise quality in achieving
their aim of offering the shopper a cheaper
alternative to a manufacturer’s brand. How-
ever the research evidence suggests that at
Sz
.G
UK
NL
@F
eB
$0 7b 810 910 1
1NNOVATlON IN RETAlLlNG
least some, probably most consumers per-
ceive own-label products to be equivalent to
manufacturer’s brands, and treat them as
such5. Retailers are often leaders rather than
followers in product development. Many
retain substantial technical departments
whose role is mainly quality control,
although it may also include product devel-
opment (Senker, 1986). Marks and Spencer,
for example pioneered cook-chill meals and
achieved a dominant position in the market
by doing so (EIU, 1989). The posture adopted
by M&S in product development was sum-
marized by their then chairman Lord Sieff as
”we only do for our customers what we can
do better than others” (Keller, 1983).
George Davies, largely responsible for de-
veloping the Next group of fashion retailers
further illustrated how a reactive model for
the retail sector is now inappropriate in his
definition of retailing:
The difference between a retailer and
a shopkeeper is someone who actually
understands the consumer and develops
his product from the design and the yarn
through to the marketing and sale of the
finished garment, while a shopkeeper
enters the process 80% down the line
(Davies, 1989).
Retailers need to be seen as capable of inno-
vating on both the products they sell as well
as the way in which they sell. Davies (1992)
proposed that a retailer can have two inter-
acting but nevertheless distinct brand
images, one for its own label product and one
for the process it offers the shopper. The
advantages to the retailer of marketing
products under its own name are many and
various (Euromonitor, 1986). One is that
price comparison with another retailer be-
comes more difficult for the shopper, because
only the retailer sells its own-label. Conse-
quently the retailer is less vulnerable to
lower-cost retail formats offering a discount
on a manufacturer’s brand, and thus to the
effects of the “wheel of retailing”.
The second advantage that today’s retailers
can employ to counter cycle effects is better
information. The introduction of Article
Numbering, a system where each product
has its own unique, bar coded number, and
electronic point of sale equipment, means
that the retailer knows precisely and quickly
what is selling. Retail buying is now highly
centralized, few store managers have dis-
cretion on what products to stock or how to
display them. The combination of central-
ization and better information means better
control over the retail operation and better
understanding of market trends. Products
233
can be deleted or their selling space increased Retailers are
or decreased depending upon their perform- leaders in product
ance in the market. Any weaknesses within a development
product range can be detected and addressed
to counter the possibility that the product
offer can be less authoritative than a com-
petitor’s, the main cause of the “concertina”
effect.
New product management in
retailing
In today’s multiple outlets the retailer can
test a new idea quickly and cheaply in a real-
istic way by carrying a new line in a number
of stores. Staff can ask shoppers for their
views. Many retailers spend little on adver-
tising and, as a percentage of sales, far less in
most sectors than do their suppliers6. The
retailer’s advantage is that customers pass its
windows and enter its stores, providing op-
portunities for promotion that have little or
no cost. Where the manufacturer of the own-
label product is done for, rather than by, the
retailer, much of the investment risk is
carried by the supplier.
Traditionally innovation is seen as having
two driving forces, technology push and
market pull (Rickards, 1985; Abernathy and
Clark, 1985). More recently Crawford (1991)
has suggested that innovation generally con-
tains a combination of both. However, any
product innovation made by a retailer is un-
likely to be technology driven, given the
nature of the retailer’s technical function.
Instead product innovations are likely to be
market driven given that the large retailer is
now fundamentally better placed than the
manufacturer to identify market factors and
to manage market pull innovation. A some-
what different scenario exists for any inno-
vation in the process by which the retailer
serves its market.
New process management in
retailing
Pellegrini (1991) suggests that the equivalent
of technology driven innovation in the manu-
facturing sector is innovation through!organ-
izational procedures in retailing. The retailer‘s 5. See PLMA, 1984 and
”technology” has to be seen not in terms of Uncles & Ellis, 1989.
technical expertise but in an ability to organ- 6. Marks and Spencer, yet
again, is a good example,
ize itself differently. A new retail concept is Davies, 1991.
basically a new or different way of serving
consumer needs, the development of which is
analogous to R&D activity. There are examples Innovation in
to support this concept of organizational pro- retailing is
cedures which create innovation. KwikSave organizational
Volume 1 Number 4 December 1992
234
7. KwikSave has been
imitated by Aldi, Netto,
and Lo-Cost; Argos by
Index; IKEA by a re-
structured MFI.
8. See Davidson et al.
(1976) on uniqueness,
Buzzell and Gale (1987) for
the differentiationlprofit-
ability analysis.
Volume 1 Number 4 December 1992
achieves its cost advantage by having a
simpler business that retails a limited product
range (a tenth of the range found in super-
stores). It displays products simply, often in
converted buildings and buys opportunisti-
cally in bulk. Its relative labour costs are half
those of a superstore. Argos, a retailer using
a catalogue marketing strategy operates from
secondary sites with low occupancy costs, yet
its customers seek it out, having selected in
advance from the retailer's catalogue. The
basic Argos shop has limited display, and
products are stored in a secure area. Both
factors help to minimize losses due to theft
that account for an average of one or two
percent of all retailers' sales. Because the
customer has to ask for the product rather
than select from a shelf, the customer's needs
are captured on the company's information
system, even though the product may be out
of stock.
IKEA, the Swedish furniture retailer, also
distributes catalogues to customers. Shoppers
enter the out-of-town stores, leaving young
children in a supervised play area if desired,
and climb to the first floor to follow a "walk-
way" that guides them past most of the
furniture display. Homewares are displayed
on the ground floor. Shoppers can select
merchandise from displays on the ground
floor or, if they want furniture, this can be
picked up from the warehouse at the back of
the store. The visit can end with a meal in the
restaurant. The average time spent in IKEA
outlets is between one and two hours.
Process
Innovators
Non
Innovators
product differentiation-
Figure 3: Model of retail innovation
CREATIVITY AND INNOVATZON MANAGEMENT
All three examples illustrate how a retailer
can innovate by organizing itself differently.
Unfortunately organizational innovations can
be copied without fear of the legal action for
breach of copyright or patent that protects
the technical innovator7.
An alternative model of retail
innovation
Retail innovation can therefore develop from
product innovation (which is largely market
driven) or from process innovation (which is
largely organization driven) or from both.
The objective of any innovation is uniqueness
and there is evidence that the overall level of
differentiation in any market is related to
profitability. In markets where the differ-
entiation between competitors is "strong"
the typical return on investment can be more
than twice that in markets where differen-
tiation is "weak"8.
Figure 3 proposes a matrix model which
combines both types of innovation. Highly
differentiated retailers with unique products
and process appear in the top right quadrant
labelled "total innovators". Successful
process and product innovators appear in the
top left and bottom right quadrants respect-
ively. Retailers whose innovations have been
duplicated or who have never innovated ap-
pear in the final quadrant, "non-innovators" .
The value of the model is not as a method
of categorizing innovation but in assessing
how the market dynamics might be acting to
Total
Innovators
Product
Innovators
ZNNOVATlON IN RETAlLlNG 235

reduce the level of differentiationlinnovation grocery superstores, because the stereo-

associated with any one type of retail offer
within a sector. Figure 4 illustrates the poten-
tial value of the model in deciding on the
policy a retailer needs to adopt by identifying
where a number of types of food retailer and
one individual food retailer might be placed,
in what becomes a way of mapping the level
and nature of innovation in the marketplace.
Butchers, bakers, fishmongers and
greengrocers
Product specialists in food retailing such as
butchers, bakers, fishmongers, greengrocers
have generally lost ground to the one-stop
typical food shopper, the housewife, now
tends to have a second role, that of wage
earner. As superstores have improved both
the quality and presentation of their fresh
produce the specialists have failed to counter
with their own innovations. Somewhat be-
latedly a large chain of butchers shops
(Dewhursts) even considered an attempt to
become radically different in both product
and, more importantly, process, by special-
izing in fresh foods (CWS, 1992).
Health-food shops
Health-food shops faced similar competition
from the grocery superstores and the mul-

product differentiation --+

Influence of market dynamics
Possible or actual strategic response
Figure 4: Innovation map for food retailing

Volume 1 Number 4 December 1992

236
tiple chemists. Products such as muesli and
mineral water have become mass market
staples so that health-food shops became
victims of the general trend towards healthier
eating (Davies. 1991bh Yet unlike the
butchuer, ’baker, fishmonger and greengrocer,
the health-food shop still retains some dis-
tinction through oflfering advice on more
exotic lines such as alternative medicines.
Product innovation Product innovation is still important so that
revives muss lines that become mass market can be re-
market lines placed by new lines. The strength of the
Health food outlet flows from its ability to
appear different in the way it sells, by giving
advice to its customers and in the design of
its premises, in other words by differentiating
its process. This is what it should emphasize
in the future.
Freezer centres
Specialist retailers of frozen foods (such as
Bejam and Iceland now merged) once enjoyed
a highly differentiated product offer, frozen
food in bulk. Gradually the market changed,
people bought smaller pack sizes and the
range and choice in superstores matched that
in the specialists. Pre-cooked and chilled
foods became preferred to frozen because
they retained a more natural texture. Freezer
centres lost their initial advantage in both
product (frozen food) and process (buying in
bulk). To recover their market advantage, the
Freezer centres are seeking to innovate with
recipe dishes and by introducing more chilled
food.
Supermarkets
Supermarkets in Britain developed from the
counter-service grocery outlets of the 1950s
and not without some consumer resistance. It
is said that one irate Sainsbury customer
hurled a wire basket at the company’s then
chairman in protest at the introduction of the
new self service format. Supermarkets rep-
resented a lower cost process but their typical
size, at around 5-10 thousand square feet,
was less economical to operate than the next
retail innovation, the superstore. Chains of
supermarkets still exist but the differentiation
yielded by their process innovation is now
low. Innovations in terms of product (take-
away meals, delicatessen) and process (Sun-
day trading, long opening hours, location)
may rejuvenate the format, but most, if not
all, of these innovations can be copied by the
superstore. Astute location within catchment
Volume 1 Number 4 December 1992
CREATlVlTY AND 1NNOVATlON MANAGEMENT
areas too small to be served by a superstore,
is probably the main hope of survival for the
species.
convenience stores
The small, often independent, grocery outlet
seemed to be the most threatened of all
formats with the advent of the superstore.
Yet many have survived and have prospered
by becoming convenience stores. The so-
called C-store has a narrow product range,
specializing in basics such as bread and milk,
essential items that a household might need
to replace between larger, weekly, shopping
trips. Many such independents have joined
voluntary associations such as Spar where
they can benefit from a well defined image and
cost advantages through bulk buying. Some
have joined franchises (such as 7-Eleven)
where the central organization offers even
more in terms of the retail process. C-stores
have innovated by introducing non-grocery
items such as videos and hosiery, by major-
ing on alcoholic drinks, and through trading
long hours. However much of their process
advantage has been usurped by larger stores
opening similar hours and on Sundays. Con-
venience stores have responded by empha-
sizing customer service and speed of service,
and in some cases experimenting with home
delivery.
Grocery superstores
Superstores, with more than 20,000 sq ft of
trading space, have developed rapidly in the
last ten years. They emphasize one-stop
shopping for all the household’s needs for
food and other routine products. They tend
to seek locations away from similar com-
petitors and to attract car users. Many re-
tailers have followed the example of Gem
superstores who were probably the first to
introduce the new process into Britain. Gem
was subsequently purchased by Asda (who
then adopted the format) but the most notable
of changes has been that of Tesco. Associated
in the 1960s with the ”pile it high, sell it
cheap” approach of its founder Jack Cohen,
the company has since closed many of its
smaller town-centre supermarkets to refocus
on out-of-town superstores. The process dif-
ferentiation represented by the superstore
continues to succeed, but too many, all too
similar, stores are being built, reducing the
market differentiation which the innovation
originally achieved.
1NNOVATlON IN RETAILING
Limited range discounters
Value for money tended to be taken for
granted by the food shopper in the 1980s. In
the less affluent 1990s this attitude is being
challenged by a number of companies retail-
ing a limited range of groceries at a discount
from often utilitarian outlets stripped of any-
thing which adds to cost. Britain’s KwikSave
and LoCost are being challenged by Netto
and Aldi from the continent. Gateway and
the Coop have both introduced discount for-
mats. As the appeal of the discounter is gen-
erally price reductions, on branded products,
the level of product differentiation within this
subsector is often quite low (Aldi do sell
mainly own-label). The process is distinctive
but becoming less so as more imitators enter
the market. KwikSave is responding by im-
proving its design of outlets, trying to ensure
that a cheap price does not mean a cheapen-
ing experience for the shopper.
Hypermarkets
A hypermarket has equal amounts of food
and non-food for sale in a large store with a
large car park. Other facilities such as a res-
taurant form part of what is a highly differen-
tiated shopping process. The hypermarket is
however an example of a level of innovation
that is beyond what the British shopper has
chosen to accept to date. Carrefour, a leading
exponent of the format, withdrew from the
British market, leaving Savacentre, started as
a joint venture between Sainsbury and BhS,
as the one major presence. Shopping for food
and non-food in the same shopping trip is
still a novel process in Britain. One way of
encouraging the shopper to accept the idea
could be greater product innovation in non-
food. This option is favoured by Asda, many
of whose stores are large enough to justify
the hypermarket label9.
Marks and Spencer
M&S are the only major food retailer in the
U.K. with both a clearly innovative product
and process, one valued by a significant
proportion of all shoppers. Their product
offer is so individual (100 percent own-label
with an emphasis on ready meals) that M&S
are rarely included in statistical analyses of
the grocery sector, even though their sales
imply they are the fifth or sixth largest
grocery business (in Britain). Their process is
equally innovative. They are now the one
national chain which retails food in quantity
in city centres, thereby appealing to the
237
working shopper. Instead of selling food
which then has to be prepared, they sell the
benefits of little or no preparation. Not
surprisingly other retailers have introduced
their own ranges of ready-meals and have re-
introduced food outlets into town and city
centres with a similar up-market appeal.
M&S have responded by strengthening their
product differentiation by continuing to
introduce new products. However, by launch-
ing their own chain of food-only stores and
extending their range of main stream grocery
items they have reduced the distinctiveness
of their process. Nevertheless, the highly
profitable M&S represents a category of its
own, differentiated by product and process
innovation.
Conclusion
Cyclical models of retail innovation were
Designing
cheapness and
developed within a paradigm of retailing
where the role of the retailer was seen as the quality
distributor of someone else’s merchandise.
The determining factors for retail innovation
were seen as cost or width of range. What-
ever the source of innovation, the format
would first grow and then decline as other
innovations, lower cost or more product
focused, replaced it. But today’s retailer can
be a significant product innovator. Better
information and greater power in the supply
chain have reduced the dangers to the retailer
of any cyclical effects, reducing the relevance
of the models.
A model of retail innovation has been pro-
posed which suggests that successful inno-
vation can be achieved through the products
sold or the process by which they are sold.
The objective of innovation is seen as sup-
porting differentiation. Any decline in the
retailer’s fortunes is not seen as determined
by any natural law but by the imitative re-
sponse of competitors copying or absorbing
the innovation. The introduction of a lower
cost method of retailing is no guarantee of
successful innovation, unless it is also seen as
significantly different by the shopper. A more
focused competitive product range can suc-
ceed but only if the retailer’s offer is seen as
distinctive, by comparison with the equivalent
part within the broader range retailer and that
same retailer is unable to modify its product
offer to match its more focused rival. A valid
defense against the imitators or innovators in
terms of process is product innovation so as
to retain the level of differentiation. 9. With their emphasis on
the George range of cloth-
The model reflects both the two elements ing, managed for them by
identified in the general literature on inno- George Davies, the one
vation but because the retailer is potentially time head of fashion re-
two types of business, product and process, tailers Next.
Volume 1 Number 4 December 1992
238
Competitor’s Innovation
or Imitation
Figure 5: Retailer innovation
Retail innovations it is capable of combining the two elements in
can be copied its strategy. As a novel retail process cannot
be patented, any such innovation is vulner-
able to imitation and it is this imitation that is
mainly responsible for the erosion in the dif-
ferentiation achieved by the innovator and
thus its financial fortunes.
Figure 5 attempts to summarize the con-
ceptual aspects of the model. A modern
retailer’s market position is sustained by a
combination of product or process differen-
tion. It can increase its innovation and grow
to its full potential. Any competitive inno-
vation or imitation on one dimension reduces
the retailer’s differentiation but the same
volume of business can still be obtained by
Volume 1 Number 4 December 1992
CREATlVlTY A N D ZNNOVATION MANAGEMENT
The Retailer’s
Potential Business
developing along the other dimension of
innovation. Alternatively the retailer can
respond by pushing back and countering the
competitor’s innovation with one of its own.
In the absence of a valid response the
retailer’s business comes under pressure and
contracts, giving way to the innovator’s/
imitator’s initiative. Thus the model is one
where two forces operate that alternatively
constrain or expand the retailer‘s business.
The cyclical process of earlier models is
retained but its inevitably is denied.
Testable propositions or hypotheses can be
generated using the model. Figure 4 indicates
that without continual further innovation
food retailing formats lose differentiation.
 INNOVATION IN RETAILING
The position in the model that is Potentially
the most profitable is where both product
and process are distinctive, but still attractive
to enough shoppers. There is clearly room for
more total innovators in food retailing. The
hypermarket appears to be one format whose
day might still come in the British market-
place. Looking further forward the economics
of teleshopping have thus far constrained its
application to food retailing. Teleshopping
is also only a process innovation, if it can
be combined with product innovation, so
shoppers can only obtain certain types of
food by teleshopping, the approach would
have greater chance of success. At present
the food sector in its entirety seems to be
losing differentiation, something that must
ultimately begin to affect its profitability.
Innovation remains a viable option for suc-
cessful competitive strategy.
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Gary Davies is Post Office Counters Pro-
fessor of Retailing at Manchester Business
School. His current areas of interest include
retail strategy and within this, the manage-
ment of image. His current research is into
the relationships between retailers and
their suppliers, and he has a book in draft
form entitled 'Trade Marketing Strategy'.
Volume 1 Number 4 December 1992