THEORIES OF RETAILING

Shamla
The wheel of retailing
• Malcolm. P. McNair’s ‘Wheel of Retailing’ theory states that

in a retail institution changes take place in a cyclical manner.

The cycle flows as follows.

• when retailers enter a market they compete by offering goods

at the lowest possible price or the innovation.

• As retailers develop experience and gain capital, they tend to

increase their level of service and quality and therefore their

price.
The wheel of retailing
• This success allows mature retailers to move steadily into
up-market position which make them vulnerable due to high
costs, declining efficiency, stagnating management
strategies and a downturn in sales.

• The retailer hence may plunge into decline or even be

forced to withdraw from the market.

• This new retailer will, in turn, go through the same cycle of

retail development.
The wheel of retailing
To sum up, the wheel of retailing can be divided
into three phases.
• Entry Phase
• Trading-up phase
• Vulnerability phase
Eg. Kirana stores were replaced by chain stores
like Apna Bazaar and Food World, which, in turn,
faced severe competition from supermarkets and
hypermarkets like Big Bazaar and Giant
The wheel of retailing
The Retail Accordion theory

• Hollander (1966) proposed the Retail Accordion theory, which

explained retail evolution as a cyclical trend in terms of the number
of merchandise categories (i.e., product assortment).

• In this theory, at the beginning of operation, a retail institution

carries a broad assortment of products. At this early stage, the retail
institution is a general store.

• As time passes, the retail institution becomes specialized by

carrying a limited line of merchandise with a deep assortment (i.e.,
various styles within one product classification). At this point, the
retail institution is a specialty store.
The Retail lifecycle theory

• A new retail format passes through the stages

of birth, growth, maturity and decline as
industries and products do. A new retail format
that enjoys a competitive advantage over
existing formats grows rapidly.
 Conflict theory
• The conflict theories hold that retail organizational evolution is derived
from inter-institutional conflict (imbalance caused due to innovations).

• Innovations in the retailing system force the established retailers to

respond or adapt to the innovation.

Stages:

1. Shock

2. Defensive retreat

3. Acknowledgement and Assessment

4. Adaptation