Retail- Theories

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The Evolution of Retail Format
The origin of retail are as old as trade itself, for centuries most of
merchandise was sold in marketplace or by peddlers.

Earlier markets were dependent on local sources for supplies of
perishable foods because journeys were far too. And long distance
transportation.

The peddlers who provided people with the basic goods and
necessities could not be self sufficient. In prehistoric times the
peddler travelled long distance to bring products to locations which
were in short supply.
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1. Social Developments and their impact:
The development of trading has been intimately associated
with social developments over the ages.
Two important developments of the 18
th
century
1. The development of rail roads and telegraphs which largely
affected the growth of retail trade.
2. In 1852 Bon Marche, the first departmental store , was set up
in Paris.
Bon Marche revolutionized retail at time by relying on volume
rather than high mark up, to make money.
By the year 1897,the store sold more than $30 million worth of
goods per year.
Evolution of retail formats in different times
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The first department store which opened in US , was Stewarts in
New York, which was followed by Macys post civil war.

The late 1800s saw the rise of the so called 5 and 10 cent stores ,
which emerged to serve the needs of the poorer classes.

2. The Industrial revolution:

The industrial revolution call for dramatic changes on the retail front.
The increase in urbanization lead to the emergence of shops, to
serve the needs of the locals.
The middle income consumers increased and mass transportation
become a way of life
Mass manufacturing made it possible to manufacturing goods in
large quantities.


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3. The emergence of self service:
Retail evolve in many ways over the 20th century.
Self service as a concept started in 1916 when Clarence
Saunders started the first self service store.

4. The development of supermarkets and convenience
stores:
The emergence of the supermarkets first saw in 1930s. first
hypermarket that was developed by Carrefour in France in
1963.
The new formats gave the customer the choice of picking up a
product, comparing it with others and then taking a decision
on buying.

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5. Speciality stores, malls & formats:
As the needs of the consumers grew and changed it was visible the
emergence of commodity specialized mass merchandisers in the
1970s.
The 70s were witness to the use of technology in the retail sector
with the introduction of the Barcode.

6. The Rise of the Web:
The world of retail changed again in 1995, when Amazon. Com
opened its doors to Worldwide market on the Web.
With the growth of the world wide web , both retailers and
consumers can find suppliers and products from anywhere in the
world.

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Theories of Retail Development
Retail Development from the theoretical perspective:

No single theory can be universally applicable or acceptable. The
application of each theory varies from market to market ,
depending on the level of maturity and the socio-economic
conditions in that market.

The retail scenario keeps changing continuously. These changes
are brought by ever changing customer requirement, economic
development of the nation , falling borders, new technologies and
by entrepreneurs.

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Theories of retail development can broadly be classified as:

1. Environmental: where a change in retail is attributed to the
change in the environment in which the retailers operate.

2. Cyclical- where change follows a pattern and phase can have
definite identifiable attributes associated with them.

3. Conflictual: where the competition or conflict between two
opposite types of retailers, leads to a new format being
developed.


Classification
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Darwin's theory of natural selection has been
popularized by the phrase survival of the fittest.

Retail institution are economic entities and retailers
confront an environment which is made up of
customers, competitors and changing technology.

So the birth, success or decline of different forms of
retail enterprises is many a times attributed to the
business environment.


Environmental theory
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Those retail institutes that are keenly aware of their
operating environment and which react without
delay, gain from the changes.

Thus Following the Darwinian approach of survival
of fittest, those retailers that successfully adapt
technological, economic, demographic and legal
changes are the ones that are most likely to grow
and proper.

The Ability to adapt to change, successfully is
at the core of this theory
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Cyclical Theory
The most well know theory of retail evolution is the retail wheel of
retailing theory.
This theory suggests that retail innovators often first appear as low
price cost operators with a low cost structure and low profit margin
requirements, offering some real advantages.
As they prosper , they develop their business, offering a greater
range or acquiring more expensive facilities they lose the focus. (on
which they entered in the market). This phase is known as trading
phase. This in turn leave room for others to enter and repeat the
process.
They then become vulnerable to new discounters and lower cost
structure as they are now Mature retailers.

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Trading up phase
Mature retailer
Top heavy
Declining ROI
Innovative retailer
Low status and price
Minimum service
Poor facilities
Limited product offering
Traditional retailer
Elaborate facilities
Higher rent
More locations
Higher prices
Extended product offerings
T
Mature retailer
Top heavy
Declining ROI
Innovative retailer
Low status and price
Minimum service
Poor facilities
Limited product offering
Traditional retailer
Elaborate facilities
Higher rent
More locations
Higher prices
Extended product offerings
The wheel keeps on turning and department stores, supermarkets,
and mass merchandise went through this cycles
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Conflict theory
Conflict always exit between operators of similar
formats or within broad retail categories.

Retail innovation does not necessarily reduce the
number of formats available to the consumer,
instead , it leads to the development of more
formats.

Retailing involves through a dialectic process, i.e.
blending of two opposite to creates a new format.

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The store enjoyed an enviable position for sometime and
later the change in customer expectations and increases
competition in the form of other department stores like,
Globus, Westside, Lifestyle etc.
Later competition gives lots of other angles also , like
Specialty store, book store, Music store etc.
Initially when shoppers stop opened its first outlet in
Mumbai in 1991 they offers apparel, imitation, cosmetics
and perfumes and home fashion. That time they also
offer loyalty programmes in place, which did not offers
by others.