THEORIES OF
RETAIL
DEVELOPMENT
KRITHIKA G.K.
Asst. Professor
Fashion Mgt. Studies
• No single theory can be universally
applicable & acceptable
• Theories very from market to market –
based on maturity & socio-economic
conditions
• Explain process of
–
–
–
–
retail development,
importance of competitive pressures,
investments in organizational capabilities &
creation of sustainable competitive
advantage etc.
Theories of Retail Development:
• Environment Theory
• Cyclical Theory
• Conflict Theory
1. Environmental Theory
• Darwinian approach “survival of
the fittest”
• Change in retail is attributed to
change in the environment in
which retailers operate
• Core of the theory - ability to
adapt to change successfully
2. Cyclical Theory
• “The Wheel of Retailing” Theory – by McNair
• Retail innovators (RI)– low-price operators, low
cost structure, low profit margin requirements,
offer real advantages, take customers away from
competition
• RI prosper – deve. & estb. Business, lose focus
on wht. was imp. earlier (trade-up), give space
for new entrants to repeat process (discounters
& low cost structures).
• Theory does not explain deve. Of retail of all
markets.
The Wheel of Retailing
Vulnerability
Phase
Entry Phase
Trading-up
Phase
Source: http://www.emeraldinsight.com/fig/0701030703001.png
3. Conflict Theory
• Exists b/w operators of similar formats or broad retail
categories
• Retail innovation leads to development of more formats &
does not reduce no. of formats available to consumer.
• Retail - dialectic process – blend two opposites – develop
new format
• Thesis – Individual retailers
• Antithesis – Department stores (opposite of thesis)
• Synthesis – Supermarkets & Hypermarkets (blending of
thesis & antithesis)
Theory of Retail Conflict
Discount Store
Department Store
Discount Department
Store