Theories of Retail Development
Theories of Retail Development Retail development can also be looked at 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. market. The theories developed to explain the process of retail development revolve aroun around d the the impo import rtanc ance e of comp compet etit itiv ive e pres pressu surres, es, the the inve invest stme ment nts s in organi organizat zation ional al capabi capabilit litie ies s and the creat creation ion of a sus sustai tainab nable le compet competiti itive ve advantage, which reuires the implementation of strategic planning by retail organizations !rowth in retail is a result of understand in market signals and responding, to the opportunities that arise in a dynamic manner. Theories of retail development development can broadly be classi"ed as# $. %nvironmental- where a change in retail is attributed to the change in the environment environment in which the retailers operate. &. 'yclical- where change follows a pattern and phases can have de"nite identi"able attributes associated with them. ( 'on)ictual- where the competition or con)ict between two opposite types of retailers, leads to a new format fo rmat being developed Environmental Theory *arwin *arwin+s +s theory theory of natura naturall select selection ion has been been popula populari rized zed by the phrase phrase survival of the "ttest. Retai etaill inst instit itut utio ions ns are are econ econom omic ic enti entiti ties es and and retai etaile lers rs conf confrront ont an envir environm onment ent which which is made made up of custom customers ers,, compet competito itors rs and changi changing ng technology. technology. This environment environment can alter the pro"tability of a single retail state as well as-of clusters and centers. The environment that a retailer competes in is suciently robust to suash any retail form that does not adust. Thus, the birth, success or decline of di/erent forms of retail enterprises is many a times attributed to the business environment. 0or example, the decline of department stores in the western markets is attributed to the gene genera rall inab inabil ilit ity y of thos those e retai etaile lers rs to react eact uic uickl kly y and and posi positi tive vely ly to environmental environmental change. Cyclical Theory The most well known theory of retail evolution is The 1heel of Retailing Retailing theo theory ry.. This This theo theory ry,, desc descri ribe bed d by 2cNai 2cNairr 33, 33, help helps s us unde unders rsta tand nd retai etaill changes. This theory suggests that retail innovators often "rst appear as lowprice operators with a low-cost structure and low pro"t-margin pro"t-margin reuirements, o/ering some real advantages, such as speci"c merchandise, which enables them to take customers away from more established competitors. 4s they prosper, they develop their businesses, o/ering a greater range or acuiring more expensive facilities, but this can mean that they lose the focus that was so important when they entered the market. 5uch +trading up+ occurs as the retailer becomes established in his own right.
Conict Theory 'on)ict always exists between operators of similar formats or within broad retail categories. 3t is believed that retail innovation does not necessarily reduce the number of formats available to the consumer6 instead, it leads to the development of more formats. Retailing thus evolves through a dialectic process, i.e., the blending of two opposites to create a new format. This can be applied to *evelopments in retailing as follows# -4. Thesis- 3ndividual retailers as corner shops all across the country 7. 4ntithesis- 4 position opposed to the thesis develops over a period of time. These are the department stores. The antithesis is a challenge to the thesis. '. 5ynthesis- There is a blending of the thesis and antithesis. The result is position between the thesis and antithesis. 5uper markets and hypermarkets thrive. This synthesis becomes the thesis for the next round of evolution.
