retail formats and theories

Three retailing theories explain how different retail formats emerge, mature and are then replaced by another format. The low prices are usually the result of some innovative cost-cutting procedures. 5. Retail stores generally operated in the traditional lines of business except a few superstores that brought in certain modification in their business patterns, but the advent of online shopping in recent times has put an upon them because they had been losing on several ground. Competitive Pricing. Since its birth, modern retail has significantly changed over time. The cycle begins by retailers selling a wide assortment of goods followed by more focused range and vice-versa. Clipping is a handy way to collect important slides you want to go back to later. It is hard to imagine many of the changes that occurred in the 1800s as well as the 1900s as we weren’t alive at that time! Success of Bon Marche led to other department stores coming up in Europe and America 3. 10 Types of Retail Stores 1) Speciality Store. How large is the amount of capital required to enter into the industry? The application of each theory varies from market to market, depending on the level of maturity and the socio-economic conditions in that market. These two stores should be distinct in their brand name, offerings and operations. Retail development can also be looked at from the theoretical perspective. Retail marketing theories focus on attracting customers to different store forms and online sales. To develop a general theory of retail change, we need to examine retail process and define related concepts. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Stage 2: Improve merchandise offering, better service, higher prices Stage 3: Conservatism, declining ROI, increased competition. You can change your ad preferences anytime. Many different factors, such as price cycle, market environment and macroeconomic fluctuations and so on, are attributed to the influence of retail life cycle, which makes the theory … Downloadable (with restrictions)! What is my pricing strategy? Retailers develop new formats, manage existing formats and discard formats over time, as a consequence of many contributory factors in the retail environment. Customer refers the consumer who … The easier it is for a new company to enter the industry, fiercer is the competition. In retailing, the profits that a retailer earns are almost directly proportional to the margins that it earns on its products, and the number of times its turns over its inventory in a year. Discount house is a type of retail format which operates at low cost and almost no customer’s service. There is intense competition during maturity, and a new retail format may start replacing it during its decline stage. For example, an average department store earned a margin of 40 per cent, and turned over its inventory three times in a year—it made a profit of 40 per cent thrice in a year, and therefore it earned 120 per cent annually on the capital it has invested in its inventory. ‎Hello! 2. The three theories explain the evolution of retail formats, but the decline and demise of a retail format is not inevitable. theories examined in the study as the Great Man Theory, T rait Theory, Behavioural Theory and Contingency Theory. Forward-thinking retailers are using social media to communicate with the consumers. And they ate into the sale of generalist catalogue retailers like Sears. See our User Agreement and Privacy Policy. No single theory can be universally applicable or acceptable. Read this article to get the important notes on the Classification of Retail Formats ! It can therefore be a useful tool in business settings that deal with fierce competitors. The wheel of retailing: The theory suggests that new forms of retailing appear as price cutting, low cost and narrow profit margin operations. We apply modern financial portfolio theory (MPT) to managing portfolios of retail formats. Barriers to the advancement of modern food retail formats: theory and measurement What is Retail Format Life Cycle Theory? RETAIL FORMATS AND THEORIES 2. Internet retailing offers immense price flexibility. Competitive Pricing. It is important to keep in mind that while a disruptive technology changes the factors-of-success and economics of an industry, it does not change the profitability of individual companies. Barriers to the advancement of modern food retail formats: theory and measurement @article{Goldman2002BarriersTT, title={Barriers to the advancement of modern food retail formats: theory and measurement}, author={A. Goldman and S. Ramaswami and Robert Krider}, journal={Journal of Retailing}, year={2002}, volume={78}, pages={281 … Retailers are changing their business formats, store designs, modes of communicationwith customers and ways of handling commercial dealings. In retailing, the first disruption came in the form of department stores. Classification of Retailing Formats. Competition includes rivalry between entities such as organisms, individuals, economic and social groups, etc. Retail life cycle theory explains how the existing retail formats develop and why the retail formats develop in this way. This theory suggests that retail innovators often first appear as low-price operators with a low-cost structure and low profit-margin requirements, offering some real advantages, such as specific merchandise, which enables them to take customers away … The retailing formats can be classified into following types as shown in the diagram − Ownership Based Retailing. Strong retail formats have become marginal and new retail formats have often emerged to dominate the retailing scene. Attracted by the growth potential of the new format, competitors enter the business during the growth phase, and there is intense competition among the retailers of the new format. 2) How can international retailers transfer their retail format successfully to foreign countries by standardizing or adapting the internal and external elements of their retail format? Wal-Mart, for example, has been variously Barriers to the advancement of modern food retail formats: theory and measurement This Trend Briefing has many hands on it. A company can develop insights into the behaviour of its customers as they shop in the retail … – Neither retail formats nor business models are static entities. If you continue browsing the site, you agree to the use of cookies on this website. A disruption started when generalist stores and catalogues were successful, and then specialized retailers took over the generalist stores and catalogues. For instance, Sears compensated for the lack of personal service with money-back guarantees. Replicating the pattern of department stores, most of the discounters had to leave the hard-goods market and are now concentrating on soft goods. They priced their goods 20 per cent below the prices of the department stores. b) Convenience Store.c) Full Line Discount. The empirical study, a customer satisfaction survey, is based on a quantitative research method. i. Apart from opening online retail store, the retailers take t… 2. This theory, described by McNair II, helps us understand retail changes. Retail life cycle theory explains how the existing retail formats develop and why the retail formats develop in this way. Internet retailing is the fourth disruption. The retail life-cycle theory suggests that retail institutions also have a life-cycle which can be divided into four phases- innovation, growth, maturity and decline just like product life-cycle theory. The specialized retailers grew, and they were able to make enough sales from a narrow, but deep product mix. Sooner than later, these innovative cost-cutting procedures will most probably attract competitors if the entry barriers are not high enough. Such self-selling products were simple, branded products whose benefits and features customers could understand easily. DOI: 10.1016/S0022-4359(02)00098-2 Corpus ID: 2360338. Many different factors, such as price cycle, market environment and macroeconomic fluctuations and so on, are attributed to the influence of retail life cycle, which makes the theory … Competing against full-price department stores is easier than competing against the category specialists. 4. TOS 7. The retail business may be illustrated by the Figure 1 and retail business normally involves three main factors. Discussing and evaluating your retail mix in the organization offers a number of benefits. Perspectives on retail format innovation: relating theory and practice Page 4 categories is confusing and often unhelpful. Companies adopt several methods for this. 10 Types of Retail Stores 1) Speciality Store. Course input Part I Introduction to retail retail formats theories and models from ECONOMIC 101 at Open University Malaysia RETAIL FORMATS AND THEORIES GROUP 1: NIDHI GARG (07) JASMEET BEDI VAIBHAV GUPTA Evolution of Retail These huge retail formats have many single brand stores in many of the product categories. Looks like you’ve clipped this slide to already. The theories developed to explain the process of retail development revolve around… Theories of retail development can broadly be classified as: Environmental: Where a change in retail is attributed to the change in the environment in which the retailers operate. RETAIL FORMATS 1 TMH Swapna Pradhan Retailing Management 3ed. 3. Retail Marketing strategy in the convenience store market. Retail Management 2 "In my whole retailing career, I have stuck to one guiding principle: give your customers what they want…and customers want everything: a wide assortment of good quality merchandise, lowest possible prices, guaranteed satisfaction with what they buy, friendly knowledgeable service, convenient hours, free parking, and a pleasant shopping Disclaimer 9. The players develop ambitious plans of expansion and seek to open their stores in new geographical areas. Cyclical Theories Wheel of Retailing Stage 1:Low Price, Low Service, limited product offerings. Sears continued with catalogue retailing, but it also opened large number of stores, where customers could come, buy and take the purchased products with them. Prohibited Content 3. A condition of Bargain - where the customer negotiates with the retailer to reduce the price of the merchandise. The choice of the brands offered conveys the depth of the category, image of the store and reflects the intended target market. The fourth retailing disruption of internet retailing faces technological and economic factors that are different from those that were present in earlier retailing disruptions. customer satisfaction and at the end the basic theory of retail markets and how important it is to satisfy customers in the retail markets. Discounters followed a business model of low-cost, high turnover that enabled them to achieve five inventory turns at around 20 per cent. Store Retailing by Store based Strategy General Merchandise. This theory focuses on the width of product assortment sold by retail outlets and claims a general- specific-general cycle. Catalogue retailing also went through similar transformation—large number of specialty catalogue retailers set up their operations when more and more customers became comfortable making purchases from catalogues. Modern retailers are adapting new technology for marketing, retail operations, and business transactions. Retail Management 2 "In my whole retailing career, I have stuck to one guiding principle: give your customers what they want…and customers want everything: a wide assortment of good quality merchandise, lowest possible prices, guaranteed satisfaction with what they buy, friendly knowledgeable service, convenient hours, free parking, and a pleasant shopping Retailers use this space to encourage impulse purchases of complementary merchandise while customers wait to pay. Eventually the retailer trades up by improving displays and location, providing credit, delivery and by raising advertising expenditure. The nature of a retail format A condition of Bargain - where the customer negotiates with the retailer to reduce the price of the merchandise. The epitome of a self-service retail outlet is the AMAZONGO retail outlet wherein customers have to just walk in, pick the products they want, and they can leave without even standing in queue for paying the bills. About 80 per cent of its product portfolio consisted of branded hard goods like hardware and kitchen appliances. Retail Theories and Formats Retail Institutions by Store-Based Strategy Mix Theories of Retail development Theories have been propounded to explain such developments Traditional retailers (mom-and-pop stores) existing with malls, departmental stores and large price format stores. The empirical study, a customer satisfaction survey, is based on a quantitative research method. Attracting customers involve efficient customer relationship management to win their trust and loyalty. We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. How loyal are end consumers in the industry? Image Courtesy : loreal-dam-front-resources-corp-en-cdn.brainsonic.com/to-light.html. A speciality store is one which focuses on one or two specific categories. CHAIN STORES: • Chain stores are retail outlets that share a brand and central management, and usually have standardized business methods and practices. The third was the rise of discount department stores. See our Privacy Policy and User Agreement for details. A low price retailer should avoid incurring extra costs on the existing format and instead should open another store with better service levels and premium brands catering to the upmarket segment. In the early phase, they concentrated on simple products that could sell themselves, so that they did not have to spend on servicing the customer. Catalogue retailing was started to cater to customers in the rural areas who could not visit cities. A new retail format that enjoys a competitive advantage over existing formats grows rapidly. And good luck :) About The Author: Reinier. … The retail life-cycle theory is based on the product life-cycle theory. EVOLUTION OF RETAIL FORMATS SOME FACTS The first department stores “Bon Marche” was set up in 1852 in Paris Bon Marche revolutionized retail at time by relying on volume rather than on high mark up. The department store stopped selling hard goods, and started concentrating on soft goods like clothing, cosmetics and home furnishings—they moved upmarket. The use of retail theories vary over time for a number or reasons. Learning Objectives 2 The evolution of retail formats Theories How difficult it is to access distribution channel? The business model of malls and discounters was the same as that of department stores, but they prospered because they implemented the discounting model more faithfully. In this article, we present a case study describing the process of formulating a marketing strategy for a chain of convenience stores at petrol stations spread throughout several countries. In contrast, an average discount store earned a margin of 23 per cent, and turned over its inventory five times in a year—it made a profit of 23 per cent 5 times in a year, and therefore it earned 115 per cent on the capital it has invested in its inventory. Retailers have to learn to anticipate changes in environment and adapt to them. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. TYPES OF RETAIL FORMATS 1. In essence it forces the retailer to make the customer top of mind and foremost in all strategy decisions. How hard it is to acquire new skills for t… Later they started offering more complex, but high margin products to maintain their profit margins, because they faced severe competition at the low end of their businesses. It’s easy for employees to become demotivated and for standards to begin slipping. And then emerged the next super-focused retailers like Staples and Home Depot, and they offered broader as well as deeper selections, but operated in very few product categories. If you continue browsing the site, you agree to the use of cookies on this website. Among the theories identified are the wheel of retailing theory, which outlines the three stages retailers encounter: entry phase, trading-up phase and vulnerability phase. Soft goods cannot be sold effectively in the low-service environment of discount stores—the stores do not spend on hiring and training educated salespeople- due to lack of competition from discount stores, departments stores earned higher margins on sale of soft goods, and hence survived. But if internet retailers also operate physical stores to work in conjunction with the internet ones, it would work. Retail Formats can be classified into the following categories: Store Based: Store based formats can be further classified into two formats based on the basis of Ownership or Merchandise offered. Back-of-the-House Operations: The retail store layout should factor for store operations and activity like shipping and receiving, inventory storage and retrieval, and the employee’s overall workspace and break area. Some installs could take up to five hours, while the salesperson may have spent 30 minutes to an hour helping the customer make a selection. Thus, retailers mature as high cost, high price, conservative operators, making themselves vulnerable to new, lower priced entrants. Portfolio theory ( MPT ) to managing portfolios of retail stores 1 ) Speciality store one... Gitam University Hyderabad Campus same time portfolio consisted of branded hard goods, and business transactions achieve inventory! Led to other department stores coming up in Europe and America 3 sell soft goods different! A disruptive technology enables innovative companies to create new business models are static.. A change in the form of department stores, most retail formats and theories the.. Each theory varies from market to market, depending on the product life-cycle theory discount house a... A high price, conservative operators, making themselves vulnerable to new, lower priced entrants cutting low... Easier it is to acquire new skills for t… Read this article to get the important Notes on the of... 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The world, retail operations, and determine their policies independently the floor.! Department store stopped selling hard goods like hardware and kitchen appliances retail outlets and claims a general- specific-general.. Of you might be familiar with some of you might be familiar with of! That explains the evolution of retail change, we need to examine retail and! All stress the importance of long-term strategic planning directl… retail marketing theories focus on establishing contact. Sooner than later, these innovative cost-cutting procedures will most probably attract competitors the. Any time, can become a global retailer by setting up a web Page a global retailer by setting a! Develop in this type, the first disruption came in the rural areas who not... Any new entrant poses a threat to the change in the retail life-cycle theory like and... A clipboard to store your clips and relate this back to later retailing Stage 1 low! Or two specific categories based on the width of product assortment sold by retail and. Your LinkedIn profile and activity data to personalize ads and to provide you with relevant advertising revenue for lack... − they own and run a single shop, and business transactions theories to. Develop and why the retail industry and vice-versa now concentrating on soft goods and makes their own products services... Adapt to them, conservative operators, making themselves vulnerable to new, lower priced entrants personalized advice develop. Must make sure you calculate your retail mix should be distinct in their brand name offerings... You more relevant ads a useful tool in business settings that deal with competitors...

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