UNIT-2

• CONTENTS

• THEORY OF RETAIL- ENVIRONMENTAL, CYCLIC, CONFLICT

• RETAIL LIFE CYCLE

• UNDERSTANDING THE RETAIL CONSUMER

RETAIL THEORY
• 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. Cyclic- where change follows a pattern and phase can have

definite identifiable attributes associated with them.

3. Conflict: where the competition or conflict between two

opposite types of retailers, leads to a new format being
developed.
1. Environmental theory

• Retail institution are economic entities and retailers

confront an environment which is made up of customers,
competitors and changing technology.
2. Cyclic 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.
 RETAIL Theory

• Theory of cyclical or circular development

• Retail firms enter as low margin,low price,low
status stores,with few customers service
• Entry phase: Decide on competitive strategy
say discount pricing.stores are designed &
built,merchandise assortment selected &
distribution system developed to offer broad
range of general merchandise at lowest
possible price (Wal-mart)
 The wheel of Retailing
• Trade-up phase : stores become more profitable &
competitive,begin to upgrade
offerings,design,layouts,add more services
&amenities & upscale the merchandise & prices

• Vulnerability phase :stores evolve into high cost

merchants thereby becoming vulnerable to low
cost,low service competitors in the entry phase
• The wheel keeps on turning and department stores,
supermarkets, and mass merchandise went through this
cycles

Innovative retailer
Mature retailer
Low status and price
Top heavy
Minimum service
Poor facilities
Limited product offering

Traditional retailer
Elaborate facilities

More locations
Higher prices
Extended product offerings

T
Trading up phase
3. Conflict theory (dialectic Process)

• 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. This can be applied to
development in retailing like;
A. Thesis: Individual retailers as corner shops all across the
country (discount store).

B. Antithesis: A position opposed to the thesis develops over a

period of time . (department store). The antithesis is a
challenge to the Thesis.

C. Synthesis: There is a blending of the Thesis and antithesis.

The result position between the thesis and antithesis.
Supermarkets and hypermarkets flourish. This “synthesis”
for the next round of evolution.
Illustration

Thesis Antithesis

Discount Store Department Store

Discount
Department Store
 The Concept of Life Cycle in Retail

• Retail organization pass through identifiable stages of

innovation, development, maturity and decline. This is
commonly termed as the “Retail Life Cycle”

• The retail life cycle is a theory about the changes through

time of the retailing outlets
A. Innovation:
• A new organization is born; it improves the convenience or
create other advantages for the final customers, which
differ sharply from those offered by other retailers. This is
the stage of Innovation.

• In Innovation organization have very few competitors.

• Because it is new concept , the rate of growth is fairly rapid

and the management fine-tunes its strategy through
experimentation.

• At this stage the level of profitability re moderate and this

stage can last up to five years, depends on the organization.
B. Accelerated Growth:
• The retail organization faces rapid increase in sales.

• As organization moves to stage two of growth ,which is the

stage of development, a few competitors emerge.

• As company has been in the market for a while it is now in a

position to pre-empt the market by establishing a position
of leadership.

• At this stage since growth is imperative, the investment

levelis also high as is the profitability.
C. Maturity:
• The organizational this stages still grows, but competitive
pressures are felt acutely from newer forms of retailing that
tend to arise.

• Thus growth rate tends to decreases.

• Gradually as marketers become more competitive and

direct competition increases, the rate of growth slows down
and profits also start declining.

• This is the time when the retail organization needs to

rethink its strategy and reposition itself in the market.

• A change may occur not only in the format but also in the
merchandise mix offered.
D. Decline:
• The retail organization looses its competitive edge and
there is a decline.

• At this stage organization needs to decide is it is still going

to continue in the market.

• The rate of growth is negative, profitability declines further

and overheads are high.
SALES The Concept of Life Cycle in Retail

Maturity
Decline

Growth Profit

Innovation

TIME
UNDERSTANDING RETAIL CONSUMER
 RETAIL CONSUMER
FACTORS INFLUENCING THE CUSTOMER’S DECISION MAKING

DEMOGRAPHIC FACTORS

FACTORS
INFLUENCING
ENVIROMENTAL
CUSTOMERS
FACTORS LIFESTYLES
DECISION
MAKING

PSYCHOLOGICAL
FACTORS
 RETAIL CONSUMER
FACTORS INFLUENCING THE RETAIL SHOPPER

1. DEMOGRAPHIC FACTORS

 Gender

 Age

 Occupation

 Education

 Family size

 Income
 RETAIL CONSUMER

FACTORS INFLUENCING THE RETAIL SHOPPER

2. LIFESTYLE

 Activities and interests

 Nature of occupation

 Availability of leisure
 RETAIL CONSUMER
FACTORS INFLUENCING THE RETAIL SHOPPER

3. PSYCHOLOGICAL FACTORS

 Motives

 Perception

 Learning

 Attitude

 Personality
 RETAIL CONSUMER
FACTORS INFLUENCING THE RETAIL SHOPPER

4. ENVIROMENTAL FACTORS

 Physical Environment.

 Social environment- culture, sub culture , social class.