THEORIES OF RETAIL DEVELOPMENT

Environmental Theory:customerscompetitorschanging technology

Effecting birth, success of decline of retail outlets.

Example: Decline of Departmental stores ---------------------non adaptability of transforming to Super/Hyper markets.

ABILITY TO ADAPT TO CAHNGES IS THE SUCCESS FACTOR.

Cyclical Theory:entry phase

Low status & price, minimum services, limited product offers, poor services. trading up phase

Expensive facilities, higher rents, more locations, higher prices, more products.vulnerability phase

Declining ROI, myopic by nature, scrambled merchandising.

Example:Departmental stores started as successful stores, but were cut by

supermarkets and discount stores.

Conflict theory:Thesis

Individual shop owners open shops throughout India.Antithesis

Opposed to Thesis. Departmental stores comes up as competitors to challenge the small shops throughout India.

SynthesisBlending of Thesis & Antithesis. Supermarkets & hypermarkets have come up.

Synthesis becomes Thesis for another round of revolution.

Concept of Life cycle in retail:Innovations

More convenience, few competitors, rapid growth rate, moderate profitability, lasts upto 5 years.

GrowthIncrease in sales, few competitors emerge, gains leadership, high investments,

high profitability, lasts or 5 – 8 yrs. Maturity

Competitive pressure, decreased growth rate, declining profits, unattractive offers.

DeclineLooses competitive edge, negative growth rate, profits very less.

Example:Shopper’s Stop opened outlet for clothing. Later on Westside,

Clobus and Lifestyle came into the market, so it had to diversify to jewelry, cosmetics & acquired Crosswords.

RETAIL FORMATS:Depends upon:

products / services offeredpricing policy the format operatescommunication mix on these parameters.store sizelooks of storelocation of store

CLASSIFICATION OF RETIAL FORMATS:Store based formats Non store based formats

independent retailer convenience storeschain stores supermarketsfranchise hypermarketsleased departments specialty stores consumer cooperatives departmental stores off price retailerscatalogue showroomsdiscount dept. storescategory killerswarehouse clubs

INDIPENDENT RETAILERSowns one storeadvantage – easy entryone to one relation with customersno economies of scalesless bargaining power

CHAIN RETAILER2 or more outlets under common ownershipsimilar merchandisesimilar ambience, ads, promotionsmore bargaining powerads and promotions are cost effectivedifficult to control all stores at once

FRANCHISINGcontractual agreementuse the format for a feestrademark / product franchise – Archie’s storesbusiness format franchise – Mc Donald’s