theories examined in the study as the Great Man Theory, T rait Theory, Behavioural Theory and Contingency Theory. Prohibited Content 3. The fourth retailing disruption of internet retailing faces technological and economic factors that are different from those that were present in earlier retailing disruptions. The third was the rise of discount department stores. Three retailing theories explain how different retail formats emerge, mature and are then replaced by another format. What is my pricing strategy? Such self-selling products were simple, branded products whose benefits and features customers could understand easily. 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. Since no single theory applies to every market and every situation, knowing something about each one may help you better understand … 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. The easier it is for a new company to enter the industry, fiercer is the competition. Retail life cycle theory explains how the existing retail formats develop and why the retail formats develop in this way. 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. They priced their goods 20 per cent below the prices of the department stores. 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. 3. Retailers develop new formats, manage existing formats and discard formats over time, as a consequence of many contributory factors in the retail environment. In this type, the customer generally serves himself which means he or she chooses their own products and makes their own decision. Internet retailing the fourth retailing disruption is internet retailing. This time, the episodes will cover a specific movement within the field, followed by a rundown of crucial texts in the field, key folks in… Stage 2: Improve merchandise offering, better service, higher prices Stage 3: Conservatism, declining ROI, increased competition. How difficult it is for the consumer to switch to the new product? TOS 7. Theories of Retailing: How different retail formats Emerge, Mature and are then Replaced By another Format? Companies carry out market research to know customer attitude towards their products but the customers’ real intents are displayed only during the process of buying in retail stores. Food Retailers.b) Departmental stores. What is my markup strategy and how does that affect my overall retail price? Retail formats 1. 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. Competition arises whenever two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). The aggregation of customers and products enabled departmental stores to charge lower prices. Retail formats 1. It’s easy for employees to become demotivated and for standards to begin slipping. Disclaimer 9. The three theories explain the evolution of retail formats, but the decline and demise of a retail format is not inevitable. Focused retailers, i.e., retailers who kept a limited number of product lines, were able to achieve margins and inventory turns similar to those of department stores because they had deeper product lines in each product category. Competing against full-price department stores is easier than competing against the category specialists. 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. 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 iii. First, you are addressing the needs of your target market. 5. This theory focuses on the width of product assortment sold by retail outlets and claims a general- specific-general cycle. Focused or specialist retailers might be in an advantageous position in internet retailing, because customers will find it easy to travel across the websites of focused internet retailers. With the space crunch, modern retailers have learnt how to use every inch of the floor constructively. Discounters followed a business model of low-cost, high turnover that enabled them to achieve five inventory turns at around 20 per cent. • In retail, dining and many service categories, chain businesses have come to dominate the market in many … Forward-thinking retailers are using social media to communicate with the consumers. To develop a general theory of retail change, we need to examine retail process and define related concepts. Apart from opening online retail store, the retailers take t… A new retail format that enjoys a competitive advantage over existing formats grows rapidly. Since implementation of theories is largely dependent on social and economic situations, high and low consumer demand may influence retailers to implement one theory over another. Modern retailers are adapting new technology for marketing, retail operations, and business transactions. 3) How can retailers successfully coordinate the implementation of their retail marketing program to culturally diversified markets? 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. And they ate into the sale of generalist catalogue retailers like Sears. 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. Barriers to the advancement of modern food retail formats: theory and measurement Internet retailing offers immense price flexibility. Looks like you’ve clipped this slide to already. 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. Read this article to get the important notes on the Classification of Retail Formats ! 1. Success of Bon Marche led to other department stores coming up in Europe and America 3. No single theory can be universally applicable or acceptable. This chapter explains the different types of retail store and also talk about the theories that explains the evolution of retail in the world. There is intense competition during maturity, and a new retail format may start replacing it during its decline stage. The nature of a retail format IT TAKES A TEAM. Retail development can also be looked at from the theoretical perspective. 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 … The retailing formats can be classified into following types as shown in the diagram − Ownership Based Retailing. The objective of MPT is to maximize overall portfolio return for a given level of portfolio risk. Malls did not have a distinct business model of its own—it simply aggregated category focused retailers in one premise. Catalogue retailing was started to cater to customers in the rural areas who could not visit cities. Department stores—Retailing was originally dominated by local merchants who kept large inventories, extended credit and offered personalized advice. Retail Formats and Theories 1. The most well known theory of retail evolution is The Wheel of Retailing theory. It can therefore be a useful tool in business settings that deal with fierce competitors. The retail mix will differ based on the store and the type of product offered to the customer. 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. RETAIL FORMATS 1 TMH Swapna Pradhan Retailing Management 3ed. Department stores which appeared later did not offer some of the personalized services of the local merchants, but they brought together an enormous number of different goods in one location, making it easier for shoppers to find what they needed. For instance, Sears compensated for the lack of personal service with money-back guarantees. RETAIL FORMATS Prepared By, Sagar Gadekar 2. Cyclical: Where change follows a pattern and phases can have definite identifiable attributes associated with them. View RETAILFORMATS.ppt from MBA 771 at GITAM University Hyderabad Campus. f) Super Centers Andg) Flea Market. But, white goods have varied and complex attributes, and salespeople have to take care to explain their features and benefits to the customers. This Trend Briefing has many hands on it. A condition of Bargain - where the customer negotiates with the retailer to reduce the price of the merchandise. Forward-thinking retailers are using social media to communicate with the consumers. The low prices are usually the result of some innovative cost-cutting procedures. RETAIL FORMATS AND THEORIES 2. 2. These stores are large in size, open for public and advertised heavily. Retailers develop new formats, manage existing formats and discard formats over time, as a consequence of many contributory factors in the retail environment. i. A disruption started when generalist stores and catalogues were successful, and then specialized retailers took over the generalist stores and catalogues. You also want to think about profitability and relate this back to the goals of your area as well as your organization. Discount house is a type of retail format which operates at low cost and almost no customer’s service. The pattern of evolution of internet retailing can be gauged from the past patterns in retailing disruptions. But if internet retailers also operate physical stores to work in conjunction with the internet ones, it would work. In retailing, the first disruption came in the form of department stores. 2. 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. They could turn their inventory over only twice a year and therefore had to charge a high price. Sooner than later, these innovative cost-cutting procedures will most probably attract competitors if the entry barriers are not high enough. 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