Wheel of retailing theory
(also called the wheel of retailing or the wheel of retailing hypothesis)
(also called the wheel of retailing or the wheel of retailing hypothesis)
DESCRIPTION
A theory of change among retail institutions putting forth the view that retail institutions follow a consistent and predictable cycle of evolution in the way they compete strategically in the retail environment.
A theory of change among retail institutions putting forth the view that retail institutions follow a consistent and predictable cycle of evolution in the way they compete strategically in the retail environment.
KEY INSIGHTS
Developed in pioneering research by McNair (1957) and Hollander (1960), wheel of retailing theory proposes that retail institutions evolve systematically. In particular, the theory argues that new retailers are able to gain a foothold in the retail market and compete successfully with existing retailers by offering lower prices that are achievable as a result of productivity gains and certain reductions in customer service. As such firms become established, however, there is a tendency for them to lose their competitive edge as a result of their raising prices, moving upmarket in their product mixes and in the customers they wish to attract, and increasing levels of customer service. Such actions, however, result in strategic problems for the firms as new, low-priced retailers attack the firms from below.
Developed in pioneering research by McNair (1957) and Hollander (1960), wheel of retailing theory proposes that retail institutions evolve systematically. In particular, the theory argues that new retailers are able to gain a foothold in the retail market and compete successfully with existing retailers by offering lower prices that are achievable as a result of productivity gains and certain reductions in customer service. As such firms become established, however, there is a tendency for them to lose their competitive edge as a result of their raising prices, moving upmarket in their product mixes and in the customers they wish to attract, and increasing levels of customer service. Such actions, however, result in strategic problems for the firms as new, low-priced retailers attack the firms from below.
KEYWORDS Retailing, evolution, institutional change
IMPLICATIONS
The wheel of retailing theory and its associated concepts can potentially help strategic marketers to understand, explain, and predict better how particular retail organizations may evolve given their particular stage of evolutionary development. While it may be difficult to identify exactly when retail organizations may undergo certain evolutionary changes, the theory is nevertheless useful in supporting analyses of one’s own retail organization as well as competitor organizations in an effort to identify predictable evolutionary paths.
The wheel of retailing theory and its associated concepts can potentially help strategic marketers to understand, explain, and predict better how particular retail organizations may evolve given their particular stage of evolutionary development. While it may be difficult to identify exactly when retail organizations may undergo certain evolutionary changes, the theory is nevertheless useful in supporting analyses of one’s own retail organization as well as competitor organizations in an effort to identify predictable evolutionary paths.
APPLICATION AREAS AND FURTHER READINGS
Retail Marketing
Brown, Stephen (1991). ‘Variations on a Marketing Enigma: The Wheel of Retailing Theory,’ Journal of Marketing Management, 7(2), 131–155.
Brown, Stephen (1991). ‘Variations on a Marketing Enigma: The Wheel of Retailing Theory,’ Journal of Marketing Management, 7(2), 131–155.
Izraeli, D. (1973). ‘The Three Wheels of Retailing: A Theoretical Note,’ European Journal of Marketing, 7(1), 70–74.
BIBLIOGRAPHY
Hollander, Stanley C. (1960). ‘The Wheel of Retailing,’ Journal of Marketing, 24, July, 37–42.
Hollander, Stanley C. (1960). ‘The Wheel of Retailing,’ Journal of Marketing, 24, July, 37–42.
McNair, M. (1957). ‘Significant Trends and Developments in the Postwar Period,’ in A. Smith (ed.), Competitive Distribution in a Free High Level Economy and its Implications for the University. Pittsburgh: University of Pittsburgh Press, 1–25.
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