Theme: Consumers & Producers

NEW RETAIL CONCEPT DEVELOPMENT: A LITERATURE REVIEW

Work In Progress

Philip J. Rosenberger III Lecturer in Marketing, University of Western Sydney Bill Merrilees Associate Professor of Marketing, University of Newcastle

Bill Merrilees Associate Professor of Marketing University of Newcastle Callaghan, NSW 2308, Australia Tel: +61-2-49 21 6649, Fax: +61-2-49 21 6911 E-mail: mgwjm@cc.newcastle.edu.au

Address for all correspondence: Philip J. Rosenberger III Lecturer in Marketing Department of Management, Marketing & Tourism University of Western Sydney, Macarthur P.O. Box 555, Campbelltown, NSW 2560, Australia Tel: +61-2-46 20 3238, Fax: +61-2-46 284 289 E-mail: p.rosenberger@uws.edu.au

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NEW RETAIL CONCEPT DEVELOPMENT: A LITERATURE REVIEW

Work In Progress

ABSTRACT This paper will present a review of the literature regarding New Retail Concept Development (NRCD). This review is the first step of a programme of research in this area, an area which has been largely overlooked in the literature. The paper first discusses NPD (new product development) models in general, with a critique of the usefulness of each model for NRCD purposes. Next, the paper reviews the existing research pertaining to new service and new retail concepts. The paper concludes by discussing the implications for NRCD research and theory development, ending with the presentation of a conceptual NRCD model. Key terms: Retailing; New Product Development; New Retail Concepts; Marketing Theory

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NPD The central importance of innovation was captured by Drucker (Fusco 1994, p.29): There are only two important functions in business: marketing and innovations. Everything else is cost. New product development (NPD) and planning has assumed a heightened level of importance in the modern world as organisations recognise the need to improve the NPD process and its outcomes (Allen 1993, Power 1993). In this part of the paper, the new product development literature will be reviewed specifically that relating to the actual process of NPD. The section begins by exploring the nature of innovation and what innovation is considered to be. The section then discusses what constitutes a new product and the role extensions play. Next, the benefits & opportunities and the costs & risks of NPD for organisations are presented. This is followed by a review of the evolution of generations of NPD modelsthe generic (sequential) and various extension NPD models (stage-gate, fuzzy-gate, rugby, activity blocks, multiple convergent processing, continuous learning, QFD, return maps, chaos approach) that appear in the literature. Key NPD success factors are then profiled. The section concludes with a summary and evaluation of the NPD models, including a table indicating the usefulness of each model for NRCD. NEW SERVICE (& RETAIL) DEVELOPMENT The literature base for NPD has been growing with speed in recent years, though the attention devoted to these two areas is scant (for services) or largely nonexistent (for retailing). In comparison to industrial and consumer goods, very little research has actually appeared on the development of new services (Voss 1994), and what has appeared largely concentrates on service process development (eg., Shostack 1984), the financial-services industry (eg., Cooper et al 1994, Cooper and de Brentani 1991), though a trend does increased services research does seem to be growing (eg., Tax and Stuart 1997). Still, the vast majority of new product success factor studies have focused on manufactured products (Cooper et al 1994, Easingwood 1986), whilst retailing research has been primarily limited to testing methods (eg., Bateson and Hui 1992) or operational aspects (eg., store atmosphere elements). These areas are discussed in detail in the Retail NPD Literature Review in the following section of the paper. NEW RETAIL CONCEPT DEVELOPMENT This section of the paper opens with the identification and discussion of NRCD issues in academic sources and the trade press. Next, a variety of theories of retail evolution are discussedthe Wheel of Retailing, the Accordion Theory,

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Multiple Wheels (of Retailing), the Retail Life-Cycle, the Theory of the Dialectic Process, the Theory of Natural Selection, the Retail Ecology Model, and Davies Theory of Retail Evolutionbefore concluding with a summarisation of the picture of NPD in the retailing literature. As mentioned before, most NPD research has been of FMCG, consumer durables or industrial products, with limited research having been devoted to retail situations. Similarly, retailing texts only briefly deal with new retail concept development (eg. Merrilees and Miller 1996), whilst principles of marketing texts give even less attention through focusing predominantly retail evolution (eg., the Wheel of Retailing in Baker 1996, Kotler 1997) or fail to even make mention at all (eg., Worsam and Wright 1995). By and large, new retail development and NRCD has been ignored in the marketing journals. What little that has been more directly written has related to services (eg., Terrill and Middlebrooks 1996, Shostack 1984) rather than retailing specifically, though there has been research done on aspects of the retail environment that would be of interest in NRCD (the store atmosphere literature is of principal interest). What has been covered extensively, however, has been what gives rise to retail form emergence and evolution. This is best typified by the Wheel of Retailing (McNair 1958) which uses price and service offered to explain how retailers start in the low end of the market and move up to higher segments through the provision/addition of extra services and store features, thus creating a gap in the low end of the market which gives rise to new entrants (and thus the wheel turns). McNairs (1958) theory and others are discussed in the following sections, but the point to make at this juncture is that these are theories on a macro levelseeking to explain the emergence of forms of retail formats in the market, eg., because of pricewhereas NRCD is dealing with the micro level the creation and development of the individual idea by a single organisation. It is this difference in level which accounts for most of the discrepancy in the literature and serves as the starting point for this stream of research. In general, few of the retail change theories have been given unanimous support. All have been noted to suffer from one thing or another. The Wheel of Retailing has garnished the lions share of research interest and associated scrutiny. The Wheel has been severely criticised as well as having been held up as the best thing going that seems to do a reasonable job of explaining retail change. Markin and Duncan (1981) are critical of the wheel of retailing, accordion, and retail life cycle theories. Instead, they put forth the environment, Darwinism (survival of the fittest) and the dialectic (conflict) as possible forces/factors. All in all, there is no clear-cut agreement in the literature as to what a model of retail change should encompass, let alone how it should or could be tested.

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CONCLUSION In summary, attention to retail-based NPD/NRCD issues has been notably lacking, though services-based NPD research has been growing of late. In terms of NRCD specifically, the literatures do suggest reasons for the general emergence of new formats (eg., Wheel of Retailing, Dialectic Theory). However, few examples related to retailing are presented in NPD texts, and those that are tend to be services. In short, barring Palmer, Lovelock (1996), Terrill and Middlebrooks (1996) and Shostack (1984) in services, there has been little attempt to actually research and define the NRCD process on a scale and degree comparable to that in the NPD literature for the NPD process. The sum of the retailing-related work to date could best be seen as falling into the latter half of the typical NPD process, where the implementation of the chosen concepts is done. To conclude, Davies (1995, p. 240) has noted that retailing does not have some theory that is specific to it. The literature reviewed in this paper suggests that Davies views hold equally well for trying to understand how new retail concepts are developed. The literatures reviewed here talk extensively about the evolution of retail formats at a macro level, but fail to adequately address the process at the micro level. It is this deficiency in the literature that will be addressed by a proposed definition and model of New Retail Concept Development, a model which will serve as the first step in the way forward. The proposed model will conceptualise the situation at the micro levelthe individual store/retail concept levelhighlighting the various factors that feed into successful NRCD. The model will provide a starting point for research into this areaboth inductive and deductive in naturewhich will seek to confirm the elements in the model and/or potentially nominating other factors for inclusion in the model. The results will improve understanding of what works in NRCD (and what does not work), offering the potential for improved developmental success of new retail initiatives.

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SELECTED REFERENCES
Brown, Stephen (1990) The Wheel of Retailing: Past and Future, Journal of Retailing, Vol. 66, No. 2 (Summer), pp. 143-149. Cooper, Robert G. (1986) Winning at New Products, Reading (USA): Addison-Wesley. Davies, Gary (1995) Directions for further development and research, in International Retailing: Trends and Strategies, (eds.) Peter J. McGoldrick and Gary Davies, London: Pittman Publishing, pp. 239-242. Etgar, Michael (1984) The Retail Ecology Model: A Comprehensive Model of Retail Change, in Research in Marketing, Volume 7, JAI Press, pp. 41-62. Markin, Rom J. and Calvin P. Duncan (1981) The Transformation of Retailing Institutions: Beyond the Wheel of Retailing and Life Cycle Theories, Journal of Macromarketing, Spring, pp. 58-66. Savitt, Ronald (1989) Looking Back to See Ahead: Writing the History of American Retailing, Journal of Retailing, Vol. 65, No. 3 (Fall), pp. 326-355. Tax, Stephen S. and Ian Stuart (1997) Designing and Implementing New Services: The Challenges of Integrating Service Systems, Journal of Retailing, Vol. 73, No. 1, pp. 105-134.

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