Evolution of Retail competition

 Retailing was established in Hawaii in early nineteenth century

 Since economy was mostly agricultural based employing over

60% of the population, retail experienced slow growth

 Only 3% of population was engaged in wholesaling and retailing

 In early 20th century, retailing began to diversify along with the

economy

 Competition emerged for local stores with the entry of Kress and
Sears departmental stores
 Evolution of Retail competition

 Post world II witnessed first major shopping centre in Hawaii

 By end of 1950’s, retailing became major employee surpassing
agriculture. Several new retail chains were set up in Hawaii
 In late 1970’s first–eleven store was set up in Hawaii
 In 1980’s, first membership store Costco opened
 WalMart opened up in 1994
 Other large retailers around the world are Carrefour in France and
Tesco in UK
 In India, Pantaloon retail is so far the most successful retailer
through its big bazaar chains
 Theories of Retail Evolution

 Cyclical Theories: Retail institutions are cyclical in

nature, repeating the same state in future
• Wheel of Retailing
• Accordion theory

 Evolutionary Theories: Retail institutions keep on

changing the state with the passage of time
• Dialectic Process
• Natural Selection
 Theories of Retail Evolution

The Wheel of Retailing

Vulnerability Entry Phase

Phase

Mature Retailer Innovation Retailer

Trading-up Phase

Traditional
Retailer
 The Wheel of Retailing

 Mature Retailer
• Top Heaviness
• Conservatism
• Declining ROI

 Innovation Retailer
• Low Status
• Low Price
• Minimal Service
• Poor facilities
• Limited product offerings
 The Wheel of Retailing

 Traditional Retailer
• Elaborate facilities
• Expected, essential and
• Exotic services
• Higher rent locations
• Fashion orientations
• Higher Prices
• Extended product offerings
 The Wheel of Retailing
• Stages through which a retailer pass
• First stage: Retailers attract customers by offering low price and
low services
• In next stage, retailers expand by adding more product range,
services and add more stores

• In the process, costs, overheads and expanse increase, thereby

increasing the prices of merchandise offered

• This create opportunity for the low price, new retailers to enter the
market, adding vulnerability to the existence of earlier stores

• The older stores sometimes also change their formats according to

changing trends
 The Accordion Theory
• Retail institutions fluctuate from the strategy of offering many
merchandise categories with a shallow assortment to the strategy
of offering a deep assortment with a limited number of categories

• The contraction and expansion is like an accordion

• The format change as per the environmental changes – culture,

economy, technology, location, etc.
• Earlier phase had small retailers catering to neighbourhood
customers, but as towns expanded, needs and wants also changed
and retailers had to specialize in product categories
• Nowadays, with globalisation & technology, customers are
exposed to variety of options such as internet, malls, hypermarket,
discount stores, etc.
 The Dialectic Theory
Thesis
Specialty Stores Synthesis
• high margins
• low turnover
• high prices Category killer
• full service • modest margins
• narrow variety • medium turnover
• deep assortment • low prices
• limited services
Antithesis • narrow variety
• deep assortment
Full line discount store
• low margin
• High turnover
• low prices
• no service
• broad variety
• shallow assortment
 The Dialectic Theory

• The new retail institutions result from the stores borrowing

characteristics from other very different competitors

• The speciality stores have high margins, low turnover, while

discount stores have low prices and high turnover

• Over period of time, both get synthesized to evolve a new pattern

• The new store such as hypermarket, supermarket, etc. may have

characteristics of both, such as modest margins and medium
turnover
 The Natural Selection Theory

• Inspired by the Charles Darwin’s theory of evolution, change and

the survival of the fittest
• Those retailers, who adept themselves according to changing
needs, technology, customers, competition and legal environment,
are likely to succeed
• Hypermarkets or supermarkets, have small speciality stores /
assigned area within the main store to counter the speciality
retails, such as boutique or jewellery shop, etc. (Shop in shop)
• Similarly many departmental stores are now changing their stores
layout according to self-service formats
• Large speciality retailers / showrooms are now opening up an
outlet in Malls also
• Most general merchants now stock prepaid cards for phone,
satellite television, etc. looking at the huge demand
 The Retail lifecycle Theory

• The Retail Institutions like products also goes through the cycle

• The four stages are Innovation, Accelerated Development,

Maturity and Decline

• The Retailers have to continuously upgrade and change according

to changing consumer demands and competition, so as to prolong
their maturity stage
 The Emerging Trends in Retailing
 Growing diversity of Retail Formats

• Consumers can purchase the same merchandize from variety of

retailers
• Various formats are available such as supermarket, discount
stores, speciality store, hypermarket, etc.
• New retailers co-exist with the traditional retailers
• Each type of retailer offer a different set of benefits to the
customers and are thus selected by the customer on different
occasion or purpose
• Greater diversity increase competition and enable customer to
satisfy his specific needs and requirements
 The Emerging Trends in Retailing

 Increasing Industry Concentration

• Competition among retailers within each format is decreasing
• Few national level retailers dominate the most formats
• In India, is the modern formats are mostly dominated by Big
Bazaar, Shopper’s Stop, Reliance Retail, etc.

 Globalization
• Most large retailers have now expanded their presence to other
countries
• Brands like WalMart, Tesco, Carrefour, etc. are moving to new
unexplored markets
• Brands like McDonald, Pizza Hut, Domino, KFC, etc. are now
havig presence in even the smaller Tier II cities also
 The Emerging Trends in Retailing

 Use of Multiple Channels

• Multi channel retailer is the one, who sell merchandise or services
through more than one channel
• Single channel retailers are changing to multi channel retailer,
according to changing market and consumer demands
• Retailer can utilize the benefit of each different channel and can
attract more customers
• Multiple channels are;
 Store: offers browsing, experience, personal service, cash
payment, immediate possession of the goods, social experience
 Catalogue: Convenience, Safety, Quality of visual presentation
 Electronic: Broader selection, more information,
personalization, problem solving information, virtual
communities (C2C)
 Retail Formats
I. Food Retailers
• Supermarkets: Self service food store offering groceries, meat,
fruit, vegetable, and limited sale of non food items such as health
and beauty aids, cosmetics, hosiery and general merchandize
• Super store: These are larger supermarkets of size 20,000 –
50,000 Sq.ft. with expanded services such as bakery, sea food,
non-food, etc.

Strategies adopted by the retailers are HLPS (High – Low pricing

Strategy) or EDLP (Every day low pricing)
• Super centres: These are in large areas of 1,50,000 –2,20,000
sq.ft. and offer a wide variety of food (40%) and non-food (60%)
merchandize. They stock over 100,000 SKUs. Stock dry groceries
 Retail Formats
I. Food Retailers
• Hypermarkets: These are usually between 100,000 – 300,000
Sq.ft. offering food (70%) and general merchandize (30%). They
stock less than super centres, and nearly 40,000 –60,000 SKUs
• Items are groceries, fresh food, hardware, sports equipment,
furniture, appliances, electronics, consumer durable, etc.
• These are more prominent in France, Argentina, Brazil, etc. and
are similar to supercentres of USA
• Warehouse Club: It offers a limited assortment of food and
general merchandize with limited service at low prices to ultimate
consumers and small businesses. These are prevalent in U.S.
• Stores are large (atleast 100,000 –1,50,000 sq.ft) and located in
low rental areas
• They have simple interiors, concrete floors and little service is
offered. There are two type of members, Wholesales and
Individual
 Retail Formats
I. Food Retailers
• Convenience Stores: These provide a limited variety and
assortment of merchandize at a convenient location in a 2,000 –
3,000 sq.ft.store with speedy checkouts
• These are modern version of mom & pop stores
• They enable consumers to purchase quickly without having to
search for the merchandize and wait in the queue for billing
• It is more prevalent in Japan, Asia and Latin American countries
• Some are also offering prepared /cooked meals, beverages,
snacks, etc.
• Some e-tailers use convenience stores for distribution purpose
• They usually charge prices higher than the superstores
• Nearly half the items bought are consumed within 30 minutes of
purchase (egg, bread, cooked meals, milk, cookies, etc.)
 Retail Formats

2. General Merchandize

• Discount
• Speciality
• Category
• Home Improvement centres
• Department
• Drug stores
• Off-price stores
• Value retailers
 Retail Formats
2. General Merchandize
• Discount Stores: They offer a broad variety of merchandize,
limited services and low prices. They offer private as well as
national brands, but these are less fashion oriented
• Speciality Stores: It concentrate on a limited number of
complementary merchandize categories and provides a high
level of service in around 8,000 sq.ft of area. Usually Apparel,
jewellery, etc.
• Category Specialist: It offers a narrow variety but deep
assortment of merchandize. Use self service approach and sales
people provides assistance on functional aspects. Home
improvement merchandise, consumer durable, books, etc.
• Department Stores: Carry a broad variety and deep
assortment and are organized into separate departments for
displaying merchandize
 Retail Formats
2. General Merchandize
• Drugstores: They concentrate on health and personal
grooming merchandize. They provide specialized services such
as order via phone or drive through windows
• Off-Price Retailers: Offers an inconsistent assortment of
brand name, fashion oriented soft goods at low prices. Sell
brand name as well as designers labels at low prices, due to
unique buying practices
• Close out Retailers: Sell broad but inconsistent assortment of
merchandize, apparel and home products
• Outlet stores: Owned by manufacturers or speciality stores
chains and also referred as factory outlets
• Value Retailers: Mostly found in lower income urban or rural
areas and are smaller than traditional discount stores. (less than
9000 sq.ft area) Specialize in giftware, party and craft items
 Retail Formats

3. Non Store Retail Formats

• Electronic Retailing: Retailer communicate with the
customers and offers products and services for sale over the
internet. Amazon, Rediff, e-bay, etc.
• They are superior skills in new technology but lack in retail
expertise and consumer understanding
• Catalogue Retailing: Non store format in which offering is
communicated through catalogue, letter and brochures. Usually
in rural areas and small towns, which lack access to stores.
Products offered includes, computers, office supplies, apparel
and home goods, toys, etc.
• Direct Selling : Sales person contact customer directly in a
convenient location and demonstrates merchandize benefits and
takes the order.
 Retail Formats
3. Non Store Retail Formats

• Television home Shopping: Customer watch the television

program demonstrating the merchandize benefits and use. Place
order by telephone and receive material through post. Includes
apparel, home appliances, cosmetics, fitness equipment, etc.

• Vending Machine: It is a non store format in which

merchandize or services are stored in a machine and dispensed
to customers when they deposit cash or use credit card. Located
in a high traffic areas or workplace and contain mainly tickets,
food items, snacks or chocolates
 Retail Formats
4. Service Retailing
• Airlines
• Automobile repairing and servicing, Rental
• Banks, Credit cards, Financial services, Insurance
• Child care centres
• Restaurant
• Education
• Entertainment parks
• Cyber Cafes
• Fitness & Health care
• Home maintenance
• Hotels
• Movie Theatre
• Video Rentals
• Legal or tax consultancies