About 80 per cent of its product portfolio consisted of branded hard goods like hardware and kitchen appliances. The retail sector comprises consumers, manufacturers, marketers, suppliers, and changing technology. 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.
Retailers have to learn to anticipate changes in environment and adapt to them. If the suppliers are at a dominating position over the company while product pricing, threatening to raise price or reduce supply, then that retail industry is said to be less attractive.
Such self-selling products were simple, branded products whose benefits and features customers could understand easily. Substitute threat is high when… Substitute threat is low when… Products of the retail company are not differentiated. Competing against full-price department stores is easier than competing against the category specialists.
The environment that a retailer competes in is sufficiently robust to squash any retail form that does not adjust. The theory suggests that new forms of retailing appear as price cutting, low cost and narrow profit margin operations.
The business model of malls and discounters was the same as that of department stores, but they prospered because they implemented the discounting model more faithfully. This creates a place for yet new entrants in the market thereby creating threat of competition, substitution, and rivalry.
Cheaper parallel products of the same category are available. Super markets and hypermarkets thrive. In the same way, developing technology and its increasing accessibility laid the foundation for online stores.
Those retailers that adapt to changes in demography, technology, consumer preferences, and legal changes are more likely to survive for long and prosper. Proprietary technology and material, government policies, and location are troublesome issues.
Discounters followed a business model of low-cost, high turnover that enabled them to achieve five inventory turns at around 20 per cent.
Later, discount stores sprung up in response to a sluggish economy and strong competition. No single theory can be universally applicable or acceptable. In the entry phase, retailers enter the market with low prices and affordable service to increase market penetration.
The application of each theory varies from market to market, depending on the level of maturity and the socio-economic conditions in that market. The result is position between the "thesis" and "antithesis". The specialized retailers grew, and they were able to make enough sales from a narrow, but deep product mix.
The movement towards soft goods is more precarious. Cyclical- where change follows a pattern and phases can have definite identifiable attributes associated with them. Intensity of Rivalry is high when… Intensity of Rivalry is low when… There is no or very less product or service differentiation.
How difficult it is to access distribution channel? The department store stopped selling hard goods, and started concentrating on soft goods like clothing, cosmetics and home furnishings—they moved upmarket. Another disruption also took place at around the same time. Thus, the new retail formats are evolved through dialectic process of blending two formats.
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.
Retailing thus evolves through a dialectic process, i. Although each one adopts a different perspective, all stress the importance of long-term strategic planning. Environmental Evolution Researchers often use the environmental theory to explain how retail business evolved from the specialized stores common in the s into department, discount, chain and mail order, and online stores that exist today.
The theories developed to explain the process of retail development revolve around the importance of competitive pressures, the investments in organizational capabilities and the creation of a sustainable competitive advantage, which requires the implementation of strategic planning by retail organizations Growth in retail is a result of understand in market signals and responding, to the opportunities that arise in a dynamic manner.
In the vulnerable phase, competition from new, more innovative businesses causes retailers to lose both market share and profitability. In retailing, the profits that a retailer earns are almost directly proportional to the margins that it earns on its products, and the number of times its turns over its inventory in a year.
The second was the mail-order catalogue. Three retailing theories explain how different retail formats emerge, mature and are then replaced by another format. But following their different marketing policies, they both have acquired prominent places in the market.
This theory, described by McNair II, helps us understand retail changes. This environment can alter the profitability of a single retail state as well as-of clusters and centers.
Retail brand is not well-known. This explains, for example, how some department stores transitioned into discount stores.Retailing strategy for Setting up Retail organization and planning:Retail Market Strategy, Financial Strategy, Site & Locations (Size and space allocation, location strategy,factors Affecting the location of Retail, Retail location Research and Techniques, Objectives of Good store Design.),Human Resource Management, Information Systems and supply.
The three theories explain the evolution of retail formats, but the decline and demise of a retail format is not inevitable. Retailers have to learn to anticipate changes in environment and adapt to them. The theories developed to explain the process of retail development revolve around the importance of competitive pressures, the investments in organisational capabilities and the creation of a sustainable competitive advantage, which requires the implementation of strategic planning by retail organisations Growth in retail is a result of understand in.