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Retail Theory & Practice Theories of Retail Change
Learning objectives  At the end of this session students should be able to: Describe a range of theories that can help to understand the retail development process Evaluate critically theories that might be of value in trying to predict future developments in retail formats
Understanding the past through theory “ There is nothing inevitable about what retail should look like in the future (Freathy, 2003) “ When predicting the future it is useful to have a clear appreciation of the past” (Freathy, 2003) “ Theory is a rather generous term for what have been described as little more than inductively derived generalisations” (McGoldrick, 2002)
Change and the retail industry   (Kent and Omar) The analysis of the external environment provides a basis for decisions about a retailer’s strategic direction both by identifying relevant issues for a particular organisation and for determining the degree of uncertainty in which it operates Uncertainty can be determined by the extent to which the environment is stable or dynamic and its level of complexity
Uncertainty and the retail industry   (Van der Heijden, 1997 in Kent and Omar) Types of uncertainty  Risks -from which historical evidence enables the organisation to assess the probability of outcomes Structural uncertainties  -unique enough not to have evidence of probabilities Unknowables  -cannot even imagine the event
Retail change theories 1 Cyclical theories The Wheel of retailing The Retail Accordion theory (also described as the Generalist-Specialist tendency)  Retail Life Cycle theory Non cyclical theories 2  Conflict Theory  3  Environmental evolution theory
Wheel of retailing 1   (Original, from Varley and Freathy)
Wheel of retailing 2  (Adapted, from Varley and Freathy)
Wheel of retail & Retail Accordian
The Retail Life Cycle
The Retail Life-Cycle
The Retail Life-Cycle
Conflict Theories Suggests that competition between rivals is the main driving force of change Implies that change is invariably led by an innovative outsider This change is forced on the existing retailers Reactions to change can be: Imitation Avoidance
Conflict Theory - Discontinuity Change is discontinuous and causes an ‘opposite’ reaction: A series of innovations drive capitalism and cause conflict which provokes a reaction  (Schumpeter 1950) The dialectical model – ‘thesis’ occurs, is challenged by ‘antithesis’ and ‘synthesis’ results. This ‘synthesis’ becomes the new ‘thesis’  (Marxist philosophy) THESIS ANTITHESIS SYNTHESIS SYNTHESIS ANTITHESIS
Conflict Theory – Conflict Response Model The basic model assumes innovation will be successful and existing retailers experience a sequence of events:  (adapted by Martenson 1981) Shock Defensive retreat Acknowledgement Adaptation & change
Environment evolution theory The law of natural selection? Businesses are continually evolving and change in response to a variety of forces Retailers that adapt the best are the ones to survive –as they adapt to changes in their environment  (PEST? and competition)
BUT! “ major retailers are now more proactive in their environmental monitoring and strategic positioning, giving them more power to forge their own destinies.” McGoldrick (2002)
Seminar Using (a) a retail change model (designated) (b) an environmental approach Consider the possible future of Boots Curry’s Digital (Dixon Group High St format) French Connection A local privately owned newspaper/ convenience store

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Week 7 retail change theories

  • 1. Retail Theory & Practice Theories of Retail Change
  • 2. Learning objectives At the end of this session students should be able to: Describe a range of theories that can help to understand the retail development process Evaluate critically theories that might be of value in trying to predict future developments in retail formats
  • 3. Understanding the past through theory “ There is nothing inevitable about what retail should look like in the future (Freathy, 2003) “ When predicting the future it is useful to have a clear appreciation of the past” (Freathy, 2003) “ Theory is a rather generous term for what have been described as little more than inductively derived generalisations” (McGoldrick, 2002)
  • 4. Change and the retail industry (Kent and Omar) The analysis of the external environment provides a basis for decisions about a retailer’s strategic direction both by identifying relevant issues for a particular organisation and for determining the degree of uncertainty in which it operates Uncertainty can be determined by the extent to which the environment is stable or dynamic and its level of complexity
  • 5. Uncertainty and the retail industry (Van der Heijden, 1997 in Kent and Omar) Types of uncertainty Risks -from which historical evidence enables the organisation to assess the probability of outcomes Structural uncertainties -unique enough not to have evidence of probabilities Unknowables -cannot even imagine the event
  • 6. Retail change theories 1 Cyclical theories The Wheel of retailing The Retail Accordion theory (also described as the Generalist-Specialist tendency) Retail Life Cycle theory Non cyclical theories 2 Conflict Theory 3 Environmental evolution theory
  • 7. Wheel of retailing 1 (Original, from Varley and Freathy)
  • 8. Wheel of retailing 2 (Adapted, from Varley and Freathy)
  • 9. Wheel of retail & Retail Accordian
  • 13. Conflict Theories Suggests that competition between rivals is the main driving force of change Implies that change is invariably led by an innovative outsider This change is forced on the existing retailers Reactions to change can be: Imitation Avoidance
  • 14. Conflict Theory - Discontinuity Change is discontinuous and causes an ‘opposite’ reaction: A series of innovations drive capitalism and cause conflict which provokes a reaction (Schumpeter 1950) The dialectical model – ‘thesis’ occurs, is challenged by ‘antithesis’ and ‘synthesis’ results. This ‘synthesis’ becomes the new ‘thesis’ (Marxist philosophy) THESIS ANTITHESIS SYNTHESIS SYNTHESIS ANTITHESIS
  • 15. Conflict Theory – Conflict Response Model The basic model assumes innovation will be successful and existing retailers experience a sequence of events: (adapted by Martenson 1981) Shock Defensive retreat Acknowledgement Adaptation & change
  • 16. Environment evolution theory The law of natural selection? Businesses are continually evolving and change in response to a variety of forces Retailers that adapt the best are the ones to survive –as they adapt to changes in their environment (PEST? and competition)
  • 17. BUT! “ major retailers are now more proactive in their environmental monitoring and strategic positioning, giving them more power to forge their own destinies.” McGoldrick (2002)
  • 18. Seminar Using (a) a retail change model (designated) (b) an environmental approach Consider the possible future of Boots Curry’s Digital (Dixon Group High St format) French Connection A local privately owned newspaper/ convenience store

Editor's Notes

  1. Note: Retail Change & Society – success or failure of different forms of retailing varies by country & society e.g Hypermarkets began in Belgium 1961, spread through Europe late 60’s early 70’s (single storey 2500m ² food & non-food) Warehouse Clubs – started in US 1976 – 3,500 – 4,000 items (food, elec, car accs) costs kept low, GM 10%, membership fee = 80% trading profit. Costco to UK 1993
  2. Theories have been developed to describe & explain the expansion & contraction of different forms of retailing 4 th group grounded in maths – chaos & catastrophe theory – progressive, relatively continuous, changes can suddenly have a violently discontinuous phase with rapid & severe change
  3. The idea of all the cyclical theories is that CHANGE FOLLOWS A SEQUENCE OF STAGES. In some cases the sequence repeats itself with each ‘cycle’ of change. THE WHEEL model (Hollander 1960) uses the hypothesis that retail change results from the innovative behaviour of individuals. Conforming examples are UK supermarkets, limited line discount stores, department stores, mail order houses. BUT small specialists and fashion boutiques don’t fit the model Loss of energy and entrepreneurial spirit tend to bring about the next ‘turn of the wheel’ E.g.’s of drift Retailer personalitites Trade up re growing customer affluence Preference for non-price competition (add services, differentiate) Belief that higher gross margins = higher net profits