Explain The Cyclical Theory of Retail


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Retail

 

Cyclical theory fundamentally describes the different phases in a company. This theory states that change follows a pattern and all phases have specific attributes linked with them. There are three primary components in this theory: wheel of retailing, retail life cycle and retail accordion. Wheel of retailing described by McNair II, helps us understand retail changes. It refers to a company entering the market with low prices and reasonable service in order to challenge competitors. Retail life cycle addresses the four stages that a company goes through when entering the buyer’s market. This theory proposes that retail innovators often first appear as low-price operators with a low-cost structure and low profit-margin requirements, offering some real advantages, such as specific merchandise, which facilitates them to take customers away from more established competitors. As they grow, they develop their businesses, offering a greater range or acquiring more expensive facilities, but this can mean that they lose the focus that was so important when they entered the market. Such ‘trading up’ occurs as the retailer becomes established in his own right.

Retail Accordion theory is evolved by Hollander (1966) which explained retail evolution as a cyclical trend in terms of the number of merchandise categories such as product assortment. In this theory, at the beginning of operation, a retail institution carries a broad collection of merchandise such as various types of products or product classifications but does not carry a deep assortment such as various styles within one product classification. The retail accordion aspect of cyclical theory suggests that some businesses go from outlets that offer an array of products to establishments providing a narrow selection of goods and services. These establishments later return to a generalized outlet store. Retail accordion is also recognized as general-specific general theory. At initial stage, the retail institution is a general store. With time, the retail institution becomes specialized by carrying a limited line of merchandise with a deep assortment. Stern and El-Ansary (1977) suggested a graphic model of Retail Accordion theory with breadth of merchandise line assortment changing across time.

 

 

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