The retail industry is constantly evolving, and it can be challenging to keep up with the changes. However, the Wheel of Retailing theory explains this evolution.
This theory suggests that every retailer goes through a cycle of growth and evolution, from low-end discount stores to high-end specialty stores. In this article, we will explore how the Wheel of Retailing theory explains the evolution of retailing.
What is the Wheel of Retailing Theory?
The Wheel of Retailing theory was first introduced by Malcolm P. McNair in 1958. According to this theory, every retailer goes through a cycle of growth and evolution.
This cycle begins with a low-end discount store that offers products at lower prices than its competitors. As the store becomes more successful, it adds more services and amenities to attract customers.
These additional services increase the store’s costs, forcing it to raise prices. Over time, this store transforms into a mid-level department store that offers a broad range of products at moderate prices.
As the department store becomes more successful, it adds even more services and amenities that further increase its costs. This forces it to raise prices again, which makes it vulnerable to competition from new low-end discount stores.
This cycle continues as new low-end stores enter the market and compete with existing ones until they become mid-level department stores themselves.
Examples of the Wheel of Retailing Theory
One example of this theory in action is Walmart. Walmart started out as a low-end discount store that offered products at lower prices than its competitors. As Walmart became more successful, it added more services and amenities to attract customers, such as in-store pharmacies and auto service centers.
These additional services increased Walmart’s costs, forcing it to raise prices over time. As a result, Walmart transformed into a mid-level department store that offered a broad range of products at moderate prices.
Another example is Amazon.com. Amazon started out as an online bookstore that offered products at lower prices than its competitors. As Amazon became more successful, it added more services and amenities to attract customers, such as free shipping and a wide range of product categories.
These additional services increased Amazon’s costs, forcing it to raise prices over time. As a result, Amazon transformed into a mid-level department store that offered a broad range of products at moderate prices.
Conclusion
In conclusion, the Wheel of Retailing theory explains the evolution of retailing by suggesting that every retailer goes through a cycle of growth and evolution, from low-end discount stores to high-end specialty stores. This cycle continues as new low-end stores enter the market and compete with existing ones until they become mid-level department stores themselves.
Understanding this theory is essential for retailers who want to stay ahead in an industry that is constantly evolving. By recognizing where they are in the cycle and understanding their strengths and weaknesses, retailers can make strategic decisions that will help them succeed in the long term.
10 Related Question Answers Found
The Wheel of Retailing Theory is a concept that explains the evolution of retailing over time. It proposes that retailers start as low-end, low-price establishments and gradually evolve into higher-end, higher-priced establishments. This theory can be applied to various retail industries, including Quizlet.
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