Wheel of Retailing

The Wheel of Retailing is a retail marketing process through which original low-price discounters upgrade their services and gradually increase prices. This evolution into full-line department stores creates an opportunity for new low-price discounters to enter the market, perpetuating a continuous cycle.
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Definition

Wheel of Retailing is a theory and process in retail marketing where initial low-priced discount retailers progressively enhance their range of services and facilities, resulting in increased prices. As these retailers evolve into more traditional full-line department stores, this opens up a competitive void that fosters the emergence of new low-price discounters, thereby propagating a continual cycle.

Examples

  1. Walmart: Originally started as a low-price discount store and has since evolved to offer a wide array of services, including banking, pharmacy, and online shopping, often at higher prices than the original discount model.

  2. Target: Initially positioned as a discount retailer, Target has progressively upgraded its stores, introduced exclusive product lines, and enhanced customer service, leading to higher average prices.

  3. Dollar General: Continues the cycle by targeting the low-price, low-service niche initially occupied by retailers like Walmart before their evolution.

Frequently Asked Questions

Q: What triggers the Wheel of Retailing process?

A: The process is often initiated by low-price retailers looking to increase market share by initially offering low prices. Eventually, competitive pressures and the desire for increased profitability drive them to upgrade their services and facilities.

Q: Does the Wheel of Retailing affect all retail sectors equally?

A: No, the impact varies across different sectors. It is most apparent in industries with high competition and low entry barriers, such as discount retail.

Q: Can the Wheel of Retailing process lead to the failure of original discount retailers?

A: Yes, if the original discount retailers fail to manage their transition effectively, they risk losing their price-sensitive customer base without attracting enough higher-income customers to offset the loss.

  1. Scrambled Merchandising: A retail strategy where a retailer increases the range of different types of products it sells to boost sales.

  2. Retail Life Cycle: The lifecycle stages a retail organization goes through, from introduction and growth to maturity and decline.

  3. Product Line Extension: Adding new product ranges to an existing product category to broaden the company’s offerings.

  4. Market Cannibalization: A scenario where a new product line takes away sales from the existing product lines of the same company.

Online References

  1. Investopedia on Wheel of Retailing
  2. Wikipedia - Retailing Industry
  3. Retail Theory: Wheel of Retailing explained

Suggested Books

  1. Retail Management: A Strategic Approach by Barry Berman and Joel R. Evans
  2. The New Rules of Retail: Competing in the World’s Toughest Marketplace by Robin Lewis and Michael Dart
  3. Retail Marketing Management by David Gilbert

Fundamentals of Wheel of Retailing: Retail Marketing Basics Quiz

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Thank you for exploring the fascinating dynamics of the Wheel of Retailing with our detailed content and quizzes. Keep enhancing your knowledge in retail marketing and retail industry strategies!

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