The forms of retail ownership and the strategic management of the retail mix.

Answer

Retail management has been used to refer to a manner in which investors in the retail sector conduct business (Berman & Evans, 2010). It is the stage at which goods and services are sold to the final consumer. Various job titles that can be found in retail management include Retail Area Manager, Retail Store Manager or Retail Assistant Store manager, among others. Management of the retail sector can take different forms based on the business model in place, either local or central (Berman & Evans, 2010). This depends on the approach that is used to deliver goods to the end user.

Historically, numerous researchers have labored to look deeply into retail evolution, being guided by the assumption that a distinct pattern would occur in virtually all retail evolution, which would further provide an idea into both the past and future occurrences in retail management (Bennett, 1966). There are three theories that tend to explain the evolution of retailing. These include Cyclical theories, Environmental theories and Conflict theory. The first one refers to those changes that begin with a single state and later revisit that state in the future, while the latter alludes to those changes reminiscent of biological evolution. The basic footstool of these theories assumes that a force, say environment or conflict, will cause evolution in the retail institution (Berman & Evans, 2010). This author of this paper champions the idea that in the retail context, doing business and living life converge. This statement is analyzed by critically discussing the theories of retail evolution, the various forms of retail ownership as well as the strategic management of the retail mix.

Theories of Retail Evolution

As aforementioned, there are essentially three theories that have been put in place to explain the evolution of retailing, namely the Cyclical theories (Wheel of Retailing and Accordion Theory), Environmental theory and conflict theory (Bennett, 1966; Hollander, 1966).

Cyclical Theories

The Cyclical theories hold a common concept that all institutions of retailing undergo a rhythmical pattern of evolution for example, low to high to low (Hollander, 1966). This is made possible by the retailers adjusting some of their retail characteristics e.g. assortment, price or any other component of the retail mix. There are two most commonly known subset of theories under the Cyclical theory main category. These are the Wheel of Retailing theory and the Accordion theory. The former represents retail evolution achieved through the aspect of price in the retail mix, while the latter deals embodies the product aspect or assortment (Bennett, 1966, p.38).

The Wheel of Retailing theory was proposed by McNair in 1958, which states that the process of evolution in the retail market constitutes of three distinct phases: the entry phase, the second being the trade-up phase and the last the vulnerable phase (Hollander, 1960). These phases are a continuum of each other. At every stage, product prices differ, as in the entry stage low pricing strategy is used in market penetration, but later increased as retailers appeal to a higher social class of consumers. However, this trend is not constant, since when the retailers get into the vulnerable phase, they increase their operational practices as well as operation costs. As product prices increase, profit margin becomes eroded and the retail institution faces competition (Hollander, 1960). This probes the emergence of new innovative institutions, who manipulate the retail mix to lure customers to them.

On the other hand, the Retail Accordion theory proposed by Hollander in 1966 explained the evolutionary process in relation to the number of categories of merchandise, also referred to as product assortment (Hollander, 1966). This theory holds that at the beginning of retail operation, an institution operates on a wide range of product assortments, but does not venture deeply into them i.e. there are no different styles within a single product category. It is actually referred to as a general store at this stage. Specialization becomes commonplace with time, and the depth of each inventory expands. Just like in the Wheel of Retailing theory, every institution at some point in time goes back to the tradition form of operation, involving broad categories of product assortment, with minimal inventories. As proposed in 1977 by Stern and El-Ansary, a graphic model of the Retail Accordion theory illustrates how general stores, shopping centers and department stores have always alternated with specialty stores as examples of narrow merchandise institutions (Berman & Evans, 2010).

Conflict Theory

The Conflict theory has been proposed by many researchers to explain the evolution of retail markets (Greyser, 1976; Hollander, 1966). There are subcategories of theories under this, one of which is Dialectic theory, proposed by Gist in 1968 (Greyser, 1976). This theory is based mainly on the evolutionary theory of Karl Marx. This theory states that for change to progress, everything existing must decline to give way for the development of new ones, positing that nothing is sacred or fixed and must thus share in the process of transformation. Dialectics thus implies that each development phase repeats former phases, though on a different plane (Greyser, 1976). Consequently, each step becomes a negation a previous step, and the proceeding step a negation of that negation. This is the double process of negation, which, instead of restoring the original form, creates a third one. In the case of retail institutions, Gist proposed that an incumbent retail institution gets challenged by a competitor, since it possesses competitive advantage over it (Hollander, 1960). In a bid to beat its competitor, the first retail institution adopts the attributes of the competitor, leading to a creation of a new institution.

Environmental Theory

Previous researchers have proposed the environmental theory which holds that the main agent of change in the retail institutions is the environment surrounding them (Hollander, 1960). To survive, these institutions have to adapt to the environment, and the proficiency of this adaptation would determine which institution becomes the market leader. This idea was originally derived from Charles Darwin’s theory of Natural selection (Greyser, 1976).

Forms of Retail Ownership

Types of retail ownership vary depending on various retail attributes such as product assortment, operation scale, and retail mix. There are five basic forms of ownership, including Independent Retailer, Franchise, Existing Retail Business, Dealership and Network Marketing (Berman & Evans, 2010).

An independent Retailer builds up his business from scratch, up to where he desires it to be. All activities including business planning to the entry stage lie on the shoulders of the owner. Consultants and staff may be hired to help in the business operation. This kind of retailing has endless opportunities (Berman & Evans, 2007).

An Existing Retail Business, as opposed to independent retailing, already has a foundation. This occurs when one buys or inherits an existing business, consequently assuming responsibility of someone else’s hard work.

Franchising involves buying the right to use a name, concept, product or business plan of someone (Berman & Evans, 2010). This strategy has high initial costs and less flexibility, though the main company provides its franchises with a good network, training and an established customer base.

Dealership is a model where retailers are acquainted with the dealership of a mother company’s product, thus acquiring the right to sell its products, while dealing in other products as well. There are usually no fees paid to obtain the license (Berman & Evans, 2007).

Network marketing, also known as Multi-level marketing, is a model where the sale of products lies on the number of people available in the network. It thus involves both the sale of products and massive recruitment of retailers (Berman & Evans, 2007).

Strategic Management of the Retail Mix

Strategic management is defined as both the art and science of management that requires analytical and creative skills, to create an overall framework of action and help the manager coin the desired image and position of the institution in the market (Berman & Evans, 2010). Retail strategy thus refers to the plan used to get more competitive than others through an innovative variation of the retail mix to penetrate and dominate the market (Yu-Jia, 2012, p.157). A retail marketing mix refers to those variables that can be combined in a calculated manner by a retailer to meet a given marketing strategy (Gooner, Morgan, & Perreault, 2011). The elements included here are product, price, place, promotion, people, process and physical evidence (also known as the 6Ps) (Berman & Evans, 2010). In order to effectively compute a strategy of managing the retail mix, one would have come up with a mission statement, establish objectives, carry out a situation analysis, chose target markets, establish positioning strategy, implement the strategy and finally evaluate results (Berman & Evans, 2007). An effective manipulation of the retail mix provides an effective strategy through which an institution can use to penetrate the market, and achieve a superior brand positioning.

Conclusion

From the discussions posed herein, it suffices to conclude that operation of a retail business is as involving as living a personal life. Since the owner is in most cases an individual, the success of a retail institution lies squarely on him. This has been evidenced in the various types of retail ownership as well as the intuitiveness needed to implement an effective strategic retail mix management.