Explain changes in retailing with the wheel of retailing and the retail life-cycle concepts.
The Correct Answer and Explanation is:
Correct Answer:
The Wheel of Retailing and the Retail Life Cycle are two key concepts that explain changes in the retailing industry over time. Both models describe how retail institutions evolve, adapt, and transform due to competitive pressures and changing consumer demands.
Explanation
The Wheel of Retailing is a theory that suggests new retail formats typically enter the market as low-cost, low-price, and low-status operations. Over time, as these retailers become successful, they add more services, upgrade their facilities, and increase their prices to enhance their image and profitability. Eventually, they become more expensive and less competitive on price, opening the door for new, lower-cost entrants to emerge and repeat the cycle.
For example, discount retailers like Walmart initially entered the market with low prices and minimal service. Over the years, Walmart introduced self-checkout kiosks, expanded product lines, and improved store environments—moving toward a more mature and service-oriented phase. Meanwhile, new discounters like Dollar General emerged, restarting the cycle at the low end.
The Retail Life Cycle, on the other hand, presents retailing as going through four distinct stages: Introduction, Growth, Maturity, and Decline. In the Introduction stage, a new retail format appears and gains attention. In the Growth stage, it expands rapidly and attracts more customers. As it reaches Maturity, growth slows, competition intensifies, and profit margins narrow. In the Decline stage, the format loses relevance, possibly due to shifts in consumer preferences or technological disruption, leading to store closures or reinvention.
An example is department stores, which enjoyed strong growth during the 20th century (growth and maturity) but are now in decline due to e-commerce and changing shopping habits.
Both models highlight that retailing is dynamic, not static. Retailers must continuously innovate and adapt to survive changing market conditions, consumer behaviors, and competitive forces.
