Emergence of entrepreneurial retail forms.
Anitsal, Ismet ; Anitsal, M. Meral
FORMS OF RETAIL INSTITUTIONS
One objective of marketing is delivering value to customers by
providing goods and services when, where and how they want them to be
delivered. Retailing may be the most important facilitator of the
exchange as it provides buying and selling parties a medium for coming
together physically or virtually to complete the exchange. Throughout
retailing history, entrepreneurs have introduced ideas to enhance this
function. Thanks to visionary entrepreneurs, multiple forms of retailing
institutions emerged throughout the last millennium to deliver value to
their customers in parallel to customers' changing life styles.
Some retail forms diminished when they no longer delivered value; others
were redefined to adjust to the changing environment. Researchers saw
that forms of retail institutions had changed from back/wagon peddlers
in pre-industrial revolution to large-scale retailers of the
"modern period" (Savitt 1989) and interactive electronic
catalogs (May, 1989), and finally to technology-based self-service
(TBSS) options (e.g., self check-out and self check-in systems). Diverse
forms of store and nonstore retailing now exist. Moreover, new forms or
combinations are continually emerging (Kotler 2000). Table 1 classifies
retail institutions and provides examples.
Entrepreneurship is an important element of retailing because it is
essential for economic growth, improves competitiveness, creates jobs,
stimulates economy, creates and redistributes new wealth (Spencer,
Kirchhoff and White 2008). Although the literature does not provide a
clear definition of entrepreneurship, Schumpeter mentioned (1950) the
role of entrepreneur in creative destruction. Common entrepreneurial
activities identified among researchers include innovating, recognizing
and creating opportunities, developing new organizations, utilizing
resources in new ways, and creating wealth. Entrepreneurs are also
recognized for their ability to work under risk and uncertainty
(Spencer, Kirchhoff and White 2008). Table 1 reveals that stores for
each retail form have involved successful and unusual entrepreneurs,
such as Sam Walton of Wal-Mart, Jeff Bezos of Amazon.com, or Mary Kay.
Although small business and entrepreneurial operations are the core
of retailing, entrepreneurship is rarely mentioned in retailing
literature. The purpose of this paper is to alert entrepreneurs and
academic researchers to the causes of new forms of emerging retail
institutions within the existing retail change theories. Ireland and Van
Auken (1987) complained that most studies in the entrepreneurship
research were descriptive in nature and focused on generic concerns and
groups and operational issues. They encouraged research on how new
businesses can be more successful. Understanding retail institutions may
provide the much needed help.
RETAIL INSTITUTION CHANGE
Every retail institution's major supply chain challenge is to
have the right product in the right place at the right time for the
right price (Fisher, Raman, McClelland 2000). Accomplishing this
objective helps in achieving ultimate goals, such as profit
maximization, stock price maximization, principal's welfare
maximization, and internal or external stakeholders' satisfaction
(Anderson 1982). Therefore, it is very important to attempt to explain,
understand, predict, and control the emergence of new forms of retail
institutions in attaining any ultimate goal.
A number of theories as summarized in Table 2 have been developed
to explain retail institution change. Some focus on cyclical patterns,
while others emphasize evolutionary relationships. Still some others
identify inter-organizational conflicts and a variety of environmental
factors causing such changes as technological innovation and consumer
trends. Finally, some efforts have been made to combine different
approaches into more comprehensive models.
CYCLICAL THEORIES
Wheel of Retailing
McNair (1931) suggests three distinct phases of changes in retail
institution forms. In the first phase of "entry," the retailer
uses its low overhead to attract customers with low prices. Later in the
second phase of "trading up," the retailer enhances
merchandise quality with some price increases. Finally in the third
phase, the retailer focuses on services of all kinds. The natural
outcome of this final stage is the increased cost of doing business. The
more retailers reach the third phase of "vulnerability," the
more likely an innovative retailer with low prices based on low overhead
emerges. Decreased rate of return on capital accelerates the discovery
of new forms in retailing.
The wheel of retailing concept has a "cost focus." It
proposes that new forms of retailing start as low-cost operators,
eventually trade up, and mature into high-cost operators (Davidson,
Bates and Bass 1976). However, Hunt (1991) made an effort to combine the
wheel of retailing, and the theory of competition for differential
advantage. The basis for differential advantage may include a variety of
innovations besides low prices. Fast-food restaurants, for example,
provide speedy service, while vending machines as early models of
technology-based self-service options offer location convenience.
Some historical developments (Table 2) support the cost basis of
the wheel of retailing (Brown 1988; Levy and Weitz 1998a). Department
stores, for example, started the first phase with Bon Marche in 1852
(Pesdarmadjian 1954), traded up after World War II, and finally reached
the vulnerability phase today. General merchandise stores such Wal-Mart
and Kmart are probably at the beginning of the trading-up phase.
Warehouse clubs such as Sam's Club are in the entry phase (Levy and
Weitz 1998a). However, the wheel of retailing did not hold for some
other forms of retail institutions such as upscale fashion specialty
stores (Levy and Weitz 1998a), boutiques (Brown 1987), convenience
stores, automatic vending machines, super-specialists (Brown 1987, 1988
and 1990), home improvement centers (Davidson, Bates and Bass 1976),
up-price retailers in developing countries and planned shopping centers
in the United States (Hollander 1960).
The wheel of retailing is an educational tool with a strong
pedagogic value, but suffers from several problems. First, it lacks
universality due to the disconfirming examples such as Marks and Spencer
as a variety chain store (Davies 1999). Second, it focuses on a single
dimension of cost, quality and price relationship, and ignores other
dimensions of retailing such as merchandise assortment and store size.
Third, it lacks empirical support (Brown 1988 and 1990); and there are
some difficulties in getting historical data on retail expenses or
percentages for analysis (Hollander 1960). Fourth, wheel hypothesis
offers only limited explanatory or predictive power (Levy, Grewal,
Peterson and Connolly 2005). Finally, there is not much consensus on the
causes of wheel pattern (Hollander 1960; Dreesmann 1968; Brown 1988).
Goldman (1975) suggests three types of trading up for department stores:
(1) routine (increasing the number of services), (2) non-routine (adding
new services), and (3) innovative (offering better service-price
combinations). However, this suggestion may not hold for the other types
of retail institutions. Some of the other forces include strong demand
for a wide variety of quality goods and services due to growing consumer
affluence; search for differential advantage due to
"intra-institutional non-price competition" (Dreesman 1968;
Brown 1988); over-saturated market due to imperfect competition;
managerial evolution and scrambled merchandising, and demographic
trends. (Hollander 1960; Davidson, Bates and Bass 1976). Finally, the
wheel of retailing does not take into account traditional
retailers' reactions against innovative retailers (Brown 1988).
Retail Accordion
Hollander (1966) demonstrates the institutional change in retailing
with an accordion pattern based on "rhythmic oscillations. "
"Instead of comparing retailing to an accordion, we might picture
it as an orchestra or band of accordion players.... Moreover, at any
time, some players (including those with compressed and those with
extended accordions) are retiring from the orchestra, while still others
(mainly with compressed instruments) are joining the band. "
Consequently, the accordion patterns work as a cycle of merchandise
assortment expansion (general store) and merchandise assortment
contraction (specialty store) (Lowry, 1997).
Hollander (1966) notes that three phenomena influence
specialization: (1) unsuccessful merchandise mixture attempts, (2)
established retailers' eliminating some of their traditional lines,
(3) increased market share of new specialists. He further suggests that
causes leading to contraction in merchandise assortment include
non-economic individual preferences, legal restraints, limited
resources, cost-growth acceleration over revenues, and consumer
preferences in the market.
Confirming cases for the retail pattern include shopping centers,
supermarkets, and drug stores (Brown 1988). Specifically, the expanding
accordion pattern includes small general stores in rural areas, while
the contracting accordion pattern involves specialty stores such as food
and drug stores (Levy, Grewal, Peterson and Connolly 2005). However,
empirically testing the universality and existence of the retail
accordion pattern is difficult due to the lack of historical data on
merchandise assortments (Hollander 1966).
Institutional Life Cycle
The institutional life cycle argues that retail institutions evolve
through stages similar to the phases of a product's life cycle.
These stages include birth (or innovation, introduction), growth (or
accelerated development), maturity and decline (Davidson, Bates and Bass
1976; Brown 1988). Davidson, Bates and Bass (1976) further argue that
the time period between a retail format's innovation and its
maturity is shortening. They calculate this period for downtown
department stores, variety stores, supermarkets, and discount department
stores as 80, 45, 35, and 20 years, respectively.
Institutional life cycle probably presents similar vulnerabilities
of the product life cycle concept. It is highly descriptive and lacks
comprehensive explanations about the emergence of retail institutions
(Levy, Grewal, Peterson and Connolly 2005). Day (1981) notes the
difficulty of predicting the time of the change from one stage to
another and of prescribing the relevant strategies in specific stages.
Dhalla and Yuspeh (1976) further note that some products gain
"second lives" and some brands die in the birth stage. This
life cycle concept eventually lacks empirical support.
Steidmann (1993) uses a different retail life cycle concept to
refer to waves in retailing. The first cycle with its strong
"purchasing orientation" lasted until The Great Depression and
heavily focused on merchandise. The second wave prevailed between post
World War II and the 1987 stock market crash, and heavily depended on
its "expansion orientation." The third wave is a reflection of
"informationalization," representing "a shift in
management focus from market expansion to information intensification,
from geography to cyberspace, from return on investment to return on
customers, from sales growth to profit growth, from increasing
individual transactions to establishing long-term customer
relationships" (Steidmann 1993). However, these waves do not
present an apparent cause and effect relationship for change in retail
institutions.
ENVIRONMENTAL THEORIES
Adjustment theory (or adaptive behavior) proposes that specific
forms of retail institutions emerge in response to changing
environmental circumstances (Lowry 1997). Blizzard (1976), as mentioned
by Brown (1987; 1988), suggests that these circumstances include
economic, political, and legal systems; demographic conditions; social
structure; value system; technology; and competition.
The natural selection concept of retailing is based on comparisons
with Charles Darwin's theory of "survival of the fittest"
and other theories of biological evolution (Dreesmann 1968; Brown 1988;
Lowry 1997). Institutional forms of retailing that can perfectly adapt
to changing environmental circumstances survive and prosper in the long
run (Brown 1988). Although the biological evolution analogy is useful in
establishing parallelism with natural selection, possible limitations
should be noted (Dreesmann 1968).
Proposed by Samli (1998), "survival of the fattest" is a
variation of environmental theories. He suggests that "the fat has
a greater probability to survive than lean, regardless of the efficiency
levels" (Samli 1998, p. 59), and provides Sears as an example of
the survival of the fattest.
According to Child, Chung and Davies, "Environment determines
business performance" ((2003, p. 243). Examples include the
emergence of department stores and suburban shopping centers (Brown
1987). Other examples of natural selection include "the relative
decline of department stores" later on and "the disappearance
of "ma and pa" stores" (Samli 1998. p. 56). However,
environmental theories interpret retail institutional change as an
automatic reaction to changing environmental circumstances and pay no
attention to humans as decision makers (Brown 1988). Child, Chung and
Davies (2003) investigated the cross-border performance of Hong Kong
firms in mainland China, and their findings indicate that "natural
selection and strategic choice ('focused on managerial
action') have a role to play, even when controlling for each
other."
Review of Environmental Factors
Although a detailed discussion of all environmental factors is
beyond this paper's scope, selected environmental factors include
economic, political, legislative, social, competitive, technology, and
labor-market issues. More specifically, high inflation, reduced consumer
expenditure, service-worker shortages, enhanced personal computers, the
Internet, regulations on commercial zoning as well as store hours and
sizes all seem to affect the emergence of new forms of retail
institutions.
Changes in retail customers, for example, are crucial. Today's
retail customers have more diverse characteristics in terms of their
needs, wants and expectations than ever before. Although generational
cohorts generally display similar characteristics within the same
generation, it is very important to understand the current trends of
retail customer change in terms of demographics and values.
Ethnic communities such as African-Americans, Hispanic-Americans
and Asian-Americans are expected to generate roughly 80 percent of the
US population growth for the next 20 years. Income distribution is
becoming more polarized. Consequently, the gap between highest-income
groups and middle-and lower-income groups polarizes retail institutions
in serving upscale customers and mass-middle and lower-income customers.
With many women no longer at home raising a family, their role in the
family and workplace has changed considerably. Shopping developed an
opportunity for entertainment and social interaction in the past, but
now it takes time away from quite limited leisure time. Total annual
shopping time for an average customer dropped from 142 hours in 1989 to
40 hours in 1993 (Levy and Weitz 1998c).
Customer values are also changing. Customers are now more
sophisticated; knowledgeable; and value-conscious, wanting more for less
each and every day (Dunne and Kahn 1997; Oesterreicher 1993). They are
not completely product takers anymore, but have started making products
on the choice boards of the Internet. Consequently, ownership of
customer relationships is becoming important (Slywotzky 2000). Cost
pressure on retail channels increases global sourcing, distribution
channel partnerships, and private labels to better control the total
costs. This pressure, on the other hand, leads to new retail formats
(Dunne and Kahn 1997). Value-conscious customers and cost-conscious
retailers summarize the essence of the fact (Oesterreicher 1993).
Another trend seems to be cocooning, "a behavioral pattern of
consumers who increasingly turn to the nice, safe, familiar environment
of their homes to spend their precious leisure time." Other trends
include social and environmental consciousness as well as dress-down
fashion (Levy and Weitz 1998c).
Technological change and the information revolution also affect
retail innovation. Noting the advances in information technology (IT)
from the first written language in 3500 B.C. to e-commerce, Kampas
(2000) concludes that the progress rate is accelerating. He emphasizes
that the mega waves of the information revolution have induced new
business opportunities as well as discontinuities. Consequently,
numerous forms of e-tailers (on-line retailers) bubbled up in late
1990s.
Important technical innovations that are useful to retail
institutions include artificial intelligence, voice recognition, virtual
reality, video conferencing, the Internet (Burke 1999; Griffith and
Krampf 1998), TBSS (technology-based self-service) options (Anitsal,
Moon and Anitsal 2002a), and mobile communication. In retailing history,
in-store innovations have included shopping carts,
universal-product-code scanners, electronic shelf labels, and
self-scanning systems (Burke, 1999) and RFID (radio frequency
identification). These innovations have potential effects on retail
institutions and customers in stores (Anitsal, Moon and Anitsal 2002b).
However, other technologies have directly enduring effects on consumer
needs and wants. Cristensen and Tedlow (2000) identify railroads,
automobiles and personal computers with Internet connection as examples
of technologies influencing the importance of location, mobility of
customers, and market boundaries, respectively.
Such technological developments used in retail environments open up
new avenues for entrepreneurs or entrepreneurial retail managers.
Indeed, recent research indicates that these managers were better able
to develop knowledge resources related to customers, competitors,
suppliers, and regulatory agencies than regular managers (Siemens 2006).
Entrepreneurs' ability to convert these knowledge resources to
market responsiveness will bring success (Griffith, Noble and Chen
2006).
CONFLICT THEORIES
Dialectical theory proposes that new forms of retail institutions
emerge due to "inter-institutional conflict." When an
innovative retailer (antithesis) challenges an established retailer
(thesis), a new form of retailer (synthesis) results. The synthesis
later becomes a thesis, triggering a new turn for assimilation (Brown
1988; Lowry 1997). For example, when a thesis and antithesis are taken
as department stores and discount stores respectively, the synthesis may
emerge as discount department stores (Samli 1998). New retail forms have
characteristics of competing retailers based on their "best
practices," "much like children result from the combination of
their parents' genes" (Levy, Grewal, Peterson and Connolly
2005, p. 84).
COMBINATIONS OF THEORIES
Various combinations of institutional retail change theories have
emerged to fill the gaps of the individual theories that are cyclical,
environmental or conflictual (Brown 1988):
Combination of Cycle and Environment
This combination suggests that the retail forms in certain stages
of a cycle do not stay the same due to changing environmental
circumstances. Therefore, modern convenience stores, for example, are
more refined than their predecessors, traditional corner shops.
Combination of Cycle and Conflict
This combination suggests that the established retailer reacts
against the innovative retailer by adopting some of the innovative
methods. The innovative retailer, in response to this move, begins
trading up by differentiating and eventually becomes vulnerable to
emerging new forms of retail institutions.
Combination of Environment and Conflict
This combination suggests that intra- and inter-institutional
competition due to environmental factors leads to new forms with more
sophisticated offerings.
Combination of Cycle, Environment and Conflict
Brown (1988) indicates the existence of two different theories for
this combination: (1) theory of spiral movement and (2) diversity theory
of market processes. Theory of spiral movement posits that existing
retail institutions trade up due to competitive pressures, and new forms
fill in the opportunities created by the naturally existing "vacuum
effect." The diversity theory of market processes identifies two
cycles in the history of retailing. Long cycles "begin in the
classical Schumpeterian manner" (Brown 1988) due to, for example,
disruptive innovations, or revolutions. Short cycles are characterized
by sustaining innovations, or evolutions based on incremental
differential advantages (Christensen and Tedlow 2000).
EMERGENCE OF ENTREPRENEURIAL FORMS OF RETAIL INSTITUTIONS
Davidson and Doody (1963) describe retail innovation as an
innovation, while Cristensen and Tedlow (2000) differentiate between
disruptive innovations (revolution) and sustaining innovations
(evolution). The form of retail institution in our case becomes an
innovation itself.
Pasdermadjian (1954) indicated that Bon Marche with its new trading
principles was a revolutionary innovation in 1852. The innovative
principles of Bon Marche, the first department store, included small
mark-up with rapid stock turn; merchandise with fixed and marked prices;
free entrance; and policies for returns, exchange and refunds. Bates
(1989) mentions other retail innovations, such as self-service,
expansion of self-service with an emphasis on customer service, and
warehouses.
According to Hopping, "The history of retail is also history
of the role of technology in society" (2000, p. 63). Alternative
payment forms in retailing have included local and international
currencies; checks; and credit, debit, smart, gift and store cards.
Advances in computers, the Internet, and mobile communication brought
some new forms of retail transactions, such as PayPal and a variety of
online auctions. Supply chains changed over time with advances in modes
of transportations, packaging, refrigerating, and fulfillment. With new
techniques and technologies, retailers started using just-in-time
inventory, quick response, bar codes, radio frequency identifications,
electronic data interchanges, and hand-held scanners, among others.
Technology changed consumers too. People spent 5 hours cooking a family
dinner in 1900 compared to 2 hours in 1950 and only several minutes
today. They now use cell phones scan a bar code for competitive pricing
information and the Internet to shop online. They have become active
participants in retail service production and delivery with advanced
technology-based self-service (TBSS) options based on self-service
technologies (Anitsal and Schumann 2007). Starting in the mid 1800s,
"Fish Street, Poultry Street, Tannery Lane, and Shoemaker Row"
have been turned into "general stores, department stores, the
catalog, and specialty stores" (Hopping 2000, p. 65). TBSS options
now include vending machines, electronic kiosks for boarding and
check-in at airports and for checkout in hotels, electronic blood
pressure monitors in grocery stores, automated car rental machines,
touch-free car washers, and automated telephone and Internet services
(Anitsal and Anitsal 2006).
Some consequences of entrepreneurial forms of retailing are
revolutionary (disruptive, pioneering, breakthrough), while others are
evolutionary (sustaining, incremental, spin-off) retail form innovations
(Table 3) (Bates, 1989; Cristensen and Tedlow 2000).
Schumpeter (1950) emphasizes the importance of revolutionary retail
form innovations in terms of "creative destruction," an
essential fact of capitalism stressing that revolutions destroy old
structures to create new ones. Two points are important here. First,
change is a process consisting of a variety of elements; and true
characteristics of these elements, as well as the process's
performance, take considerable time to reveal themselves. Second, the
details of the process can be clarified, but do not take us to a
conclusive point. The relevant problem here is not "how capitalism
administers existing structures," but "how it creates and
destroys them." At this point, competition comes into the picture.
The competition from a revolutionary new type of retail institution not
only affects the performance outcomes of existing retail institutions,
but also shakes their foundations and eventually destroys them.
Consequently, gaining and keeping a sustainable competitive advantage as
well as converting it into superior performance outcomes are crucial.
Several exploratory studies have tried to integrate existing models
of retail institutional change such as the "multi-polarization
model" by Brown (1987) and to introduce new concepts such as
"big middle" by Levy, Grewal, Peterson and Connolly (2005),
besides those mentioned in the section about combinations of theories.
Kirby (1976), as cited in Brown (1987), notes the delicate relationship
between fewer larger retailers and small shops/stores. Brown (1987)
attempted to integrate this polarization principle with the retail
accordion and the wheel of retailing to offer the
"multi-polarization model." His new model argues that
"developments at one end of the retail spectrum induce activity at
another" (p. 160). The multi-polarization model specifically states
that certain dimensions (such as broad/narrow inventory, small/big
establishment and service/price orientation) are interdependent. Levy,
Grewal, Peterson and Connolly (2005) introduced the "big
middle" concept as "the market space in which the largest
retailers compete in the long run, because there is where the largest
number of potential customers reside" (p. 85). Origination points
are either innovation or low-pricing. Regardless of their originations,
retailers transition into the middle of the more competitive marketplace
as they become big. US retail history consists of three periods for the
"big middle" (Brown, Dant, Ingene and Kaufmann 2005).
Woolworth's and Montgomery Ward were in the variety store period.
Sears Roebuck and JCPenney were the major retailers in the
national-chain department store period. K-Mart, Wal-Mart and Target
represent the big middle in the modern discounter period. Other than the
traditional discounters, the big middle retailers in the 1990s included
Home Depot, Best Buy, The Gap and The Limited. As corporate
entrepreneurs, the "big middle" retailers with their deep
pockets can leverage retail technologies (e.g., RFID, computerized
shopping carts, etc.) better than smaller shops due to huge upfront
investment (Sethuraman and Parasuraman 2005).
The "big middle" concept can be discouraging for
entrepreneurs who do not have enough funds to use retail technologies
upfront. However, alternatives exist for collaboration with fellow
entrepreneurs to overcome such difficulties. Research indicates
entrepreneurs that formed contractually integrated networks enjoyed
using formal information sources (Lindblom 2008). The effectiveness of
contractually integrated retail entrepreneurs came from the individual
retailer's ability to use formal information sources to increase
sales.
CRITICAL ACCOMPLISHMENTS, GAPS AND FUTURE RESEARCH AVENUES
The comprehensive literature review--a combination of integrative
and theoretical reviews--on the retail institutional change reveals
numerous critical contributions to the retailing discipline within the
marketing field. One of the earliest studies started with McNair's
"The Wheel of Retailing" (1931), which later became one of the
most popular topics in marketing. Further studies tried to modify this
theory and eventually produced a variety of retail change approaches
that have shortcomings for primarily two reasons: (1) relatively
different evaluation criteria for what is contribution to knowledge in
terms of today's validity perspectives, and (2) difficulties on
empirical testing due to the long time-horizon requirement and specific
operationalizations with proper data. However, all these previous
studies form an infrastructure for future studies in terms of useful
concepts.
The literature on retail institutional change also reveals several
gaps in much of the existing knowledge. First, "retail
institution" is imprecisely specified. Second, the current models,
conceptualizations, paradigms and generalizations do not meet the
criteria for "theory" (Brown 1988). Much of the literature has
been descriptive (Brown, 1990). Third, only covering the
"artifacts" via processes, theories of retail change do not
grasp the "substance" of retail history (Savitt 1989). Fourth,
most of the change theories were developed with the American retail
environment in mind; however, the retail patterns especially in
developing countries are sometimes different (Hollander 1960; Brown
1988). Fifth, theories on changes in retail institutions are not
mutually exclusive (Samli 1998). To understand the complexities in the
retail environment towards emerging new retail forms, those existing
theories should be combined and extended for comprehensive frameworks
with better predictive powers.
Nevertheless, existing literature's descriptive research focus
creates an opportunity for more analytical studies (Brown 1990). No
single theory can completely explain the emergence of new forms of
retail institutions. However, a comprehensive focus on combinations of
cyclical, environmental and conflict theories may develop further
insights because institutional change (Brown 1988) is "the outcome
of environmental influences and a cycle-like sequence of inter-and
intra-institutional conflict."
Research studies seem to reflect the essence of retailing when they
focus on the change of multiple types of retail institutions in the long
term (Savitt 1989). However, accomplishing this will be the result of
multiple studies with programmatic research.
Focusing on individual retail organizations will help sidestep the
problems of institutional definition and the lack of historical data
(Brown 1988). Eventually, this focus will create an opportunity for an
increased number of empirical studies with enhanced rigor and validity.
Comparative studies in the highly internationalizing retail world
are encouraged to compare and contrast retail institution change in both
well-developed and developing countries.
Brown (1988) states that consumer changes cause a change in retail
institutions. However, this important issue is for future research
(Dunne and Kahn 1997) to determine whether changes in retailing also
cause changes in consumers.
Studies with a competitive focus will take top priority because
emergence of new retail institution forms may bring sustainable
competitive advantages, while resistance to change may destruct existing
retail forms. Accordingly, studies understanding, explaining, predicting
and controlling this phenomenon help set the overall macro strategy for
the retailer. Researchers in entrepreneurship areas also call for
further theory development (Bruton, Ahlstrom, Li 2010; Spencer,
Kirchhoff and White 2008). A review of retail theories may give
researchers an opportunity to evaluate constraints of institutional
theory upon which entrepreneurship research heavily relies.
The integrated literature review of institutional retail change as
well as competitive advantage leads to the following research questions:
(1) Is a new form of retail institution, i.e. e-tailer (online or
virtual retailer) a source of competitive advantage? (2) What are the
strategic choices for traditional retailers as emerging e-tailers case
to sustain their competitive advantages in the long run? (3) What are
the performance outcomes of possible strategic entrepreneurial choices?
AUTHORS' NOTE
The authors would like to thank Dr. John Tom Mentzer for his
invaluable comments on an earlier version of this paper.
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Ismet Anitsal, Tennessee Tech University
M. Meral Anitsal, Tennessee Tech University
Table 1: A Classification Of Retail Institutions
STORE-BASED RETAIL INSTITUTIONS
Form of Retail Institution Explanation
Specialty Store Narrow product line with a deep
Drug Stores assortment
Other Specialty Stores
Department Store Several product lines with each
operated separately
Supermarket Low-cost, low-margin, high-volume
operation
Convenience Store Limited line with high-turnover at
slightly higher prices
Discount Store Lower price with lower margin and
higher volumes
Off-Price Retailer Buy at less than regular wholesale
Factory Outlets prices and sell at less than retail
Closeout Retailers prices
Single-Price Retailers
Independents
Warehouse Clubs
Superstore Routinely purchased food and non-food
Category Killers items in large selling spaces
Combination Store
Supercenters
Hypermarkets
Catalog Showroom Broad selection of fast moving brand
names with high markups
NON-STORE RETAIL INSTITUTIONS
Form of Retail Institution Explanation
Back/Wagon Peddlers Individual merchants
Street Vendors
Catalog/Direct Mail Communicate through catalog, letters,
brochures
Vending Machines Indoor and outdoor machines for snacks,
candies and soft drink at convenient
and high-traffic locations
Direct Selling Face-to-face product demonstration and
selling
TV home shopping Customers watch TV and place orders by
telephone
E-tailer Online retailer over internet
STORE-BASED RETAIL INSTITUTIONS
Form of Retail Institution Examples
Specialty Store Walgreen, Rite Aid, Eckerds, CVS, GNC,
Drug Stores Tall Men, The Body Shop, GameStop, The
Other Specialty Stores Limited, The Gap, AutoZone, IKEA,
Payless Shoes, Pearle Vision, Tiffany's
Department Store Sears, JC Penney, Nordstrom,
Bloomingdale's
Supermarket Kroger, Safeway, Bi-Lo, Food Lion
Convenience Store 7-Eleven, Circle K
Discount Store All-purpose : Wal-Mart, Kmart
Specialty : Best Buy
Off-Price Retailer
Factory Outlets Mikasa, Dexter, Ralph Lauren,
Closeout Retailers Big Lots, Bud's Warehouse Outlets,
Single-Price Retailers Dollar Tree, Family Dollar,
Independents T. J. Maxx, Lehmann's,
Warehouse Clubs Sam's Club, Price-Costco
Superstore
Category Killers Home Depot, Petsmart, Staples, Toys 'R'
Us, Foot Locker, Sports Authority,
Combination Store Jewel, Osco Stores,
Supercenters Wal-Mart Supercenters, Super Kmart
Centers, Super Target
Hypermarkets Carrefour, Continente, Meijer's
Catalog Showroom Service Merchandise,
Best Products
NON-STORE RETAIL INSTITUTIONS
Form of Retail Institution Example
Back/Wagon Peddlers Individual sellers selling hot dogs,
Street Vendors pots/pans, etc.
Catalog/Direct Mail Lands' End, Spiegel, JC Penney
Vending Machines Coke machines,
Frito-Lay machines
Direct Selling Mary Kay, Amyway
TV home shopping QVC, HSN
E-tailer Amazon.com, B&N.com
Source: Adapted from May (1989), Levy and Weitz (1998ab), Kotler
(2000).
Table 2: Theories Of Institutional Change In Retailing
Theory Explanation
Cyclical Theories
Wheel of Retailing Entry-Trade up-Vulnerability
Retail Accordion General-Specific-General Cycle
(Expansion and Contraction)
Institutional Life Cycle Birth-Growth-Maturity-Decline
Polarization Principle Counterbalancing relationship between
fewer larger retailers and small
stores
Environmental Theories
Adjustment Theory Capability of Adoption
Natural Selection Survival of the "fittest" based on
Charles Darwin's view of evolution
Survival of the Fattest Being fat is more important than being
lean, regardless efficiency.
Conflict Theories
Dialectical Theory Thesis-Antithesis-Synthesis
(Inter-institutional conflict)
Combinations of Theories
Cycle-Environment Cycle as a reflection of changing
environmental circumstances
Cycle-Conflict Assimilation by challenged institution
versus differentiation by newcomer
Environment-Conflict Inter-and intra-institutional
competition based on environmental
circumstances
Cycle-Environment-Conflict
* Theory of spiral Competitive pressures-vacuum effect-
movement environmental circumstances-
reestablished original format
* Diversity theory of Long cycles and short cycles
market processes
Theory Confirming Examples
Cyclical Theories
Wheel of Retailing Variety stores, supermarkets,
mail-order houses, gasoline stations,
department stores, discount stores,
off-price shops, shopping centers
Retail Accordion Rural general store to specialty
store, single-line business to mass
merchandiser and department stores to
highly specialized category killers
Institutional Life Cycle Traditional counter-service grocery
stores, variety stores
Polarization Principle Hypermarkets versus small shops/stores
Environmental Theories
Adjustment Theory Department stores in mid 19th century,
British suburban shopping centers,
salad bars in grocery stores,
boutiques in department stores, video
stores, tenants of shopping centers
Natural Selection
Survival of the Fattest Sears, K-Mart
Conflict Theories
Dialectical Theory Department store-discount store-
discount department store
Combinations of Theories
Cycle-Environment Traditional corner shop to modern
convenience store, supermarket to
discount food store
Cycle-Conflict
Environment-Conflict Complicated offerings of retail stores
Cycle-Environment-Conflict
* Theory of spiral
movement
* Diversity theory of
market processes
Source: Adapted from Dreesman (1968), Davidson, Bates, and Bass (1976),
Kirby (1976), Brown (1987; 1988), Lowry (1997), Levy (1998a).
Table 3: New Format Innovations In Retailing
Revolutionary Evolutionary Innovations
Innovations
Supermarkets Super Drug Stores
Mail Order Catalogs Combination Stores
Discount Stores Super Specialty Stores (Category Killers)
Warehouse Clubs Off-price Apparel Stores
E-tailers Catalog Showrooms
Home Improvement Centers
Hypermarkets
Warehouse Home Centers
Shopping Malls
Source: Adapted from Bates (1989), Christensen and Tedlow (2000).
