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Emergence of entrepreneurial retail forms.

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).
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Author:Anitsal, Ismet; Anitsal, M. Meral
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Date:Jul 1, 2011
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