Understanding Wheel of Retailing Theory
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Explain : Wheel of Retailing
Explain : Wheel of Retailing Theory
The wheel of retailing theory explains the life cycle of a retail organization and the different levels through which it passes. The life of a business is divided into four quadrilaterals, each of which are discussed in detail below:
Quad 1: Entry
The initial phase of the wheel of retailing is when the organization enters the market with limited products at a very reasonable price, keeping a low margin.
Since the business entity still needs to build its reputation at this stage, and the consumers are not very much aware of the organization.
Moreover, the organization provides minimal services and the infrastructure used is usually low cost and temporary. Thus, at this level, the company tries to penetrate the market with a low price strategy.
Quad 2: Growth
With the low price strategy, the organization can build its reputation in the market. At this level, the retailer can adopt growth strategies like slightly hiking the price of the products, widening the product category, upgrading the store and providing additional services.
This is the phase where the organization can keep a better margin since more and more consumers prefer to buy the products. Now, the retailer concentrates on the other aspects of competitiveness, rather than price.
Quad 3: Maturity
At this phase, the organization has gained a high reputation and established itself as a well-known business entity. Now, the business is unable to acquire more new consumers, also the customer turnover increases.
Therefore, the retailer’s main area of concern at the maturity level is customer loyalty and retention by enhancing their satisfaction level.
Quad 4: Decline
This is the level where the business starts going down. The other firms enter the market with their low-priced competitive products, to drag customer’s attention. In no time, the competitor’s products take over the market, and the organization tend to lose its customers.
Thus, the organization now plans to revive the business through divestment, merger, acquisition and other strategic alliance.
The wheel of retailing theory explains the life cycle of a retail organization and the different levels through which it passes. The life of a business is divided into four quadrilaterals, each of which are discussed in detail below:
Quad 1: Entry
The initial phase of the wheel of retailing is when the organization enters the market with limited products at a very reasonable price, keeping a low margin.
Since the business entity still needs to build its reputation at this stage, and the consumers are not very much aware of the organization.
Moreover, the organization provides minimal services and the infrastructure used is usually low cost and temporary. Thus, at this level, the company tries to penetrate the market with a low price strategy.
Quad 2: Growth
With the low price strategy, the organization can build its reputation in the market. At this level, the retailer can adopt growth strategies like slightly hiking the price of the products, widening the product category, upgrading the store and providing additional services.
This is the phase where the organization can keep a better margin since more and more consumers prefer to buy the products. Now, the retailer concentrates on the other aspects of competitiveness, rather than price.
Quad 3: Maturity
At this phase, the organization has gained a high reputation and established itself as a well-known business entity. Now, the business is unable to acquire more new consumers, also the customer turnover increases.
Therefore, the retailer’s main area of concern at the maturity level is customer loyalty and retention by enhancing their satisfaction level.
Quad 4: Decline
This is the level where the business starts going down. The other firms enter the market with their low-priced competitive products, to drag customer’s attention. In no time, the competitor’s products take over the market, and the organization tend to lose its customers.
Thus, the organization now plans to revive the business through divestment, merger, acquisition and other strategic alliance.
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