Wheel of Retailing (Essay Sample)

Wheel of Retailing
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A wheel of retailing can be defined as the process that is observed in the retail market when an originally established discount store advances its products and services in order to increase prices once it has established (Lehman, 2009). As it moves through the wheel of retailing, a discount retail business may develop into a higher end department store, leaving its former niche to be filled by newer discount businesses. Some retail businesses such as Wal-Mart have formed major representations of many businesses that have undergone the wheel of retailing for a long period. The theory of Wheel of retailing states that retailers usually move from the low end where they offer low prices of the products as the business establishes to a higher end where the same businesses offer products at higher prices as the costs of running the business increases. To understand how Wal-Mart has moved along the wheel of retailing, this paper shall discuss a brief history of the Wal-Mart retailing business since its establishment. During the 1960s and 1970s, Wal-Mart retailing business was operating in the first phase of wheel of retailing which is innovation. Wal-Mart had only one location, the prices of the commodities offered were low and there only few advertisements made.
Through the inspiration that Walton who was the head of the business got after observing other performing discount department store, he established a second store in Arkansas. This was the beginning of the second phase of the wheel of retailing that is known as trading up. According to (Lehman, 2009), this phase is characterized by increase in the number of customers served by the business entity, increase in the number of the locations, and also increase in the number of advertisements made. This second phase of the wheel of retailing saw Wal-Mart establish other branches in various parts of the world. Wall-Mart retailers made many profits by allowing their costs and margins increase. The success forced the company to open more facilities in order to accommodate increasing growth of the retailing market. By the year 2005, estimates show that the business was controlling approximately20 percent of the retail grocery and consumables business. With this great steps being made by Wal-Mart retailers, the cost of managing the business increased and the retailers had to eventually raise the prices of the commodities traded by the business. This marked the beginning of the third phase under which the Wal-Mart is operating to the present. This phase is known as vulnerability. In this phase, the business entity becomes conservative and creates an opportunity for new price oriented retailers. As a result, Wal-Mart Company has become conventional just like the companies that it replaced. In fact, the company seems to be moving back to where it started in the wheel of retailing cycle. This is because newer retail businesses have developed new strategies that lower the costs and prices of commodities and thus attracting more customers.
In terms of the supply chain, Wal-Mart is facing a major challenge since other companies which are competitors of Wal-Mart have come up with new trends of adapting to the new trends in the retailing business. Most of these companies have learnt from the successes of Wal-Mart and have come up with other benefits of their own. Wal-Mart’s capacity to utilize its supply chain to survive the stiff competition from rival companies has patently disappeared. The inventions that Wal-Mart had made in technology can no longer be feared by other rival businesses. Other competitors like Best Buy and Target have come with up with new systems that are good and that can help the companies make more profits than Wal-Mart. Wal-Mart’s new initiatives have sucked up great resources and the results of this is little benefit. In the early 1990s, Wal-Mart was believed to be the most shining example of the retailing industry since it embraced technology in its operations.
There are many other investors who are starting up retail businesses in the regions that were previously colonized by Wal-Mart. This has...