A Research Paper On The Evolution Of Retailing

Definition of Retail

Retail is the final stage of any economic activity and it occupies an important place in the world economy. According to the website Encyclopedia Britannica, retail define as the selling of merchandise and certain services to consumers, either individual units or large numbers of customers depending on the kind of business the retailer is in and their target customers. Furthermore, authors Philip Kotler and Kevin Lane Keller defines retailing as all activities that involved selling of goods or services to the final consumers for personal, non-business use.

Introduction to the History of Retail

Since its inception, retail has significantly changed and evolved over time from traditional stores to the dramatic increase in the number of consumers who shop on computers and mobile devices over the last decade. Forrester reports that by 2022 e-commerce sales will represent approximately 17% of total retail sales, up from 13% in 2017 prompted retailers to improve their online presences and integrating traditional brick and mortar and Ecommerce experiences for the consumers.

To further understand how this major trend changed the ways retailers operates and consumers shops, let’s discuss in-depth about the origins of retail.

Evolution of Retail

Based on the website lumenlearning.com; prior to the 1800s, retail was predominantly made up of local merchants who provided full services to customers that often include offering credit, repairs, and offering one-on-one services to consumers to explain the features and benefits of products. Two retail options existed at that time. The first, involved selling items directly to consumers through company-owned stores and the second option involved employing a commissioned agent in which a company agent would be responsible for delivering manufactured goods to shopkeepers who, in turn, would sell them. Manufacturers and merchants opted with what customers desired at the time, which was a ready access to a wide assortment of reasonable priced items which lead to a new form of retailing: the department store.

Parisian retailer named Aristede Bouciaut (1810-1877) was credited by business historians for developing the first department store called Le Bon Marche, this establishment featured the latest fashions and accessories that were strategically arranged within a spectacular setting with a purpose of attracting shoppers. In early 19th century, U.S. retailers from Boston to Richmond and from New York to Chicago quickly adopted Le Bon Marche layout and services and the modern department store was born.

Well into the post-war era, large downtown department stores in major metropolitan city centres dominated retailing. Furthermore, in the 1950s, over 4,000 department stores operated nationwide with many new stores opening in suburban areas. However, over half of these stores had closed their doors by mid-60s and the trend continued for the next three decades. These stores were replaced by discount department stores, shopping centres and large malls.

The utilization of the internet in the 90s created a huge impact to the retail industry and continues to drive product and marketing innovation to this day. Shoppers now have nearly unlimited access to an unprecedented assortment of products and their purchases are not restricted to a physical “bricks-and-mortar” place or store hours. With a few clicks, shoppers can compare prices of goods faster and more efficiently than before. Furthermore, retailers recognized that Ecommerce allows for the optimization of inventories while selling a wide range of profit margin goods.

Online shopping allows consumers to directly buy goods or services from a seller over the Internet using a web browser. Consumers find a product of interest by visiting the website of the retailer directly or by searching among alternative vendors using a shopping search engine, which displays the same product’s availability and pricing at different e-retailers. As of 2016, customers can shop online using a range of different computers and devices, including desktop computers, laptops, tablet computers and smartphones.

An online shop evokes the physical analogy of buying products or services at a regular “bricks-and-mortar” retailer or shopping centre; the process is called business-to-consumer (B2C) online shopping. When an online store is set up to enable businesses to buy from another business, the process is called business-to-business (B2B) online shopping. A typical online store enables the customer to browse the firm’s range of products and services, view photos or images of the products, along with information about the product specifications, features and prices.

Earlier Stages of Ecommerce

During the introduction stage of Ecommerce, many businesses were still trying to analyse and understood its full impact towards retailing, however it causes many conventional retailers to reconsider and re-examine their business strategies and reinvent the way they offered their products and services and the way they interact with their customers.

In 1999, Regina Fazio Maruca, a senior editor at Harvard Business Review, interviewed a selected group of industry experts and professionals such Raymond Burke, a professor of marketing at Indiana University, Sir Richard Greenbury, chairman of Marks and Spencer, John Quelch, dean of the London Business School, Ragnar Nilsson, chief information officer of Karstadt, and Robert A. Smith, CEO of the Neiman Marcus Group at the time. She wrote and published an article titled “Retailing: Confronting the Challenges That Face Bricks-and-mortar Stores,' in this article, she gathered and compiled the perspectives of the above-mentioned group of experts with regards to the effect of Ecommerce to their respective businesses. The article also discussed the following questions:

  • Will technology change the way we interface with customers in the future?
  • Will all of these technologies be successful?
  • Which technologies to embrace? Which to ignore?
  • Which to spend precious resources on? When to pull the plug if success is not measurable and immediate?
  • Why have so many innovations failed?

Collective answers from these focus groups are compiled and summarized into the following:

  • Use technology to create an immediate, tangible benefit for the consumer.
  • Make the technology easy to use.
  • Execution matters: prototype, test, and refine.
  • Recognize that customers' response to technology varies.
  • Build systems that are compatible with the way customers make decisions.
  • Study the effects of technology on what people buy and on how they shop.
  • Coordinate all technologies that touch the customer.
  • Revisit technologies that failed in the past.
  • Use technology to tailor marketing programs to individual customers' requirements.
  • Build systems that leverage existing competitive advantages.

Another challenge that traditional stores were facing when it comes to adapting to Ecommerce is the full understanding of the new set of competitive rules created by the establishment of the on-line sales. These challenges include understanding on-line customer behaviour and response, ability to overcome organizational hurdles, and how to approach channel management integration.

After conducting an exploratory research that involved an initial sample comprised of 30 young people aged 16-18 years old, researchers Charles Dennis, Lisa Harris, and Balraj Sandhu (2002) came to a conclusion that support previous findings that the most important issue affecting internet shopping is shopper’s preferences for the experience of “real” shopping, then the issue of security, and although internet is described as convenient for shopping but the degree of convenience according to respondents are still based on the speed and reliability of both the internet and the shopping process as well as the aftercare.

The researched also predicted that physical stores may lose a substantial business to internet shopping and suggested three possible approaches on how they could protect their market share; these are multi-channel retailing, the internet shopping centre, and emphasis on leisure, eating, and drinking such as services that e-shoppers cannot consume from the web.

The previous researched have acknowledged the limitations of the research arising from the small and non-representative nature of the samples and exploratory in nature and they plan to progress to larger scale survey and to develop methodology to assess personality aspects of the internet.

In the earlier parts of 2000, conventional retailers have some apprehension on adopting on-line strategy and integrating it with their existing physical store because they feared that on-line activities would have a negative effect on their physical store sales and that Ecommerce would monopolize retailing industry. However, these fears and assumptions turned out to be unfounded as proven by the results of the study conducted by Eyal Biyalogorsky and Prasad Naik (2003) about the effect of on-line activities on off-line sales through the method they developed that allows retailers to use readily available market data for making informed decisions. This theory was further supported by the results of the study conducted by David Bahn and Patrick Fischer (2003) using 25 firms from different retail industries as their focus group. Moreover, Blanca Hernandez, Julio Jimenez, and Jose M. Martin (2009), who carried out a CATI survey in Spain using a random sampling method of 805 valid telephone calls, substantiates the claim about the initial apprehension of Ecommerce adoption and adaption within customers.

The popularity and pervasiveness of online shopping shows no signs of slowing down which is putting traditional retailers in a unique position. How can brick-and-mortar stores integrate e-commerce strategically and successfully? In what ways will online retailers emulate brick-and-mortar stores as seen in the trend of popular online stores opening pop up shops for customers to shop in person. By having a better understanding of past industry trends and challenges, modern retailers can learn from their successful predecessors while also blazing a new trail forward.

Ecommerce/Physical Stores Integration

As the initial effect of Ecommerce within the retailing business industry have gradually changed from apprehension to acceptance, from slowly adopting, then comes adaptation of the Ecommerce, and now traditional retailers have started integrating it to their existing business strategy and hence, multi-channel retailing have been introduced to the retailing market.

After conducting a survey and studying it for six months through distribution of questionnaires to 7,428 individual consumers with common purchasing experiences from firms who were operating on multi-channel, Elliot Bandoly of Emory University along with James D. Blocher, Kurt M. Bretthauer, Shanker Krishnan, and M.A. Venkataramanan of Indiana University (2005) found that to be successful on operating on both on-line and off-line channels, companies should not only consider the risks of integration and smooth transition between the two channels, but also the risks associated with product availability within both channels that is critical to increasing consumer retention rates. This was further supported by the study conducted by P. Sullivan and J. Heitmeyer (2008) drawn from a sample of 140 Gen Y population (Millennials) and concluded that these demographics prefer efficiency and experiential value when deciding which channel to patronize.

Multi-channel Ecosystem

Nowadays, retailers have evolved from channel integration to offering multiple options to their consumers on how and where they make their purchases. These channels not only include on-line and physical locations, but also through telephone, email, catalogue sales and hybrid models.

In a book written by Markus Ståhlberg and Ville Maila in 2014 titled, Multi-channel marketing ecosystems, here they discussed the evolution of marketing when it comes to adapting, integrating and ways on how to succeed on creating a synergized environment on how to market products and services to customers that will resulted in a profit with the ever-evolving world of technology. This further explored in the book written by Debra. Zahay Kiseol Yang in 2015 titled “The impact of digital shopping channels on multi-channel marketing and attribution in the changing retail landscape.” On this book, they selected and compiled four articles based on its topic “diversity and consumer use of digital channels in their shopping,” and came up to a conclusion that in order for a multi-channel retailers to be successful and sustain their business, they have to come up and maintain a long term strategy on how to capture and maintain their customer trusts and loyalty through assurance when it comes to their privacy and offer of great customer experience. Furthermore, in a study conducted that comprised 1000 firms from both physical and digital forms in Taiwan, Ing-Long Ing-Long and Shwu-Ming Wu (2015), substantiates the previous results about a successful channel integration through “improved customer trust, improved customer awareness, consumer risk reduction, coverage of diverse shopping preferences, improved service efficiency, increased repeat purchase, and enhanced customer profitability.”

Retail in Canada From Early 20th Century to the Present

In the earlier 20th century, as Canada’s population grew, so is the popularity of the mail-order catalogues which was first introduced by the department store in Montreal named Calsey’s, followed by Eaton’s and Hudson Bay. Then in 1869, Timothy Eaton founded Eaton’s which became the symbol of a retail and social institution in Canada up until the 50’s. In 1997, Eaton’s declared bankruptcy and was later bought by Sears Canada in 1999. There were other retailers that opened up and expanded across Canada such as Hudson’s Bay, Sears, Woodwards, Simpsons among others. In the 1960’s, Simpsons partnered with Sears and became one of the first company in Canada to used computers at their locations until that partnership ended when Hudson Bay acquired Simpsons in 1978.

These days, online purchases are increasing and it’s becoming more popular among Canadians, from clothing, to flights or travel packages, books, tickets, music, government services and even household goods and groceries.

09 March 2021
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