WWW.amazon.com and it's position in the wheel of retailing.

Essay by bristolroadUniversity, Bachelor'sC+, November 2004

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1) Carry out an analysis of where Amazon.co.uk is on the wheel of retailing. Give reasons for your answer. (50%)

The concept of the wheel of retailing was originally created by McNair (1958) and latter modified by Hollander (1960), the concept attempted to show the life cycle of a retail establishment over time. The analysis of retailing, the selling of products directly to customers for personal use (Brassington and Pettitt, 2000), is extremely important, as in the U.K this sector employs 10.5% of the workforce and represents 36% of consumer spending (Management of Marketing, course handout, 12th Jan 2004). The emphasis of the original theory was that entrants to a new retail market would begin trading as cut- price, low overhead, low margin and low status operators. Then over time, through a process of trading up, theses traders will increase their overheads by offering additional services and product lines, perhaps in better locations, smarter premises and with more sophisticated marketing communications.

Eventually, they mature as higher-cost, high price merchants, vulnerable to newer types, who in turn go through the same pattern (definition adapted from Blackwell Dictionary of Marketing, 1997). Some of the reasons that cause this movement are misguidance, e.g. being coaxed by suppliers into unnecessary modernisation, changing retail personalities, e.g. original innovators being replaced by less cost conscious successors, and the presence of imperfect competition, i.e. retailers avoid direct price competition and chose to compete on services instead (Marketing Management, 1996). An often-used example of the wheel pattern is department stores, they originally appeared as strong competitors to the small retailers but now face increasing competition from cash and carrys and supermarkets. An example of how the retail life cycle works in the real world is the online book and CD retailer Amazon.co.uk. In terms of the wheel of...