Have Discount Retailers gone upmarket in the UK?

Have brush off Retailers gone upmarket in the UK?Preliminary InformationWorking Title of Dissertation Have Discount Retailers gone upmarket in the UK? If so, how and why?Research Question and aimTo investigate fix of Aldi and Lidl stores in relation to income/social class of catchment area(compare 1991, 2001 and 2011 census data) to image store strategy.Why would more affluent household shop at hard rejecters?Understand hard discounters non-locational strategy.IntroductionThe review aims to look at suppositional explanations of retail merchants change such as the Wheel of Retailing and the Conflict Theory. It then focuses on interrogation studies which try to generalise consumers store choice decision and factors influencing it. Finally, it go out briefly look at methods which are utilize to see retailers store decisions. All the sources are either books or peer-reviewed journal articles. Understanding the current belles-lettres available is important as it would help su pport my research findings and improve my research methods based on other academics research.The or so widely used archetype in explaining retail growth is the Wheel of Retailing created by McNair in 1958. The details of his work are mostly described in Hollander (1960) work. The position describes most retailer start as a low margin or focuses on low impairments such as the discount food market retailers. Investment in facilities and renovations increases, in that respectfore, sounds to increasing cost and price with its emphasis on service which allows a utmoster profit margin. This leaves a gap for lower margin retailers to show the market which will make traditional retailers vulnerable to competition. Hollander also identified the factors causing the changes which are Management Deterioration, price competition and excess capacity in factories. The Retail life cycle is a similar theory propose by Davidson et al (1976) cited in Levy et al (2005). It describes 4 stages of a retailer Introduction, addition, Maturity and decline. The focus is the profit level and the market share whereas the Wheel of Retailing focuses on the price- tone of voice continuum. Sparks (1990) field study on Kwik Save provides an excellent case study on how it has progressed through the cycle with the name discount removed from their store in 1986 suggesting a move to the maturing stage. These cyclical theories are simple to understand and supportive examples can be found, however, Roth and Klein (1993) found that it is very difficult to test it with limited expense data and Brown (1991) criticise that it lone(prenominal) considers price and quality and ignores other factors such as assortments and store size. Also, it assumes that there is only one path to retail growth, therefore alternative theories such as the Big eye (Levy et al, 2005) was developed. It considers another path of development through innovation targeting at a higher income market which then moves in to the Big Middle to benefit from economies of scale and where there is the highest demand focusing on services.There are also non- cyclical theories. The conflict theory suggests competition is the main reason for changes in retailing. Stores can be classified as thesis which has higher margins and antithesis which have a lower margin (such as discounters). Over time, a merger could occur which will lead to synthesis to reduce competition or increased price competition through introduction of value private labels (Burt and Sparks, 1994). Changes in the purlieu also embolden retail changes. Levy et al (2005) mentioned Dresseman s(1968) work which uses Darwins natural selection theory as an analogy for retail changes where only the fittest store will survive. Roth and Klein (1993) also identifies environmental factors such as demographics, regulation and demand encourage retailers to adapt otherwise they would be outcompeted.Overall, the theories suggest that retailer change due to a changing environment and try to avoid competition, especially price which is the focus of retailers who just joined the market.Consumers store choiceUnderstanding consumers shopping behaviour is important as it allows retailers to strategically plan their store location, format and the assortments. Therefore, this is an area which is widely researched. Fox and Sethuraman (2010) and Leszczyc et al (2004) provides a summary of consumers store choice and segmentation. There are three types of consumers price, service seekers and cheery-pickers. Price seekers are usually from lower income households who are more price conscious (Katsaras et al., 2001) and would travel to an everyday low pricing (EDLP) stores which are usually cheaper, larger stores to do their main shopping. This includes the deep-discounters. For service seekers who usually are single household who have a higher income and time-deprived due to work commitments, they therefore value public lavatory store more which provides better services such as Tesco Express Shops. They are known as High/Low Price Store (Hilo) who offers discount by promotion. When doing a Multi-Purpose Trips, both groups will visit stores near shopping centres and would visit both types of stores. The final type of shopper is the cherry-pickers who go to different stores to look for the beaver deals, hence they would visit both types of stores and have a lot of time to do shopping but also has the lowest loyalty to a cross or store.Apart from price and convenience, assortment is another factor affecting store choice. Briesch et al (2009) found that it is the 3rd most important factor and it is mensural in Store Keeping Units (SKU). Generally, store size is used as a proxy for assortments hence EDLP stores usually has higher SKUs and are more loving to customers who want choice. However, Broniarczyk et al (1998) study found that retailers could make significant reduction in SKUs and customers perception will remain the same. Briesch et al (2009) also concluded that only the number of brands and availability of favourite brands would affect store choice suggesting assortment could be less important than brands in consumers store choice decision.Brands can be separated into private labels and National brand. The UK is a unique market that the private labels are stronger than in continental Europe. For example, Tesco own private label has three grades Value, Finest, chemical formula (Krafft and Mantrala, 2010) which is different from other countries where private labels are seen as low cost and quality(Burt, 2000) hence able to directly compete with National Brand. In the same paper, he mentioned previous studies in the USA by Myers, 1967 found that there is no socio-economic difference in choosing National or private brands but Liversey and Lennin (1978) found that more affluent and young people are more likely to take risks to buy new national brands than lower income people. Hence there is no d ecease consensus whether private and national brands are targeting different groups.During economic recession, people become more price orientated hence Hard-Discounters would be popular during the period as their price are 15-40% cheaper than traditional retailer (Lamey, 2014). According to Colla (1994) study, he found that 1/3 of people in the sample thinks that the quality in discounters is high due to the basic display hence shop from them. This means traditional retailer are not only competing with hard discounter on price but also on its quality which means after recession, these customers are very likely to be retained. Also, this shows different customer has different view on factors such as quality, therefore different literature provides a different view and there is no consensus on the most important factor.It is now becoming common for retailers to use models to help decide where stores should be located. The three methods that will be discussed are Regression, GIS and Spatial Interaction Model. Regression can be used to accurately predict how one factor affects another with known values. This allows understanding of the relative importance of each factor. Leszczyc and Timmermans (1997) work used regression to analyse variables such as income with repeated trips, store loyalty etc. using data collected from consumer.GIS can be used to help to understand store location decision by doing simple catchment area analysis. This involves drawing a buffer of a certain travel time or distance on the computer programme to show how far people would travel to a store (Benoit and Clarke, 1997). Neighbourhood data could also be incorporated which will help to identify authorisation new site and analyse current store strategy of a retailer. However, this paper and Birkin et al (2002) raises issues of using the method. How should the buffer be defined and when the buffers overlap, how can we deal the number of consumers or revenue to each store? The second prob lem could be solved by using a spatial interaction model which according to Brown (1993), it considers the Trade-off between distance and attractiveness of alternative of shopping area. Hence revenue can be allocated according to the attractiveness (e.g. Floorspace) and its availableness relative to another. This will improve the accuracy of the analysis.The literature review showed that a wide range of theories have been constructed to understand changes in retail and through research has been done on consumers behaviour and how they are analysed. However, more research is mute needed in understanding customers perception of different store types as results still vary a lot. The review of the methods helped me to consider other methods to analyse the relationship between discount retailers and income and the store choice review would help me with the questionnaire design to understand consumer behaviour for discount retailers. Finally, the theory review would help explain the find ings in GIS analysis.ReferencesBenoit, D. and Clarke, G.P. 1997. Assessing GIS for retail location planning. journal of retailing and consumer services. 4(4), pp.239-258.Birkin, M., Clarke, G.P. and Clarke, M. 2002. Retail Geography and intelligent net planning. Chichester Wiley.Briesch, R.A., Chintagunta, P.K. and Fox, E.J. 2009. How does assortment affect grocery store choice? Journal of merchandise Research. 46(2), pp.176-189.Broniarczyk, S.M., Hoyer, W.D. and McAlister, L. 1998. Consumers perceptions of the assortment offered in a grocery category The impact of item reduction. Journal of Marketing Research. pp.166-176.Brown, S. 1991. Variations on a marketing enigma The wheel of retailing theory. Journal of Marketing Management. 7(2), pp.131-155.Brown, S. 1993. Retail location theory evolution and evaluation. International check out of Retail, Distribution and Consumer Research. 3(2), pp.185-229.Burt, S. 2000. The strategic role of retail brands in British grocery retailing. European Journal of Marketing. 34(8), pp.875-890.Burt, S. and Sparks, L. 1994. Structural change in grocery retailing in Great Britain a discount reorientation? The International Review of Retail, Distribution and Consumer Research. 4(2), pp.195-217.Colla, E. 1994. Discount development in france The introduction of the format and the competitive response. Journal of Marketing Management. 10(7), pp.645-654.Fox, E.J. and Sethuraman, R. 2010. Retail Competition. In Krafft, M. and Mantrala, M.K. eds. Retailing in the 21st century, current and future trends. Online.London Springer, pp.239-255. Accessed 19 March 2017. Available from https//www.dawsonera.com/readonline/9783540720034Hollander, S.C. 1960. The Wheel of Retailing. Journal of Marketing. 25(1), pp.37-42.Katsaras, N., Wolfson, P., Kinsey, J. and Senauer, B. 2001. Data mining A segmentation analysis of US grocery shoppers. St. Paul, MN The University of Minnesota, The Retail Food Industry Center, Working Paper. p01.Krafft, M. and Mantrala, M.K. 2010. Retailing in the 21st century current and future trends. Berlin Springer Verlag.Lamey, L. 2014. Hard economic times a dream for discounters. European Journal of Marketing. 48(3/4), pp.641-656.Leszczyc, P.T.P., Sinha, A. and Sahgal, A. 2004. The effect of multi-purpose shopping on pricing and location strategy for grocery stores. Journal of Retailing. 80(2), pp.85-99.Leszczyc, P.T.P. and Timmermans, H. 1997. Store-switching behavior. Marketing Letters. 8(2), pp.193-204.Levy, M., Grewal, D., Peterson, R.A. and Connolly, B. 2005. The concept of the Big Middle. Journal of Retailing. 81(2), pp.83-88.Roth, V.J. and Klein, S. 1993. A theory of retail change. The International Review of Retail, Distribution and Consumer Research. 3(2), pp.167-183.Sparks, L. 1990. Spatial-Structural Relationships in Retail Corporate Growth A Case-Study of Kwik Save Group P.L.C. The Service Industries Journal. 10(1), pp.25-84.