Question

how the big middle theory operates in business and, benefits and shortfalls of big middle

Answer 1

Cyclical models assume that retailers pass through before-known stages and follow a certain cycle. Well-
known theories within the cyclical theory are the wheel of retailing, the retail accordion and the concept
of the Big Middle
The wheel of retailing, illustrated in Figure 3, is a concept
originating from McNair (1958). It holds that new retail
institutions begin as low-status and low-price firms. Over time
they develop into bigger operators, involving higher
investments with higher operating costs and bigger facilities.
They evolve into a mature state as a high-cost, high-price firm,
experiencing competition from new operators who will undergo
the same cycle (Hollander, 1960). These competitors will start
in the Entry Phase and thus will ask lower prices. This will
move the established high-price retailers to the vulnerable
phase. The department store is a classic example of the
hypothesis of the wheel of retailing, starting as smaller, more
specialized stores operating at low costs. The shift to the trading-up phase happened when specialized stores
elaborated their product assortment and services in the post-war period. Around 1950, they experienced
heavy competition from specialized stores and discounters who operate at a lower-cost and lower service
level, which brought them in the vulnerable phase.
Hollander (1966) saw an accordion pattern in the
history of retail development (Figure 4). His retail
accordion theory is also referred to as general-
specific-general cycle or the theory of sequence of
generalization and specialization (Brown, 1987).
The left side of the figure shows the expansion and
contraction of general stores with a wide assortment
and the right side shows the expansion and
contraction of specialized stores, with a more
narrow but deep assortment. In fact, the name
'accordion' does not fully honour the theory;
Hollander (1966) modified prior researches that
noted a dominance of subsequently general stores and specialty stores. Instead he compared the retail
institutions with a band of accordion players. Players (with extended or contracted instruments) could at
any moment join or leave the band, which represented general and specialty retailers that arrived or left the
retail landscape. Alike, the existing band players consist of players who contract and extent their instrument
and who are able to change their contraction or extension. This represents the existing retail institutions that
constitute of general as well as specialty stores who, on its turn, can choose to broaden or limit their product
assortment. Especially the coexistence of both large general merchandisers and smaller boutiques and
specialty stores make for a pleasant shopping environment. Therefore, it is likely that the retail environment
will never consist of only one of the two. The retail accordion evaluates retail evolution based on only the
breadth of the product assortment. Nevertheless, the retail accordion can be looked at with regard to the
retail environment, as Hollander (1966) did as well. An example is competition that plays a part; specialized
stores will continue to look for a gap in between the large general stores. Another example is consumer
Figure 3 The wheel of retailing, Reprinted from “The
concept of the Big Middle,” by Levy, M., Grewal,
D., Peterson, R. & Connolly, B., 2005, Journal of
Retailing, p. 84
Figure 4 The retail accordion.
trends; the wish to reduce shopping time can result in more one-stop stores that offer a wide variety of
goods.
Levy et al., (2005, p.83) introduced the Big Middle
concept, shown in Figure 5, to better explain how and in
what way retailers evolve. It combines life cycle elements
with the concepts of innovative behaviour or sharp price
policy of newcomers, who will eventually move into the
Big Middle or will be In-Trouble (Levy et al., 2005;
Reynolds et al., 2007). Each retailer usually falls in one of
the four categorizations, and each categorization serves a
different consumer segment. Conform this hypothesis new
retailers starts as being Innovative or focussed on Low-
Price. The ones that want to grow and therefore have to
expand their target group will move to the Big Middle,
where good value is offered at reasonable prices. The
retailers in the Big Middle are likely to become large,
volume driven generalists, although the precise type of retailers in the Big Middle change and will keep
changing (Levy et al., 2005). The move to the Big Middle necessitates a large investment due to expansion
of the width and depth of product assortment. This risk can therefor cause the retailer to be In-Trouble
and/or even Exit Retailing. Besides, there is a constant threat of Low-Price and/or Innovative new-comers
that can shift into the Big Middle. Therefore the Big Middle is not a so to say safe marketspace, but a
marketspace in which retailers continually have to evaluate themselves to remain their value. An example
is that in 1970 the department stores ruled the Big Middle, but around 1990 mass merchandisers like Wal-
Mart, that focused more on cost-efficiency and therefore low-pricing, took over the Big Middle. The Big
Middle is similar to the retail accordion in terms that it shows the coexistence of a range of store formats.
2.1.3 Conflict theory
The conflict theory is also called the dialectic theory and is about the effect of new appearing business
formats on the established ones (McArthur et al., 2016). The dialectic theory is derived from Marx's Theory
of Evolution and applies on retail institutions. The thesis-antithesis-synthesis theory has been the core of
conflict theories. The established retail formats serve as thesis. New formats (with opposite characteristics
from the thesis) form the antithesis. In time, the 'conflict' created by the new format, will result in a new
format; the synthesis. The synthesis will on its turn become an established retail format and will form the
thesis in a new cycle. The rise of the synthesis can be the result of different scenarios. It can be the result
of the adaptation by the established format, taking over certain elements of the antithesis. In this way a new
type of retail institution develops: the synthesis, which in turn becomes a new thesis. Another explanation
is that a new retail format is a result of combining the thesis and antithesis, ‘choosing the best of both
worlds’ (Lowry, 1997; Gist, 1968). Another possibility is that both competitors remain their retail system,
which gives room for another new format to arise as synthesis between the two. As Markin & Duncin
(1981) wrote, the innovation to which the established formats are forced, can come forward in assimilation
or differentiation. Brown (1987) addressed that the first reaction of the established retailer would be to
compete the new and innovative antithesis and stay put on its own format (a defensive strategy).
Though, eventually the established retailer notices the need for innovation to regain competitive advantage.
An example of this is the defensive position that independent retailers took in during the supermarket
expansion of the 1960's and 1970's. They were either lobbying for legislation that would protect them from
supermarket competition or they recognized the need to adapt to this competition.
Either way, after a conflict retail formats will adapt and act in a way that finally restores the marketplace
according to this theory. An example of dialectic theory is the appearance of the discount department store
(synthesis), after that the original department store (thesis) had been confronted with the arrival of the
discount store (antithesis).
The conflict theory can be linked to the environmental theory with regard to the fact that the retail
marketplace adapts when the competition, which is part of the environment, changes. Markin & Duncin
(1981) also integrate the environment a bit further in their conflict theory. They write that the rise of new
competition is a result of a conflict in economical and social perspective. This environmental conflict gives
space for new innovations in retailing that consequently conflicts with the existing retail market. The thesis-
antithesis-synthesis can also be called a cycle, however this theory does not apply any categorizations to
the three stadia in terms of low-price or innovation strategy and product assortment (as cyclical models.