Wheel of Retailing

Definition: the Wheel of Retailing is a life cycle phenomenon in retail in which new shops or service providers typically start as a competitor on price of existing providers.
After a new formula has become successful, there is a tendency to increase the services offered and the quality ("upgrading"). But this leads to higher costs and eventually to higher prices.
As a result, the new formula gradually starts to look more and more like its earlier competitors.
This effect is strengthened by the typical reaction of the traditional contenders on a new price competitor: downgrading their services, simplifying their offer and lowering their prices.

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More on pricing: By-Product Pricing, Cost-based Pricing, Decoy Effect, Demarketing, Dynamic Pricing, more on pricing...

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