McNair’s concept “The Wheel of Retailing” is one of his most valuable contributions. In essence, it suggests that there is a pattern or process, a lifecycle of retailing, that moves from an entry position with low prices to gain market share to eventually moving upscale with higher-quality products aimed at more affluent consumers. Japanese automobile manufacturers, for example, proceeded through this cycle after entering the U.S. market with inexpensive vehicles that captured market share and then gradually moved upscale with higher-priced vehicles (e.g. Acura, Infiniti, and Lexus) that offered higher margins to the manufacturers.
As McNair once explained, “It seems to me that there is more or less a definite cycle in American distribution…The cycle frequently begins with the bold new concept, the innovation. Somebody gets a bright new idea…[and] attracts the public on the basis of the [low] price appeal.” Over time, the retailer trades up, improves the quality of his merchandise, improves the appearance and standing of his store, attains greater respectability. Meanwhile, capital investment and operating expenses increase. “Now the once upstart has entered the mature mode of retailing. Rapid, often imprudent growth results in “top-heaviness, too great conservatism, a decline in the size of return on investment, and eventually vulnerability [to] the next fellow who has a bright idea and who starts his business on a low-cost basis, slipping in under the umbrella that the old-line institutions have hoisted.”
Keep in mind that these are a few of McNair’s comments about a business world he surveyed more than 50 years ago. The cycle continues today, suggesting that the best time to make a change is when you don’t have to. Although no one denies that, few abide by it.