what is the wheel of retailer the wheel of retailing is a major hypothesis regarding patterns of retail development in which new types of retailers generally enter the markets as low margin low status low price operators they gradually acquire more elaborate premises and facilities and move up market the wheel of retailing also called the retail wheel refers to how retailers start off as discount stores but start boosting their prices as soon as they become established finally they mature as high-cost high price upmarket merchants who are vulnerable to the markets newer entrants the term wheel of retailing was coined by professor Malcolm P McNair who taught at Harvard Business School for 43 years the wheel of retailing is not an economic or retailing rule it is a hypothesis it might not be applicable to every retail situation however it does seem to explain a number of retail trends in many nations economies most retailers start off on low cost low margins and low price but as their sales begin to rise they rapidly shift to a high cost high revenue business model that is until the newcomer arrives doing exactly what they did when they first came let's imagine that Fred Bloggs opens a new restaurant blogs meals in a temporary location he offers a number of limited items at very low prices as soon as the construction of the premises is completed fred begins introducing greater variety and offers several new services including free home delivery as well as bed-and-breakfast as blogs meals becomes more established fred begins to raise prices on his earlier items he wants to recover the fixed cost rapidly so that he may have an early break even two years later a new restaurant enters the scene and begins to offer the same items as blogs meals but at very low prices Fred will have to reduce his prices back to what they were earlier he has turned full circle in the wheel of retailing thank you for watching this market business news video on the wheel of retailing