IN 1958, McNair proposed a "wheel of retailing" hypothesis to account for the emergence of innovative forms of retailing and the course of their development [I]. This hypothesis explains the impact made in the United States by the department store, the variety store, the supermarket and the discount store. It is not, however, universally applicable, either in America or any other country [2]. Neither does it explain the response of the established retailing institutions to the penetration of the innovators. To cover these gaps, an extension of McNair's theory is set forth in this article. According to McNair, each new type of retailing institution penetrates the market through a policy of low price margin and fast turnover. Gradually, however, the new retailers upgrade their locations, premises, equipment and customer services, which increases their investments and operating costs and, thus, their prices. The innovators come to resemble the conventional outlets more and more in services and prices, until, eventually, the new retailers themselves become vulnerable to competition from innovators of another type; the entry of the latter marks the beginning of a new turn of the wheel. Publication of the "wheel of retailing" hypothesis aroused considerable interest among economists and students of marketing. Some attempted to verify and explain the theory [3]. Others rejected it or raised additional hypotheses [4, 5]. A limiting factor in McNair's hypothesis is that the emergence of a considerable number of retailing institutions cannot be explained by the "wheel of retailing". Not all new institutions begin with comparatively low levels of prices and service which are later upgraded. On the contrary, many start with comparatively high levels of prices and service which are later downgraded. In the United States; for example, the convenience stores, the vending machines... [ABSTRACT FROM AUTHOR]