science

Retail life cycle

Retail life cycle is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Retail life cycle rather than just read about it. In short: The retail life cycle theory holds that retail institutions experience the cycle of innovation, growth, maturity and decline, like goods and services that they sell, similar to that of the product life cycle. The market traits and strategies which are taken by retail institutions should differ in variable stages of retail life cycle.

Key takeaways

Retail life cycle belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Retail life cycle to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Retail life cycle from memory before moving on to harder problems.

Reference excerpt

The retail life cycle theory holds that retail institutions experience the cycle of innovation, growth, maturity and decline, like goods and services that they sell, similar to that of the product life cycle. The market traits and strategies which are taken by retail institutions should differ in variable stages of retail life cycle. The theory of retail life cycle is first introduced by William Davidson WR, Betas AD and Bass SJ in 1976.

Description

The founders of this assumption took the American retail industry as the research object and then pointed out that the period of different new business forms from innovation stage to maturity stage is gradually shortened, reflecting the rule of retail cycle. Masonand Mayer selected over a dozen of different retail organizations in the USA in 1987 to further explain and verify this theory. Retail life cycle theory explains how the existing retail formats develop and why the retail formats develop in this way. Many different factors, such as price cycle, market environment and macroeconomic fluctuations and so on, are attributed to the influence of retail life cycle, which makes the theory more convincing. However, this theory does not point out what are determinants of changes of retail formats and why the retail life cycle exists. In addition, the influence of interactions and responses consumers is not considered.

Different stages of retail life cycle

Innovation stage In the innovation stage, in which the reformation and development of business methods promote the emergence of new retail formats, the operating characteristics of new formats have not been understood by both consumers and the industry, lowering market share. Moreover, because of the development cost of new formats, it is hard for retail companies, which apply the new methods, to make profit at this stage. This theory holds that the innovation in retail institutions is realized through the reformation of business methods. The reformation of business methods is mainly realized by decreasing the cost of operation and the price of products or services. However, it may also be innovated through improvement of product mix, customer service, sales, store selection, store design or sales promotion, business hours, logistics system and other ways, some of which are usually combined and innovated. Sometimes the company which leads the new retail format may become the target of hit. During the period, the emergence of new forms can also lead to the blow of competitors and retaliation. In this stage, it has little impact on the existing competitive structure for its low market share.

Growth stage In the growth stage, Langlois, R., & Robertson, P. (1995) points out that the new business formats start to be accepted by consumers and traits of new formats are widely understood in the industry. As a result, the market share begins to ascend and copycats are also on the rise. The competition between companies that apply traditional methods and new methods gets more intense. At that time, companies who have reformed their operating activities firstly can increase the marker sales and the profitability. At the meanwhile, the competition between companies of new and original retail formats begin to turn out white-hot. With the rapid growth of reformed companies, customers of companies without innovation intend to choose products and services of innovative companies. Therefore, the unreformed retail institutions begin to take various actions to stop the decline of customers. In fact, many companies, which use original retail formats, meet challenges of new formats with the positive attitude and apply some new methods in the existing formats. The competition of different retail formats is unique and increase the vitality in the market. Later in the stage, with the wide application of new formats, the competition of companies which accept new formats will emerge and augment. The competition of different retail formats does not take the main role in the market. In the competition of new formats, some companies lacking competence start considering to leave the market. The remaining companies are inclined to take actions like improvement of service standard, expanding the commodity portfolio and improvement of shop facilities. Despite the continuing growth of sales, the cost will surge as well. Apart from the direct cost, indirect cost will increase sharply including promotion cost and the expense incurred by the increasing size of the organization. The cost may be higher than the sales and companies will face the non-profit situation.

Maturity stage In this stage, companies of new retail formats are incapable of taking more market share and expand the customers' base. In this period, companies which won out in the growth stage are trying to maintain the market share. However, the profit margin begins to decline because the new retail formats could not make any company have edge on the others and companies have to decrease the price in order to defeat competitors. Therefore, how to decrease the cost is the main problem that each enterprise faces. In order to pursue the differential advantage in the period of competition, the enterprises compete to make the market more mature and stable. Characteristics of new formats have been gradually lost and new formats change to traditional formats. Thus it becomes an important opportunity for the emergency of another new format. For chain businesses, in this stage, they need to consider closing inefficient shops and open new shops in good addresses as well as develop to diversified and compound retail organization. It should be pointed out that the retail format even in the maturity stage can be improved to make the company come back to the growth stage. According to the research of Sun, L., Kay, R., & Chew, M. (2009), department stores in the United States has been in the maturity stage after World War II. After that, the development of shopping centers gave department stores an opportunity to grow again because department stores were different at that time form before, and they were reformed based on the model of shopping centers.

… excerpt ends here. Continue reading the full article.

Worked examples

Example 1 — a first encounter with Retail life cycle

Start with the simplest possible case. Write down what Retail life cycle claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Retail life cycle before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Retail life cycle ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Retail life cycle

In research: Retail life cycle appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Retail life cycle in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Retail life cycle is common in secondary-school and first-year university syllabi. It links to neighbouring topics Business models, Product management, Retail formats, so understanding it makes those chapters shorter.
In everyday life: Look for Retail life cycle outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Retail life cycle in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Retail life cycle means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Retail life cycle out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Retail life cycle in simple terms?

Why does Retail life cycle matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Retail life cycle?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Retail life cycle.