M4T1 - Retail Life Cycle

Concept of Life Cycle in Retail
The concept of product life cycle is also applicable to retail organizations. This is
because retail organizations pass through identifiable stages of innovation,
development, maturity and decline. This is what is commonly termed as the
retail life cycle.
Attributes and strategies change as institutions mature. The ‘Retail Life Cycle’ is a
theory about the change through time of the retailing outlets. It is claimed that
the retail institutions show an s-shaped development through their economic life.
The s-shaped development curve has been classified into four main phases:
Innovation:
A new organization is born; it improves the convenience or creates other

advantages to the final customers that differ sharply from those offered by other
retailers. This is the stage of innovation, where the organization has a few
competitors. Since it is a new concept, the rate of growth is fairly rapid and the
management fine tunes its strategy through experimentation. Levels of
profitability are moderate and this stage can last up to five years depending on
the organization.
Accelerated Growth:
The retail organization faces rapid increases in sales. As the organization moves
to stage two of growth, which is the stage of development, a few competitors
emerge. Since the company has been in the market for a while, it is now in a
position to pre-empt the market by establishing a position of leadership. Since
growth is imperative, the investment level is also high, as is the profitability.
Investment is largely in systems and processes. This stage can last from five to
eight years. However, towards the end of this phase, cost pressures tend to
appear.
Maturity:
The organization still grows but competitive pressures are felt acutely from
newer forms of retailing that tend to arise. Thus, the growth rate tends to
decrease. Gradually as markets, become more competitive and direct
competition increases, the rate of growth slows down and profits also start
declining. This is the time when the retail organization needs to rethink its
strategy and reposition itself in the market. A change may occur not only in the
format but also in the merchandise mix offered.
Decline:
The retail organization looses its competitive edge and there is a decline. In this
stage, the organization needs to decide if it is still going to continue in the
market. The rate of growth is negative, profitability declines further and
overheads are high.
The retail business in India has only recently seen the emergence of organized,
corporate activity. Traditionally, most of the retail business in India has been
small owner managed business. It is difficult to put down a retail organization,
which has passed through all the four stages of the retail life cycle.
In the private sector, till a few years ago, most cities in India had a few
independent retailers. For example, Mumbai had stores like Akbarally’s.,
Premsons, Amarsons and Benzer. Then Shopper’s Stop opened its first outlet in
Mumbai in 1991.The store initially offered apparel, imitation jewelry cosmetics
and perfumes and home fashions. It also had a customer loyalty program in
place, which many stores at that time did not offer.
The store enjoyed an enviable position for a while. However, with the change in
customer expectations and increased competition in the form of other
department stores like Globus, Eastside, Lifestyle, etc and the rise of specialty
stores, the company has been forced to rethink its product offering. It now not
only stocks apparel, jewelry, cosmetics etc that it earlier stocked but has also
acquired the book store chain – Crosswords.
Cross words counters have been added to many of the existing stores. The store
in Andheri (Mumbai) also houses Planet M, music retail chain and a small coffee
shop. In May 2008, the company embarked upon a major exercise in terms of
repositioning of the store, which involved among other things, a change in the
logo. It is necessary to keep in mind that a retailer need not always move from
maturity to decline. By reworking the marketing strategy or by changing the
product or service offering, a retailer may succeed in moving back to the growth
phase after reaching a stage of maturity with a certain format and a certain mix
of products.

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Concept of Life Cycle in Retail

A new organization is born; it improves the convenience or creates other

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