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= Retail life cycle =

The concept of the retail life cycle is that many retailers experience four different stages that bring about discernible stages of growth and decline in their business life. The use of the retail life cycle concept can help management analyze the direction and magnitude of future evolutionary processes. The retail life cycle concept is derived from the widely known concept of the product life cycle. In addition, the retail life cycle model has been used to study retail format in many advanced countries such as the united states. Most of these studies had been focusing on the evolution of the retail life cycle. The model of the retail life cycle is the most useful tool to understand the increase and decrease of retail institutions.

Retail life cycle theory background
Retail is an extensive field of study. In the study of retail institutional change, there are three basic theories that can be concluded from numerous schools of thoughts. They are cyclical theory, conflict theory of retail institution changes and environment theory. The environmental theory deems that the operating environment of retail institutions will cause institutional changes. In cyclical theory advocates that retail institutional change is a trend of the cycle. There are four types of the conceptual models-the retail life cycle, the polarization principle, the retail accordion and the wheel of retailing. In 1976, Malcolm P. McNair was the first person who advocated the wheel of the retailing model. The wheel of the retailing model describes that the formats of retail started at selling low price, and then developed into the high cost of distribution modes. In McNair's perspective, the wheel of retailing is towards low cost and price at first. Then, the retail institutions have a trade in store decor, services offered, and merchandise stocked. Finally, the retail institutions will be inferior when a newer form of retailing start up with lower cost and price. However, the wheel of the retail concept has suffered from two important limitations. First one, because the wheel theory is too concentrated on changing cost and gross profit margin relationships and it is limited on cost-oriented that is the foundation of new retail companies’ innovation. The second one was that the wheel of retail concept never really decided to confirm the speed of retail innovations ups and downs. Therefore, in 1976, Davidson, Bates, and Bass proposed that the retail life cycle concept as a method to explain and predict institutional action.

Innovation
The first stage is innovation. Generally, the innovation stage is like infancy. Its characteristic is emerging a new in the entrepreneurial, retail institution. Innovation is away from existing retailing methods. In the beginning, businesses may not get great profits. Usually, new companies control the cost of the product, which provides a favorable price position. The advantage may be from a unique character such as distinctive product assortment, locational advantages, advertising, and promotional methods. Therefore, in the innovation stage period, the advantages improved customer acceptance, which raised the level of products sales. When customers are getting to know the products, there will be a tremendous opportunity for the growth of profit. On the other hand, the profit may be affected because of the insufficient economic scale and start-up costs for companies, which cannot be capitalized. But at the end of the innovation stage, those retail intuitions will be rapidly making money.

Example
Amazon’s new grocery store, Amazon Go was the first of this kind of store for Amazon brand. It is also a new concept in the structure of the store. Consumers can browse and buy all in one step, improving the speed of shopping process and deleting the traditional cash register pay station instead of filling a cart and paying at the checkout line.

Accelerated development
In the second section of the retail life cycle, sales volume and profits will have a rapid rate of growth. Because these new companies get trust and appreciation from customers and these companies fill the needs and want in marketing. In this stage, those companies that have established will actively expand their business.

Example
Ulta Beauty is a good example of a company experiencing growth, thanks to the popularity of the cosmetics industry. Over the next five years, Ulta officials have said they plan to open 100 new stores each year. This comes after the company reported a second-quarter net income that grew more than 30 percent.

Maturity
The third stage is a significant process that companies facing the rate of growth are decreasing in the profit and sales volume. The market share of the new format has entered zero growth and the possibility of expanding customers is not large. Consequently, many factors come together resulting in very important operating problems. First, companies’ management is facing difficulties in huge and complexed organizations. Second, retailers expand their businesses that exceed the size of the total market.

Example
Fast food industry in the late 1960s and discount department stores in the early 1970s. manager found that they were facing the problem that assaulting from new forms of distribution.

Decline
Due to changing in consumer buying behavior and the emergence of new formats, the market has shrunk significantly, and the overall industry position has declined, eventually exiting the market. At this stage, due to changes in consumer purchasing behavior and the emergence of new formats, the market share of the traditional format (the original new format) has fallen sharply. Although the competition tends to ease, sales have begun to decline, and losses have occurred. Some companies have begun to withdraw from the market. During this period, as the status of the entire industry is declining.

Example
In 1975, A&P announced that A&P was closing around 1300 concession stores because many of its units were economically outdated in today's market.

Use of retail life cycle
Retail life cycle demonstrated vividly in its application to the department store, which can be proved by historical data. Retail life cycle theory helps us track the development process of the format of stores. We also can predict the structure of retail in the large-scale transformation, which is on the basis of dating the increase and decrease trend of the department store and formulating a retail institutional development plan accordingly. In the second half of the 19th century, retail stores had increased quantitatively and in the early 20th century they can be accepted gradually. In addition, In addition, the European Union has studied six types of retail life cycle formats. These include hypermarkets, discounters, food retailing, non-food retailing, large-area specialists and, retailers.

Managing the retail lifecycle
Because today retailers have to manage many stores, employees and customers. Effective management can help retailers to improve the advantage in the competitive market. Three business processes constitute the basis of retail life cycle-Planning, execution, and analysis. Three processes also have an important component that is collaboration. The first process planning is aiming to match products and prices to channel and location. The second process execution is checking the report. The third process is Analysis. Retailers check their report every day and making plans. Collaboration means that retailers connect extended companies.

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