The life of a typical retail "concept"—the complicated mix of products, service, locations, store format, operations, and brand image that makes a retailer unique—has been halved over the past 25 years. Concepts born in the 1970s, such as the specialty clothing store Merry-Go-Round, had an average run of 15 or 16 years before earnings growth slowed significantly. Younger formats will probably last only four or five years before growth slows (Exhibit 1).

Several developments are shortening life cycles. Consumers have become more sophisticated and tend to shop around for value, while retailers have improved information systems to recognize and respond faster to shifts in consumers’ needs. Overall competitive intensity has increased, especially in the United States and the United Kingdom.

As formats mature, retailers need to act quickly. Once a retail concept starts to decline, its financial performance can tumble rapidly, making recovery increasingly difficult. A recent study of established retailers with three consecutive years of negative earnings growth found that almost half went bankrupt and most of the others took at least another four years to recover (Exhibit 2). To avoid this fate, retailers must become expert at concept renewal. They must also expect to renew frequently—even, as...