What is the significance of a product's life cycle in merchandising?

The significance of a product's life cycle in merchandising lies in its ability to assist retailers in anticipating demand and planning markdowns. Understanding the stages of a product's life cycle—introduction, growth, maturity, and decline—allows retailers to make informed decisions about inventory management, pricing strategies, and promotional activities.

During the introduction phase, demand may be uncertain, so retailers carefully monitor sales to adjust their inventory levels. As a product enters the growth phase, demand typically increases, prompting the retailer to stock more of the item. Once the product reaches maturity, sales stabilize, and retailers may start planning markdowns to clear out inventory in anticipation of the product entering the decline phase, where demand begins to drop. This proactive approach helps retailers optimize their inventory turnover and manage cash flow effectively.

In contrast, other choices relate to different aspects of retail management rather than the specific implications of a product's life cycle. Managing employee turnover, predicting stock market trends, and maximizing supplier negotiations, while important, do not directly connect to how understanding the product life cycle influences merchandising strategy. The focus on demand anticipation and markdown planning is what makes the correct answer particularly relevant within the context of merchandising.