The suffix "re-" means to repeat something. It can also be phrase "to re-do something". This can imply "re-doing" it in a better way, a way that suits someone more. "To place something somewhere" means to put something down somewhere. If you combine it - there you go! To put something in the place of (something better).
PS: You may find this useful:
a prefix, occurring originally in loanwords from Latin, used with the meaning “again” or “again and again” to indicate repetition, or with the meaning “back” or “backward” to indicate withdrawal or backward motion: regenerate; refurbish; retype; retrace; revert. From Middle english.