When you consider that many retailers only refurbish their stores once every 5-8 years, or when leases are due for renewal, it’s not surprising that the effects of an updated store design on sales and ROI are not top of mind.
What is surprising however is how little it takes to get customers to notice a change in a store. We once had a project for a major department store in which all they wanted to do was repaint 6 stores. The difference in the ambience of their stores was quite amazing and customers reacted very positively by spending up.
Making changes to your store can also be the best form of marketing for your business as the effects are longer lasting than any advertising. Recently I presented to the board members of a retail group and compared the cost of developing a new store design for their company to the investment for one TV campaign in regional markets. Long after the ads have finished the effects of store design on sales and profits can be felt.
STORE PLANNING CAN MAKE MONEY
A very important part of store design is planning – and when I think of all the badly performing stores we have had to work on, most of their problems boiled down to a few typical problems:
- Wrong store size – too much space costs dearly and not enough space limits range
- Poor customer circulation around the store
- Poor navigation – difficult for customers to find what they are looking for
- Poor sight-lines
- Poor product adjacencies – related departments are not located near each other
Get just one of these issues right and you will be thanking your store designer for increasing your profits.
We are constantly amazed at how few retailers have accurate data on their return on space (Gross Margin Return on Space, or GMROS) at a department or category level. When you consider how expensive rent, fitout and inventory are, it often surprises us when retailers don’t use GMROS as part of their store design briefings.
Just recently we worked on a project for a client that had detailed GMROS data and we were able to demonstrate how much profit improvement could be achieved by optimising the square meterage of each department and the lineal meterage allocated to each category.
We discovered that most of their stores had far too much space allocated to poor GMROS contributors and using a process called Heat Mapping, we changed their store layouts quite substantially using the results of our analysis.
SPEED UP YOUR FITOUT
Another major impact on store profitability is the impact on sales during fit-outs. Most builders measure their construction and fit-out programs in working days. Retailers see the same days as lost sales.
The benefits of speeding up and shortening the process of fitting out stores are numerous: Less customer inconvenience, less wastage on staff costs, and most importantly, less negative impact in terms of lost sales.
Many retailers will tend to fight to save a few dollars on fit-out costs, oblivious to the effect this has on sales. You need to ask your store designers to design your stores in such as way that fit-outs can be implemented faster – fast track design and fit-out is a new and emerging trend.
SPEND LESS MORE OFTEN
Almost as bad as leaving store refurbs for up to 7 years is the tendency to think of spending large sums of money on fit-outs – infrequently. We always encourage our clients to think in terms of the A-B-C strategy in which a new design concept can be broken down into design ‘packages’
We often rank these packages into levels of cost and scope from high to low:
- Major refurbishments
- Minor refurbishments (refresh programs)
- Cosmetic updates (makeovers)
Our advice to retailers is always to spend an appropriate amount of money on new stores or major refurbishments and then to spend smaller amounts of money more frequently. Don’t wait for your lease to expire or an unpleasant phone call from your land lord.
Design is first and foremost a creative process – a right brain activity. But the positive effects of a good store design on the bottom line are a left brain exercise.
I suggest that its time to think with the whole brain and to think about Designing for Profit.