Tag Archive for Active Retailing

Stores are Getting Smaller, Not Necessarily Better

“Small” is the latest “big thing” in contemporary retailing in 2015….less is more. Ironically, the impetus for the reduction in size of store footprints is in significant part due to a recent trend of building huge stores over the past two decades. During that period, Walmart, SuperTarget, Costco and even the likes of Kroger found nirvana in retail formats well over 150,000 square feet. Others followed. “Size Matters” was the battle cry.shutterstock_206702317

The size of traditional supermarkets doubled in many instances. Categories and variety were expanded and even the most traditional retail supermarkets made ample space to “sell everything but the kitchen sink”. It should be noted that Midwestern DIY retailer, Mennards actually does sell groceries and the kitchen sink.

Fast forward to present day. That quest for size is largely responsible for saturated and sub-optimally productive retail markets. As a consequence, many retailers who opted for big boxes find their revenue per square foot in constant decline. Additionally, Amazon and other e-retailers have taken a sizable chunk of sales and productivity advantage away from these larger box operators by not having to operate thousands of labor-filled stores and burgeoning on-hand inventory. Now, even the retailers that invented “big” are nervous.

Walmart believes part of the answer is building smaller Neighborhood Markets and even smaller “Express” stores. Other retailers across the Food, Drug, and Mass channels are experimenting with limited variety “express” formats. Target, Whole Foods, Stop and Shop, and regional independent, Martin’s are chains that have made recent headlines with their experimentation into the world of smaller “express or urban” formats.

Simply said, lots of smart people from very successful retail chains are diving in head first into smaller footprints. But reducing store size has its inherent risks and consequences. The following are areas of four shopper dynamics retailers should consider in when designing a more concise footprint;

  • Shopper’s Variety Comfort Zone: Smaller footprints necessitate dramatic reductions in both breadth and depth of categories. Without extensive research into the reasons shoppers frequent a retailer’s physical stores, eliminating variety can create the risk of sending the wrong message to shoppers who find comfort in knowing a retailer has what they want, when the want it. Balancing the benefits of less space with the loss of variety is a delicate, but very important process.
  • Before Shrinking Store Size: Have a Viable Companion On-line Shopping Alternative: Before a retailer leaps into smaller footprints, it would do well to first develop a consumer centric approach for shoppers to have access to less frequently purchased items. This could be accomplished via an in-store kiosk where items can be ordered and dropped at the store for pick-up or delivered to the home, as just one example.
  • Operational and Merchandising Limitations: With reduced space comes with it the opportunity for faster moving items to be more readily out of stock. With all the current issues even the best retailers are having with out of stocks, reducing inventory capacity in smaller footprints may only exacerbate this problem. Also for those retailers who still rely heavily upon brand dollars for slotting allowances, end caps reservations and other in-store placements, there will be much less room for such things in an “express” store. Technology, planning and customer data can mitigate these issues if included in the design plan.
  • Inefficient Layouts: Multiple studies have concluded that a significant portion of the inefficiency with larger formats is not simply connected to the actual amount of square footage retailers must merchandise, or shoppers must navigate, rather much of the problem lies with inefficient store layout. During the design phase of a smaller footprint, it is an excellent time to lever research to better understand the dynamics of the current formats. Shopper traffic flow, hot and cold spots, dwell time, optimal departmental placements and are critical in enhancing the Customer Experience (CX). Once armed with the knowledge of how shoppers are engaging existing formats, large format stores can be improved and new smaller prototypes, can be made more efficient out of the gate.

Market conditions are conducive for smaller formats to continue to populate urban areas and saturated markets. Reducing store size brings with it the opportunity for more efficiency, productive sales areas and a more efficient customer experience. Conversely, with less space to sell into, merchandising the stores and engaging the shopper will require thoughtful planning based upon measurable in-store shopper behaviors. Let the discovery begin!

mark heckman

Chasing the Ghost of Shoppers of the Past

The deliberate, time rich shopper of the past, to whom we market our stores, no longer exists. Quite the contrary, In general shoppers are time starved, distracted, and in some cases just flat out annoyed when they enter our stores. This new shopper increasingly finds ways to short-circuit the store plan, finding their items and moving on as quickly as possible, despite the retailer’s best efforts to induce the shopper into a long and deliberate visit.

Shoppers are trying to tell us something!

To amplify my point, there exists quantitative research in abundance supporting the notion that bricks and mortar stores are rapidly alienating themselves from the evolving shopper. Among several notable KPI’s (Key Performance Indicators), such as Dollars per Square Foot, Same Store Sales and Customer Counts are trending in the wrong direction for all except the very few that have strategically embraced the new shopping paradigm.

Dr. Herb Sorensen, who I consider the very best source of empirical knowledge on consumer shopping behavior, stated in one of his recent publications that the relatively short time the shopper spends in a retail store is mostly devoted to moving from point “A” to point “B” and not engaged with actual shopping at all. This is particularly true in larger foot print stores of 50,000 square feet and more. In fact, only twenty percent of the entire shopping trip involves the shopper facing the shelf and engaging in the purchasing process.

The implications of this information are profound. Retailers and their marketing partners spend annually $275 billion in the U.S. on advertising, marketing, and promotion initiatives. These monies generally are regarded as less than efficiently spent, due to a variety of reasons, but chief among them is that those funds are not reaching the shopper effectively at the shelf, when and where the majority of purchased decisions are made.

Retailers and brands alike now have access to new research techniques and resulting data that can help them re-think how they lay out their stores and categories. Ultimately, each retailer should have a Visual Strategy for its bricks and mortar stores. Much the same way a web designer uses Google Analytics to build and fine tune an efficient website, physical stores must be approached in the same way.