Archive for June 3, 2015

Playing “Small Ball”…..the New Game in Retailing

“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.

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;

  1. 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.
  1. 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.
  1. 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.
  1. 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 measureable in-store shopper behaviors. Let the discovery begin!

 

mark heckman

 

 

 

From The MorningNewsBeat: No Plan Survives Contact With The Enemy

Wednesday Morning Eye-Opener:

By Kevin Coupe

Businesses of all kinds got some great advice from a sage military strategist this week, as retired Gen. Stanley McChrystal appeared on “The Daily Show with Jon Stewart” the other evening. He was there to plug his new book, “Team of Teams: New Rules of Engagement in a Complex World,” and Stewart began the interview by showing a chart from the book that focuses on the current military-political structure in the Middle East.

The subject, at the moment, was the Middle East. But the discussion could have been about any competitive business situation.While we think of many of the forces in the Middle East to be medieval in their orientation, ISIS, McChrystal said, “is a 21st-century organization that uses some frightening tactics, really quickly, and then they leverage Digital Communications to essentially tie their enemies in knots.”In fighting such organizations and creating a future strategy, he went on, “it is fundamentally impossible to predict.

So what we really have to do is go at things with an awful lot of humility that says what we’re going to to is approach things with the reality that we’re going to have to adapt constantly and iterate. You’re not going to come up with a 100 year plan, or a 50 or even a five year plan. You’re going to come up with general directions and frameworks, and you’d better learn every day, because that’s the world we’re in now.”And then McChrystal delivered the business lesson.”In the military, there is a saying that no plan survives contact with the enemy…I think that’s what we’re finding in business now, too.

You’ve got competition from competitors, garage start-ups, new technology, all of these things, and organizations that get very happy with being efficient, with very, very wired processes that have worked for their grandfathers, fathers and brothers, now don’t work.”One can’t assume that the enemy – or the competition – is wired the way we’d like them to be wired, that they are thinking in traditional terms or planning traditional strategies. Rather, one has to assume the opposite – that the competition is going to see the marketplace through a different prism, see opportunities for both effectiveness and efficiency where we’ve missed them, and use strategies and tactics that we haven’t considered.“No plan survives contact with the enemy”.

Eye-Opening words to live by.

Source: MorningNewsBeat