In my view, the over-storing of America is perhaps the most immediate and imposing problem facing retailers, especially those who have invested heavily in expanding their physical footprint over recent years. The public investment community, industry pundits and retailers themselves have used the “plan for new store growth” as one of their key metrics in judging the health and future vitality of the enterprise. Things are changing. The rapid increase in the percentage of retail transaction on-line
(about 15% today with it expected to reach 50% by 2030, the strategy of investing heavily in physical stores is now put many of these retailers behind the proverbial ‘eight ball’.
In fact in the U.S., the overstored marketplace equates to about 7.3 square feet of retail space per capita. That’s well in excess of the 1.7 square feet per capita in Japan and France, and the U.K.’s 1.3 square per square feet. Most believe that U.S. number to be unsustainable and the recent announcements of store closures and Chapter 11’s in the retail industry
provides evidence of that belief.
As we have seen, in an over-stored marketplace, new store growth typically slows and actually begins to cannibalize the retailer’s own existing sales to the point where it no longer represents the most profitable way to grow sales revenue. Dollars per square foot performance begins to drop and suddenly once profitable stores become a “drag” on the chain’s performance. In such situations, the once powerful asset of a new store has turned very suddenly into a lethal liability.
There is a way forward for bricks and mortar retailers in a market with too many retail outlets, but it requires a radical change of focus and success metrics aimed at customer growth rather than store growth. Measurements such as new customers, customer share of wallet, transaction size, and repeat transactions all become worthy of becoming Key Performance Indicators, (KPI’s). These metrics focus upon the shopper, not the store. Further, in this new metric paradigm, customer lifetime value should displace store related metrics like dollars per square foot, same store sales and store volumes as the key standards of success.
Operating in an over-stored marketplace requires much more than new metrics. This new customer-centric approach also involves assessing how the internal real estate of each store is utilized. With each passing day, shoppers are becoming more acquainted and comfortable with web-based shopping options. Past purchase history and the use of subscription lists expedite and enhance their shopping experience. Point and click technology has become more ergonomic as website use tracking research to refine their sites according to customer usage, and that’s why is important to also have a good web hosting, which you can get from different sites like http://www.armchairempire.com/Reviews/web-hosting.
Concurrent to the progress seen on-line, retail stores have experienced minimal change. Upon occasion, in-store kiosks and other technologies are beginning to surface to ease the pain of searching for products and deals within the physical store, but all too often, nothing of substantial change is evident when shopping in-store. It is an experience very much designed for the shopper to do all the heavy lifting in terms of finding and purchasing the items on their list and beyond.
Successful physical stores going forward will be more concise in it’s merchandising. Studies tell us that today shoppers spend about 85% of their time in-store searching for the next purchase event, not spending! These inefficient stores will continue to suffer lower sales productivity numbers as the ever-changing in-store shopper will demand the same level of efficiency they experience on-line, or at least stark improvement over their current in-store experience.
To accommodate this new standard of shopping, bricks and mortar merchants must place the items that sell the most within easy grasp of the passing shoppers as they traverse the store according to their needs. This approach stands in stark contrast to traditional merchandising that places priority ‘manipulating’ the shopper’s footsteps through the store by placing key categories and items in all corners of the store to insure shoppers must traverse more of the store’s aisles and departments.
The adjacent chart depicts a typical U-turn Dominant Path that the majority of the shoppers take and leveraging that path to place the most frequently purchased items along that path.
Finally, in an over-stored environment, those stores that survive and thrive will not only view their shoppers holistically across both physical and on-line touch points, their stores will reflect this approach by offering access to on-line options to the in-store shopper.
Progress is evident in this area among several retail channels, with home delivery, BOPIS (Buy On-line, Pick up in-Store) and with kiosks enabling shoppers to buy additional items not stocked in the store. Each one of these services can increase the retailer’s share of wallet with a shopper, without the cost of additional stores and inventory.
Such strategies must be more than ad hoc efforts to accommodate a new shopping trend, but rather they will require a re-thinking of the business, its success metrics, and an entirely new commitment to change from a traditional retail operation to a shopper-centric agent. Physical stores that overtly reflect this new way of doing business will provide the shopper faster access to products, more efficient trips, and a new array of purchase options that do not exist currently.
In an over-stored marketplace new stores will be built, but they will be fewer, smaller, smarter and much more shopper friendly. Those stores that are not will likely join the growing list of closures that have dominated the retail industry in recent months.