Efficient Retail Floor Space Management 2.0 (Macroplanning)

Efficient Retail Floor Space Management 2.0 (Macroplanning)
February 15, 2021 Omnibus

The way retailers organize and arrange product categories within their floor space strongly impacts customer shopping behaviour.

Different in-store research cases prove the effects of store layouts on average basket size, volume, and value.

Also, own direct experience of store operators supports this – they just know that moving ice-cream refrigerators from a barely visible corner to highly frequented counters works like a miracle for sales. Or that moving important category like carbonated drinks from a low to a heavy traffic position might increase category sales value by 3 times.

Knowing this, successful retailers and suppliers approach space management systematically. They carefully study shopper profiles and incorporate their findings into store layouts.

Easily we can claim that store layouts and the processes behind maintaining and improving them are not just core but also the crucial advantage of every retailer.

— CATEGORY-BASED FLOOR SPACE MANAGEMENT

Product categories are usually defined as discrete groups that consumers perceive as similar or related. What is “something that protects and comforts the human foot?” Yes, a shoe. And this shoe makes a typical category within a larger segment of clothing etc. The hierarchy of such product categories is called Consumer Decision Tree.

The more CDT reflects the shopping habits the better.

Category management as a native computer-aided discipline highly excels in analytical capabilities particular to this area of retail management. In hands of a capable floor space manager Heatmaps, frequency of category buying, space to sales analysis, and all sorts of retail mathematics for each particular store are reachable within hours, if not minutes.

But there are limits to this view of floor space management. Up to a point rationalization of floor space management provides many business benefits (easier store navigation, lower inventory levels, less time for filling the shelves). But rational space organization is just part of the formula and doesn’t guarantee floor plan efficiency anymore.

The limits are set by changed shopping habits and different shopper expectations.

— ADVANCED FLOOR SPACE MANAGEMENT PRINCIPLES

As buyers, we are buying not only with brains but with all the senses. The stores organized only by logical, engineering principles are usually not on the thriving edge of retail.

Just take your regular grocery supermarket store into focus. You might find different levels of product arrangement:

CATEGORY-BASED

Might be a prevailing arrangement principle – you get all the dairy products or non-alcohol beverages in one place. This makes it easier for a buyer to stock up on routinely bought categories.

EXPERIENCE-BASED

But there is definitely a part of the store where you expect products from different categories put together as pleasantly as possible. In the deli you expect cheeses to be placed close to sliced meat, vegetable spreads. Oh, yes, and maybe some local wine or a bottle of chianti. How about homemade biscuits? Also. So here we exit plain category-based arrangement. We better call it an experience-based arrangement. Visual merchandising gains importance in these areas.

MISSION-BASED

From here to mission-based is just a step. Heat & Eat department, On-the-go, Ready for Dinner etc. Here we can find smoothies, sliced fruit, sandwiches, dips, salads, etc. all placed together. Definitely higher added value for the customer – if we have a base of customers that’s big enough.

THEME-BASED

But there might be an even higher level of arrangement, based on seasonality (Summer Party) or specific rituals (Back To School), or even attitudes or ethical shopping. The Fair Trade section could be a confirmation of the latter.

 

The same principles apply also to specialty stores. In consumer electronics, the gaming section means much more than ordering recently published games into racks. Gaming could start with gaming chairs, special equipment, provide experience, build community, etc.

Not to mention, the one and only, IKEA. Their categories are structured on a higher level. It’s far from putting all the sofas together, all the wardrobes together, all the beds together, which was the regular arrangement principle in furniture stores before IKEA turned furniture selling into home design. This might be a bit overlooked power of Ikea but is actually organically inscribed in the DNA of the company.

— LEVERAGES FOR SUCCESSFUL RETAIL SPACES

As mentioned, traditional category management raised up in the 1990s struggled to organize assortment within confines of categories and then applied all sorts of computer-based operations on these.

Advanced category management (we call it “swift category management”) should support different hierarchies of product arrangement as described above.

Actually, it should give architects and interior designers the inputs for drawing creative store spaces, then support the layouts through machine learning processes.

That’s what Omnibus’s retail store layout proposal method #leverages is at its core. It provides 1) full flexibility but also 2) firm guidelines in this area.

I’ll write about best practices where we used the #leverages principles, its theory & practice in the following months. Until then, you’re kindly invited to read our free, informative PDF.

Or jump on board. We can analyze your retail space, discover opportunities, suggest suitable product arrangements, and help to support your teams to take the right steps toward remodeled store layouts.

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