Pilot Store As a Leverage for Efficient Space Management

Pilot Store As a Leverage for Efficient Space Management
July 24, 2020 Omnibus

What defines efficient store space management? Books and countless presentations in retail environment have been written about this. Let’s try to simplify: such spatial layout of merchandise that 1) convincingly satisfies basic shopping intention of a customer, in a 2) tactically proficient way that guarantees profitability to a retailer, whereby 3) the stock turnover is fast with a balanced flow of input and output quantities of products.

As an upgrade to the 3 conditions above we can add 4) extending customers’ desires towards unplanned purchases in a non-intruding way and 5) ensuring space flexibility over time as customers’ intentions are dependent on seasons (capability of adjusting shelves and other elements in a floorplan).

Sounds not too complicated but many retailers struggle with that. Especially, store chains developed around a specialty category (pet food, baby care, stationery, …) or national chains who didn’t have enough resources to build space and category management departments. Many of them correctly pointed out that their retail space is far from optimized due to many uncontrollable contingencies at work. Some common troubles are a) the Purchase department makes orders without space limitations in mind, b) slow turnover categories are spreading over the floor while c)  fast-growing categories with trend upwards are underspaced .

APPROACH A – HEAVY IT INVESTMENT

Retailers stuck in a “space trap” often try to find a quick outside solution to get them out. They decide to invest in expensive IT solutions or new store equipment. Unfortunately, this expensive approach usually backfires. The purchases don’t increase enough, IT solutions take an enormous amount of time and effort from employees. Also, seasonal adjustments could be unsolvable with fixed presentations that took a lot of time for preparation. Also, the process of software implementation usually gets extended over the years with pretty vague efficiencies.

THE OTHER WAY – PILOT STORE

There is another way. Perhaps it seems slower at first glance – which is something top managers prone to immediate visible impact are also scared of – but actually it pretty soon catches up on the first approach. And overtakes. Besides, it immediately involves and focuses your team on an actual project.

So what’s the alternative approach?

Taking the bull by the horns instead of searching for the technological miracle. How? Through space arrangement and optimization in a pilot store. We can define basic store concept, execute diagnostics of stock and sales, prepare solid space vs sales hypotheses, and implement all that in an actual store environment. Our tool Smart Store Layouts is simple but extendable enough as a framework for space to sales analysis on a category level. The mathematical part of the task should be underpinned with a visually convincing presentation. The feedback is immediate – and it comes from real customers. We can measure the right indicators, and improve space arrangements in iterations.

Our title image shows a pilot store as a transmitter that sends a signal far away. That is exactly the idea of a prototype or pilot store. A successful space management solution established in one store prepares us to spread efficient solutions on the whole chain. Great leverage!

Instead of fruitless meetings and wasting brain cells with the “strategic plans” for huge investments, we at Omnibus, therefore, recommend kicking off a pilot store. It works as a development tool. It serves for the perfection of processes and provides basic requirements for efficient store space management. When ready – the evidence-based processes could be supported with appropriate software and IT solutions. Parts of the solutions could be hired as cloud services and others just easily duplicated in a standardized form.

By that, we strike more flies at once: investment costs are drastically cut down, our teams are getting hands-on proficiency at solving space problems, financial effects get increased as they are supported by continually working processes!

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