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 the retail environment have been written about this. Let’s try to simplify: such spatial layout of merchandise that 1) convincingly satisfies the 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 also came to the conclusion that the retail space of their stores 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, d) assortment and space arrangements vary from store to store which means losing on sales.

Sooner or later the retailers described above begin to search for a solution that would take them out of the “space trap”.

WHAT TO CONSIDER?

Retail store improvement is not just a matter of space optimization – you need to be able to create a valuable experience for the customers, pack it in the concept and then execute well; it’s a combo! IT solutions with strong algorithms might help but only after you meet other conditions (concept, people, processes, feedback loop); relying solely on IT might seem a perfect shortcut but in reality, it usually backfires; also plan enough time for IT solutions implementation, as you’ll get in the loop of iterations towards really working solution.

Here is a checklist that could direct you towards the solution. Answer all the questions and see where do you have gaps. Fill them.

  • First thing first. Do you know who the customers are, how they shop, and what do they expect? Don’t overanalyze but prepare initial shopper analysis.
  • What is your unique selling proposal (USP)? Is it valuable to the customer? Does it show in your store concept? How?
  • Is your store concept already clear to you? Is it proven somewhere? If not, clear it, define it.
  • How strong are your current space management processes? Do you have a clear linkage between space planning and execution? Do you have a control loop? What is the control mechanism? Who checks the store compliance to space instructions and how often? Define all of the above for the pilot store (necessary tasks, responsibilities, how do you check them?)
  • Do you have lists of equipment and all the data about current floor plans? Is there any equipment that is absolutely necessary to execute the remodeling?
  • Don’t forget about reasonable time frames. Build to last, be prepared to educate your staff – do not only invest in something that will supposedly bring success overnight.
  • Which particular store is closest to your expectations? Take the points that work and could serve as a basis for remodeling.
  • Finally. Last but not at all least. Actually first. What is the level of knowledge your team has – do you have a capable visual merchandiser, analysts who provide insights, well trained, and experienced space managers? If not – how will you get them to the level needed for success? Where will you fill empty competences with your own staff and where rely on outside experts?

MVP PILOT STORE

A pilot store might serve to put all of the above on track. You might still get an idea this is a waste of time as shiny IT powered outside solutions can promise you immediate success but don’t forget – successful retail store is a combo! There are clearly some leverages that you can use in order to work towards solution sufficiently – but no magical wands for overnight success. Also, a clear goal with some deadlines immediately involves and focuses your team energies on an actual project.

So you’ve decided to remodel your existing store into a pilot store. Congratulations, there you go. This means taking the bull by the horns instead of relying solely upon the technological miracle.

You might check all of the above and see where there are inconsistencies. Do you have customer analysis at hand? Do you have all the data on available space? If not. Remember. This is your minimum viable product – or minimum viable future store, no sophisticated tools are needed at this moment. Just measure all the available shelves, promotional elements, and square meters for services. You’ll prepare computerized automatic procedures later. Define the key measurements and loops and make people responsible for particular tasks in execution. But don’t forget also to define where are your weak points where your team will need a) extra help and/or b) additional knowledge in order to get to the MVP.

You 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. Smart Store Layouts – our simple but extendable tool – could serve as an analytical framework for space to sales analysis on a category level. The mathematical part of the task should be underpinned with a visually convincing presentation of the offer. Putting all the relevant features of a tested concept together in a minimum viable product (MVP) makes a test for a new generation of a selling point. The feedback is immediate – and it comes from real customers. We can measure the right variables, establish and improve space arrangements in iterations. You can also adjust tactics according to the results and user experience.

PROVEN STORE CONCEPT

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. After iterations, the concept is proven and ready to spread on the whole chain. Great leverage!

Instead of fruitless meetings and wasted brain cells with the “strategic plans” for huge investments, we at Omnibus, therefore, recommend kicking off an MVP 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 ripe enough – 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, retail teams are getting hands-on proficiency at solving space problems, financial effects get increased as they are supported by continually working processes!

To help retailer teams staying on track when embarking on a many times foggy & unpredictable sea of retail store remodeling we have put all our experiences and actionable insights in a workshop package that steers the participants from the concept to an actionable pilot store plan.

 

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