The Essential Guide to Retail Store Layouts that Shape the Customer Experience
Smartsheet Contributor Kate Eby
October 26, 2017 (updated August 3, 2022)
Although the retail industry is transforming as technology continues to shape the consumer landscape, the primary goals of a sound retail strategy have not changed: Deliver value in the supply chain and create a unique customer experience. The rebirth of retail stores — after years of digital disruption and economic challenges — is possible if retailers can successfully contend for their consumers’ attention, and in return, earn their business. One way to do this is to design a digital and physical retail environment that captures the overtaxed attention of consumers today.
In this article, you’ll learn about how retail customers predictably behave, why this behavior matters, and how you can influence it with a thought out store layout design. Use the navigation guide on the left to find a collection of essential retail floor plans and discover the pros and cons of each. If you’re ready to plan and design your store, jump ahead to the tips and best practices from professional retail designers, and browse through the design resources to help you imagine and create a new environment that captures your customer’s attention.
What Is a Retail Store Layout?
A retail store layout (whether physical or digital) is the strategic use of space to influence the customer experience. How customers interact with your merchandise affects their purchase behavior. This retail principle is one of the many from Paco Underhill, author of Why We Buy: The Science of Shopping, keynote speaker, and founder of Envirosell.
The interior retail store layout has two important components:
- Store Design: The use of strategic floor plans and space management, including furniture, displays, fixtures, lighting, and signage. Website designers and user experience (UX) researchers use space management techniques and web design principles to optimize e-commerce websites. We’ll further discuss a variety of popular retail floor plans later in this article.
- Customer Flow: This is the pattern of behavior and way that a customer navigates through a store. Understanding customer flow and the common patterns that emerge when customers interact with merchandise based on the store layout is critical to retail management strategy. Physical retailers are able to track this using analytics software and data from in-store video and the wifi signal from smartphones. For example, solution providers like RetailNext provide shopper analytics software for retailers to understand flow and optimize the customer experience based on in-store video recordings. The technology also exists to track the digital customer flow and online shopping behavior. Using “cookies” and other software, online retailers can track customer behavior, including how customers interact with their website.
While the exterior retail store layout includes exterior store design and customer flow, it also includes the following factors:
- Geographic location of the retail store (real estate)
- Size of the building and length of the walkways accessible from the entrance and exit
- Use of furniture and exterior space for people to gather and interact
- Style of architecture of the retail building
- Color of paint and choice of exterior building materials
- Design of the physical entrance and exterior window displays
The objective of retail store design is to positively impact customer experience and create value, which is the primary goal of retailers in the supply chain. For more information on retail strategy and management read the article “ How to Survive and Thrive in Retail Management .”
A Step-By-Step Guide to Planning Store Layouts that Maximize Your Space
It is essential to understand your customer flow and the general patterns of navigation in your specific retail environment before you can optimize customer experience and plan a strategic store layout. Retailers, consultants, store planners, interior designers, and architects all use a variety of retail floor plans and concepts to influence customer flow and behavior. Retail giants along with small, independent retailers can improve customer experience, and in return, long-term profitability with efficient store layouts. In Store Design and Visual Merchandising: Creating Store Space That Encourages Buying, author Claus Ebster offers valuable insight into maximizing your retail space.
Step One: Target The First Floor
The first step to maximize your profitable retail space might be the most unavoidable, however the principle and knowledge behind the customer behavior is crucial for understanding your overall design strategy. Ebster’s research indicates that customers prefer to navigate the floor of a retail store they initially entered. Walking up and down stairs or using elevators and escalators to navigate a store hurts customer flow. When possible, planning for a single floor store design will optimize the customer experience. Exceptions exist, such as downtown locations where real estate is at a premium or large department stores with multiple categories of merchandise. Further, Ebster points out that retailers should consider customer perception if they are a luxury retailer, as shoppers often associate multi-level stores as “elite.” Conversely, if a discount retailer is planning store layouts, as customers associate single floor layouts with “less high-end” merchandise. Consider your overall retail strategy and store layout design prior to selecting your store location. If you have multiple floors, account for the preferences of first floor shoppers by using this space for the feature or high-margin merchandise in your retail mix.
Step Two: Identify Customer Flow
Ebster presents some general rules for customer traffic. Customer flow patterns vary depending on the type of retailer, the size of the store, and the target customer. Ebster encourages retailers to use their observations to discover the problems and opportunities unique to their environment. The next step in maximizing your space for profitability is identifying your customer flow. The most effective method for understanding your existing customer flow and identifying areas of opportunity is video recording and heat mapping analysis. This service is available via solution providers such as Prism (you can also do a quick online search for heat mapping consultant services in your area). However, setting aside different times of the day to make in-store observations in person and recording your notes is a step in the right direction for identifying customer flow patterns.
Step Three: Avoid The Transition Zone
After you identify how your customers navigate your entire retail space, turn your attention back to the entrance. The transition zone area, coined the “decompression zone” by Underhill, refers to the space just beyond the entrance to a retail store. The average customer needs this space to transition so they can familiarize with the new environment. Underhill is adamant that nothing of value to the retailer, not high-margin merchandise, prominent signage, or brand information goes inside this zone. Customers need time, however brief, to adjust to new lighting, smells, the music, and the visual stimulation in the store.
Step Four: Design for Clockwork Navigation
The next step moves beyond the transition zone and shifts the focus on how to leverage a customer’s tendency to navigate the retail environment. The area just outside of the transition zone is where most retailers make a first impression. Customers consistently turn right after entering the store and continue to navigate the store in a counterclockwise direction. Ebster points out that this customer behavior repeats itself time and again in consumer research. Although researchers and design professionals have different explanations for the reaction, in general, many recommend displaying high-margin merchandise and valuable information just to the right of the entrance (outside of the transition zone). Underhill popularized the “invariant right” and proved the effectiveness of the technique with thousands of hours of video.
Step Five: Remove Narrow Aisles
Finally, follow your customer flow through the transition zone and around the retail space in a counterclockwise pattern. Search for tight spaces or bottlenecks along aisles or around fixtures and displays. Repeated analysis of Underhill’s video research demonstrates that customers in the US — women in particular — value their personal space when shopping. If a customer is touched, bumped, or otherwise interrupted when interacting with merchandise, they are likely to move on from the items or exit the store altogether. Ebster uses customer behavior research from one study of a supermarket to further advocate for broader aisle design. Video analysis showed fewer customers entering narrow aisles in the store compared to the more expansive, accessible walkways. These aisles send positive signals to shoppers and positively impact customer flow and merchandise interaction. Avoid narrow aisles and corridors when planning your store layout and strive to protect customers from what Underhill coined as the “butt-brush effect.”
Essential Retail Store Layouts
Once you research and understand how customers navigate your store, you can start influencing how they interact with the merchandise. The foundation for this strategy is the design of your store floor plan. To create an environment that strategically emphasizes the desired purchasing behavior, it is essential to use all of the floor space you have allotted for merchandise, base your layout on the principles of customer behavior, and not sacrifice customer flow for artistic taste. With these factors in mind, the following are common store layouts for your consideration.
Forced-Path Store Layout
This layout directs the customer on a predetermined route through the retail store. As an example, Ebster uses furniture retailer IKEA to demonstrate the use of the forced-path store design. Research shows that, with this type of store layout , IKEA achieves a uniform and efficient customer flow that promotes higher sales.
Ebster discusses the advantage of a forced-path layout: Every aisle in the store is maximized. With customers exposed to all of the merchandise offered, this design might entice the customer to make an unplanned purchase. However, he points out that using this store layout risks irritating shoppers that have a specific task and desired location, and could also overwhelm shoppers by hurrying them through an experience of customers all moving in one direction together, quickly.
Grid Store Layout
The grid store layout design is a familiar, repetitive pattern favored by retail drugstores like Walgreens and hardware stores like Ace Hardware. According to Ebster, there are multiple advantages to the grid layout, including the following:
- Customers can move quickly through an efficient floor space using standard fixtures and displays.
- The presentation is uniform and comfortable due to its popularity, creating a seamless customer experience.
- Design simplifies inventory control for the retailer - a key to retail strategy that leverages store design to maximize profitability.
However, the downside of this layout is the lack of aesthetics and the “sterile and uninspiring” environment often associated with its use. To counter this, Ebster recommends effective signage to guide customers and create a “cognitive map” of the store.
Loop Store Layout
Also known as the “racetrack” layout, think of the loop design as the “yellow brick road” of retail store layouts. Ebster uses this analogy to describe the way a loop store layout uses a path to lead customers from the entrance of the store to the checkout area. This is a versatile choice for store design when implemented with another layout style or used as a prominent feature of the retail store. Ebster recommends this layout for a larger retail space (over 5,000 square feet) and encourages a clear and visible loop for customer flow.
Designers accomplish the loop effect by making the floor path a standout color, lighting the loop to guide the customer, or using a different floor material to mark the loop. Lines are not recommended, as they can be a psychological barrier to some customers, potentially discouraging them from stepping away from the loop and interacting with merchandise. Ebster encourages a loop design that rewards the customer with interesting visual displays and focal points on the way to the checkout area.
Straight Store Layout
The straight store layout is efficient, simple to plan, and capable of creating individual spaces for the customer. Plus, a basic straight design helps pull customers towards featured merchandise in the back of the store. Merchandise displays and signage is used to keep customers moving and interested.
Liquor stores, convenience stores, and small markets use the straight design efficiently. However, the drawback is the simplicity: Depending on how a customer enters the store and moves past the transition zone, it may be more difficult to highlight merchandise or draw them to a specific location.
Diagonal Store Layout
Just as the name implies, the diagonal store layout uses aisles placed at angles to increase customer sightlines and expose new merchandise as customers navigate through the space. A variation of the grid layout, the design helps guide customers to the checkout area. Small stores can benefit from this space management option, and it is excellent for self-service retailers because it invites more movement and better customer circulation.
When the checkout is located in the center and possibly raised up, the diagonal layout offers better security and loss prevention due to the extra sightline effect. The downside of this layout is that it doesn’t enable the customer to shortcut toward specific merchandise, and the risk of narrow aisles is higher.
Angular Store Layout
The name of this design is deceptive, as the “angular” store layout relies on curved walls and corners, rounded merchandise displays, and other curved fixtures to manage the customer flow. Luxury stores use this layout effectively because, according to Herb Sorenson’s research from Inside the Mind of the Shopper: The Science of Retailing, customers notice free-standing product displays 100 percent of the time (end cap displays - those at the end of aisles - also get noticed 100 percent of the time).
There is a perception of higher quality merchandise that the angular layout leverages to target the appropriate customer behavior in that environment. And although this design sacrifices efficient space use, because of the rounded displays and limited shelf space, if a retailer has sufficient inventory storage away from the sales floor, this layout is useful in creating a unique perception.
Geometric Store Layout
Popular with retailers targeting trendy millennials and Generation Z demographics, a geometric layout offers artistic expression and function when combined with the appropriate displays and fixtures. The unique architecture of some retail stores, including wall angles, support columns, and different ceiling styles mix well with the uniqueness of a geometric layout.
Merchandise displays and fixtures of various geometric shapes and sizes combine to make a statement, often as an extension of the retailer's overall brand identity. Clothing and apparel stores use a variety of environmental merchandising strategies (for example, music, scents, and artwork) with the geometric layout to enhance the customer experience.
Mixed Store Layout
The mixed store layout uses design elements from multiple layouts to create a flexible option for retailers. Department stores use a compelling mix of straight, diagonal, and angular concepts, among other design elements, to create a dynamic flow through a range of departments featuring a variety of merchandise.
Large grocery store chains also successfully combine mixed store layout elements. For example, customers have the flexibility to navigate through a grid layout for their basic groceries but feel compelled to search the angular displays featuring high-margin wine, beer, and imported cheeses. The advantages of combining different store layouts seems apparent, but the space and resource requirements to maintain this design can pose difficulties to retailers.
What Is a Free Flow Store Layout?
A free flow layout rejects typical design patterns and styles commonly used to influence customer behavior. In a free flow layout, the intent is not to lead the customer using predictable design patterns, displays, or signage. There are no specific design rules followed for this retail store design, and customers have more liberty to interact with merchandise and navigate on their own. For this reason, the free flow layout is sophisticated in its simplicity.
Ebster points out that customers feel less rushed in this creative environment. Retail stores look less sterile in the free flow design, and merchandise may seem more intriguing. The only limitation for retailers using this layout is the overall space available, but that doesn’t mean that the research on customer navigation behavior and tendencies shouldn’t be accounted for as well. The main disadvantage to this experimental design layout is the risk of confusing customers past the point of their preferred behavior and disrupting customer flow.
What Is a Boutique Store Layout?
According to Ebster, the boutique layout (also called shop-in-the-shop or alcove layout) is the most widely used type of free flow layout. Merchandise is separated by category, and customers are encouraged to interact more intimately with like items in semi-separate areas created by walls, merchandise displays, and fixtures. Typically used by boutique clothing retailers, wine merchants, and gourmet markets, this layout stimulates customer curiosity in different brands or themes of merchandise within the overall category.
- The downsides of the boutique layout include the following factors:
- Reducing the total display space for merchandise with inefficient space management
- Encouraging too much exploration of separate areas within the store
- Confusing customers past the point of purchasing behavior.
Ultimately, the exploration can distract from customer interaction with the merchandise.
Retail Store Design Tips From The Pros
Jaina Rodriguez is a Creative Director of the Integrated Design-Retail Design Studio at Microsoft. She is adamant that store design is important and should not be overlooked when designing the customer experience.
“It is everything! The look, feel, and sounds evoke feelings in consumers and the more it resonates, engages, comforts, or surprises them, the more likely they are to purchase or become a fan, which leads to [more] fans,” says Rodriguez. “If [the design] is too loud, has obstructed or confusing pathways, which some retailers use as a sales tactic, no rhyme or reason [...], it is not conducive to customers spending more time [in store] or converting sales.”
A store’s layout design is not an isolated advantage for retailers. Rodriguez points out that the customer experience is influenced by more than the overall layout. “It’s a mix of thoughtful moments — placement of product stories and unassisted digital experiences throughout the [store] footprint — mixed with sales people that help consumers make decisions quickly and effectively.”
“I think alongside [customer] flow is understanding the sales data to help better inform where you want to [attract] the customer and what the overall experience is from the front to the back of the store,” says Rodriguez. “For a store footprint [design] within a mall, a commercial shopping area, or [inside] a third party retailer (for example Best Buy or Target), understanding the key players around your area and their sales tactics should be a priority. Many companies make the mistake of copying what others are doing, which creates more confusion. People have brand loyalty and want to see differentiation and a reason to move from their comfort zone.” “Best Buy does this well,” says Rodriguez. “They do a great job with a mix of digital innovations, retail pros and the Geek Squad. They can entice the customer via emails, push alerts via their app, digital experiences throughout the store, assisted and unassisted sales, and tech help to ensure your product is ready to use or installed properly. Basically, they cover all the bases from start to finish and while they don’t always hit the mark, they are open to innovation and trying and measuring new ways to reach the customer base and beyond.”
Rodriguez does not agree with all of the store layout design and “storytelling” that Best Buy uses throughout some of their locations. For example, she believes the video game section could be designed to be more cohesive and less scattered in different spaces.
Authenticity Creates Real Customer Experiences
When it comes to designing the retail store and customer experience, Rodriguez has a specific message. “Be authentic and real,” she says. “Create memorable moments to build and keep fans.”
“So many companies are obsessed with going viral, ROI (which is important), and creating something they think is cool, that they forget why they are doing it. Building fans and purveyors of quality takes time and not every campaign or interactive experience you install will hit the mark,” adds Rodriguez.
“Sometimes it hits the mark but the reaction is delayed. There is no way to measure whether someone saw a great campaign or experienced a digital innovation you created and if that led them to buy months down the road. But the reality is those authentic and real moments stick with people and it takes time [...] The focus should be continuing to be authentic and real — negotiating and editing with successes and failures, but never wavering on those two things.”
Rodriguez points to Nordstrom and Tesla as examples of retailers that understand the importance of authentic, real customer experiences that are easy and memorable.
“Retailers should remember that not every product or outcome is tangible,” shes says. “Interactive experiences at Tesla showrooms in malls allow consumers, who would otherwise not be able to afford the car or wouldn’t go out of their way to visit a dealership, to build and interact [with a virtual vehicle]. They provide a boutique experience which draws in consumers based on emotion, feelings of nostalgia, and even sex. It puts something out of reach directly into their hands.”
Rodriguez appreciates how Nordstrom varies store design elements and floor plan layouts for different customers and how important balanced design is to the customer experience. “They aren’t afraid to experiment and try new things to see how it affects their broad range of target markets,” she says. “Nordstrom understands the importance of providing varying experiences for many types of consumers, creating pop-ups that change out quarterly (sometimes more frequently), curb-side service, personal shoppers, and even a bar just beyond the most shopped area to loosen up shoppers’ inhibitions and their wallets.”
Data Drives Design
To know your customer is to know your retail business. The correlation between a retailer's profitability and the customer experience is closer than ever in retail history. For physical retail stores, this experience is connected to the customer’s surroundings — how they navigate the store’s environment, and the flow of attention they spend on your merchandise and messaging.
The digital, online retail experience follows a similar principle. The design of a website or mobile application, and the user experience the layout creates, is critical to creating value for a customer and in return, has a positive impact on the retailer’s profitability.
For Rodriguez, data emphasizes the importance of design in the overall customer experience and is a core part of any successful retail design playbook. “Data is essential to creating a memorable and effective experience,” she says. “For online experiences, there must be a mix of testing and best practices.”
According to Rodriguez, at Microsoft the data collected from customers interacting with digital screens might include the following:
- Tracking time spent in experience
- Hot spots (how the customer interacts with the device’s screen)
- Click Through Rates (CTRs)
- Impact to sales (ROI)
- Analysis of other sales/promos during that time to influence
Rodriguez further explains that once data is collected and analyzed and an update is needed, it should happen quickly. If the tests are successful, the formula should be documented and repeated. Using data to design and plan physical or digital retail layouts with the overall experience in mind creates value for customers.
“Retailers should not make assumptions about their clientele or only make decisions based on their personal experiences, wants, and needs,” says Rodriguez. She adds a reminder to retailers about the importance of aligning the desired experience of the target customer with retail management and the overall retail strategy. She recommends looking to market research and customer data to make the most impact, remembering that executive leadership, for example, may have a store design strategy that data shows is not aligned with the target customer experience.
“People want their experience to be individualized. [Customers] have become fickle and often are annoyed by an overabundance of help, even if they need it,” she adds. “Algorithms and data are scary to most consumers, but when they realize how it can help to filter and tailor their experience to exactly what they need and want, even before they know they need or want it, the retailer then becomes priceless.”
The Multi-Channel Mindset
Connecting the customer experience with a mobile friendly retail strategy is important, as people are increasingly dependent on their mobile devices and interacting with the digital world throughout the day. Retail customers use their mobile devices to stay connected throughout their shopping experience. This might include checking prices and inventory availability, or using their device to find physical store location and hours.
“As a mobile-first world, we sometimes must forgo the shiny experiences and provide a user with a friendly, value proposition-focused customer journey with fewer clicks to get consumers where they need to be,” says Rodriguez. Part of a sound mobile-first retail design strategy, when considering your ecommerce site or mobile application, is simplicity. Mobile design strategy means impacting the customer experience by making shopping easier.
“From an online perspective, the customer journey should be straightforward, user friendly, and require as few clicks as possible to get the customer where they want to go,” says Rodriguez. “Many consumers stick with what they know until they see the value. Often, this is due to habit or lack of energy to create a new account, enter information, etc.”
Rodriguez believes that the more a retailer does to simplify purchasing, the more value they add to the customer experience. She uses Amazon’s strategy for linking new services and products based on the customer’s purchasing habits as an example of the “ease of purchase” experience retailers should strive for.
“Amazon Go and Amazon.com provide ease of shopping at your fingertips without the hardship of dealing with, well, anyone,” says Rodriguez. “This footprint is a great example of how to bring a digital experience into a brick and mortar reality. While they continue to test, their key to success is measuring, monitoring, and reacting quickly to individual consumer needs.”
Mobile applications provide an opportunity for retailers looking to make purchasing simple and easy, whether the customer chooses the brick-and-mortar or digital shopper journey. “Stores with robust mobile apps can add on everything from triggering [...] a mobile push alert when [the customer’s] within a certain distance from a store location,” says Rodriguez. This alert might notify customers of an in-store event or send a specific deal on seasonal merchandise based on the geo-location of the customer.
“Retailers willing to push the limits of their applications (and spend development dollars) can also use apps to track [in-store] customers and remind [them] of sales or products currently in their cart, request service on the floor with their mobile device, or forgo any interaction with sales reps by ordering everything on their device via scanning barcodes or shopping available stock to have it ready for them at the register,” she adds.
Video Is a Game Changer
Using video to enhance the digital experience and create customer interaction is a game changer. “Video is key,” says Rodriguez. “Studies show that video on home or product pages have conversion rates between 80-100 percent.” Rodriguez recommends using video in “short, snackable bites.” In addition to online advertising and store branding opportunities on social media platforms like Facebook and Snapchat, the reduced cost of digital displays and user friendly digital video tools provides retailers with creative, affordable ways to design their stores to leverage video. A couple examples of leveraging interactive video display include the following:
- Touchscreens: Customers spend an increasing amount of their day interacting with their mobile devices and retailers can leverage this habitual behavior. “Consumers will try to interact with any type of screen out of habit,” says Rodriguez. “This is an opportunity to quickly educate consumers, update content remotely, compare products, and share ratings, reviews, or tech specs.” Rodriguez claims most retailers and businesses using touchscreen presentations or video displays are not taking full advantage of their power. “Most are basically PowerPoint [presentations], or the screens aren’t cared for, or they are turned off, or broken.” She cautions that “customers are too smart and tech savvy” and using this technology in the wrong way can quickly turn a positive effort into a negative customer experience.
- Streaming Content: Rodriguez highlights a unique in-store content marketing trend for retailers to engage customers. Combining store design and digital technology, retail stores can use strategically placed screens to connect customers to their overall brand message or targeted marketing campaigns. “[...] the online journey should be done first (or in tandem with) the [digital] campaigns and store footprint,” says Rodriguez. “[Digital] experiences are often seen as separate, but the goal should be to create a seamless experience whether the customer is on their desktop at home, their mobile phone, or physically in the store.”
Sensor Technology
Specialized sensors provide data and interactive customer experiences using video and internet of things (IoT) technology. Sensors benefit retailer and customer, as the data gathered from their use provides insight into customer flow and purchasing behavior. Rodriguez highlights Disney’s use of wristbands to provide visitors with a personalized experience. The device can unlock the hotel room door and change imagery on digital screens to match the visitor’s experience of choice. “This isn’t a tangible thing, but provides a sense of belonging, delight, and memories that will build and keep fans coming back for more for generations to come,” she says. The following are examples of different types of sensor technology that are relevant to retail store design:
- Heat Maps : A heat map is a visual representation of data. In retail, this data displays how customers interact with merchandise and navigate the retail environment in physical stores using video surveillance to map movement. Heat map technology provides data for online retailers as well, plotting data, and visualizing how a customer navigates and interacts with a website using their mouse for example.
- Phidgets : Phidgets are sensors, often used in robotics, that manage different environmental elements. There are many uses for phidget technology, according to Rodriguez. “These are basically sensors that come in a wide array of options such as distance, heat/cold sensing, and seismic,” she says. “There are fun ways these can create interactive experiences, triggering an event when the product is handled and even changing content on the screens when a person approaches the display.”
- Radio Frequency Identification (RFID) Sensors: According to Rodriguez, RFID technology is becoming more popular as retailers experiment with more uses for the sensors including inventory management. “With [RFID] gates installed, supply chain management becomes easier. A retailer can use the tags to sense when a product has moved from the back room to the floor, activate an experience on a screen once a product is picked up or moved, and can take the place of the old barcode system,” she says.
Top Store Layout Design Strategies that Impact the Customer Experience
Moving merchandise from the end of the supply chain to the customer is a retailer's primary function. Successful retailers do so by creating value and delivering a differentiated customer experience. How customers experience your merchandise is determined by how your store is designed to guide them to interact with it. A retail management strategy that successfully leverages store design to drive customer flow and create unique experiences is a big part of your overall retail brand. It is a proven method for producing the kind of value that keeps retailers competitive and profitable.
Allison Walzer , Sr. Retail Channel Marketing Manager at Microsoft, believes store design is a direct reflection of your brand and a vital part of staying competitive with e-commerce trends.
“One of the main challenges for stores is how they will stand out from competitors and a busy [retail] marketplace,” says Walzer. “How do they create the convenience and experience to drive customers to come into the store?”
“Store design really has to stand out from the pack right now,” she says. “It’s crucial for brick-and-mortar stores to create experiences that encourage people to visit stores.”
Visual Merchandising Strategy
Visual merchandising is a core retail strategy. It is the “language of the store,” writes Ebster — the way retailers communicate with the customer through visual imagery and the presentation of merchandise. Part art and part science, visual merchandising involves everything that helps create a unique customer experience. The well-lit entryway, the strategically placed furniture, fixtures, and promotional displays combine with the store layout to influence customer behavior and make the customer’s journey efficient, unique, and memorable.
“[We] are noticing a turn to lifestyle- and experience-driven retail experiences,” says Walzer. “Stores are integrating materials from home or outdoors to create a comfortable, beautiful shopping space that leads to longer dwell time in stores.” She describes a visual merchandising strategy that luxury brand retailers use to promote health and beauty by placing living plants inside their stores.
Visual merchandising brings together the overall environment of the retail store. It is a strategic element in retail management that distinguishes a retailer from the competition. The type of merchandise offered is a crucial consideration in the how the retailer influences uses visual merchandising elements to target customers. As Malcolm Gladwell writes in his feature article, “The Science of Shopping,” “the clothes have to match the environment.”
Walzer recommends that retailers deciding how to plan for visual merchandising elements that work for their concept consider their customer flow in a way that guides the customer through “the path to purchase.”
“Aesop is killing it right now,” says Walzer, when asked about retailers that highlight the importance of store design. “Their stores are beautiful and each one is different and contextual while still keeping in step with their brand. They concentrate on materials and even acoustics to create a personal environment. Each shop is individual and takes the environment and city into account when building a new store. It’s the right approach to make a memorable shopping experience and delights customers with its idiosyncratic design-led principles.”
The visual merchandising techniques that a retailer chooses can alter the customer’s perception of the retailer’s value. Ebster recommends looking at visual merchandising from the customer’s perspective. For more retail merchandising tips and best practices from experts and researchers, check out “ The Art and Science of Retail Merchandising .”
Zone Merchandising Strategy
Customers also respond to where products are placed. A zone merchandising strategy combines visual merchandising with your store layout design to highlight high-margin merchandise or merchandise you want featured. Creating zones using walls, merchandise displays, and signage develops semi-separate areas. Merchandise displays are set up as speed bumps to keep the customer in the zone and slow them from leaving the area.
“Stores need to be thoughtful in their layout, and have clear zones so navigation is easy. Not everyone likes to ask sales assistants for directions,” says Walzer. She recommends creating “instagrammable” moments in-store. “Make it fun and easy for people to share their stories on social media,” she says. This includes using hashtags in messaging, or on merchandise displays, creating “set-designing” zones, and favoring natural light with “unique designs that make for cool backdrops or host events.”
Lighting Strategy
Proper lighting is more than just making sure the customer can see and interact with the merchandise. When done well, light can help structure and influence the customer’s mood while shopping.
Store planners and designers use lighting solutions to highlight or downplay specific areas of the store to draw in customers and create an environment that works in sync with the retail brand and the merchandise offered. Lighting specialists provide expertise in the appropriate types of lighting for specific store layouts, based on natural light exposure, and can recommend solutions that suit budgets and environmentally conscious business models.
Signage Strategy
Signs serve multiple purposes for retailers. They are the graphic representation of the retailer's brand and merchandise. Signs provide product information for specific merchandise, help customers navigate the store layout efficiently, and create the desired price perception. Retailers should keep signs fresh and updated based on the merchandise offered, the season, or specific promotions. Keep in-store signs and messaging consistent with the brand voice and use standard fonts and colors that are easy to identify and read with your lighting.
“From a strictly visual perspective, it’s key to have clear readable signage from the outside that leads customers in the store. From there, plan the customer journey from [a] high level,” says Walzer. She recommends using signage that encourages overall shopping (for example, placing old and iconic imagery - specifically for tech stores - towards the front of the store). When the customer arrives at specific merchandise, or the “buy level,” use signage that builds the buy messaging.
Display Strategy
The word “display” comes from the French word “deployer”, which means “to unfold.” Far from being exclusive to clothing, however, promotional displays help “unfold” the merchandise you offer to the customer. Along with your store layout design, displays set the stage for your customer’s overall experience when navigating the store. In general, displays come in all shapes and sizes, and refer to the movable units in the store that feature merchandise such as tables, racks, or gondolas.
Careful selection of the type and placement of displays is crucial to the overall retail strategy of using space management and store design to influence customer flow and in-store behavior. Also, treat displays as flexible, cost-effective investments and ask your product manufacturers and suppliers about providing low-cost options specific to their products and brands.
Fixture Strategy
If displays are the flexible, freestanding, and modular units used to present merchandise, then fixtures refer to the more permanent units in the store. Counters, wall mounted shelving units, support columns, and bench seating are examples of fixtures. The purpose of fixtures is to coordinate your store layout and influence customer flow and interactions. In other words, they are designed to impact the customer flow and bring attention to merchandise in a consistent, familiar environment.
In general, fixtures are less versatile than displays and in-store design layouts, but when planned carefully, they become a defining part of a retail space. Walzer recommends minimal, clean, and uncluttered fixtures, and modular signage areas to promote offers. Fixtures need to drive a premium look and feel. Materials that are “authentic and have some warmth to them” work best (real wood versus laminate, stone or marble versus coated plastic, glass versus acrylic).
“Fixtures should be made from premium authentic materials that are durable and uplevel the experience,” says Walzer. “If the table is shoddy and falling apart, why would you want to buy what is merchandised on it?”
Window Strategy
Windows welcome customers from the outside and draw them into the store where layout design and the various elements of visual merchandising go to work. The window display requires careful attention to lighting, size of display units, type of merchandise featured, props (like mannequins), and signage. Because the customer has yet to enter the store, a window display must combine all of the visual merchandising elements to successfully pique the customer’s interest and promote the retailer’s brand and personality.
Communal Design Strategy
Concentrate on how to create community and engagement with store design. “What makes a consumer want to come and repeatedly spend time in a retail store in the digital age will be based on the feeling you get when you are shopping,” says Walzer. “Create a rapport with the customer, pull in elements from the community as part of the design inspiration. If there is a local artist or ceramist or musician, use those pieces in the stores.” Walzer mentions the Seattle-Tacoma International Airport showcasing Sub Pop artists and Pearl Jam artwork as an example. “[They] are currently doing a great job. It’s creating pride for residents and a sense of joy for travelers, who are also customers that purchase Sub Pop gear at the store.”
Other Space Management Considerations
As discussed, the visual presentation of merchandise and the influence of store layout design is vital to retail strategy. There are also functional considerations involved in the overall store layout that impacts the customer experience. One example is to keep design functional with the overall space.
“It’s not so much about the space as how the space is designed,” says Walzer. “If it’s a crowded or awkward space, build in open walkways, keep merchandising elegant. If it’s a large space, don’t let it look too cavernous. Create walkways to guide the purchase journey with easy wayfinding.”
The following is a list of additional space management factors to consider:
- Legal Requirements: Review the standards issued under the Americans with Disabilities Act (ADA) to understand the legal requirements for retailers in the United States. For example, the ADA requires a minimum of three feet of aisle width for customer accessibility. Consult with qualified professionals if you’re planning changes to your store layout design that may impact customer accessibility.
- Seating: Provide customers with comfortable seating to enhance the overall customer experience and slow customers down. Clothing stores with dressing rooms are the primary example of this strategy in use. According to Ebster, an extended store visit increases the likelihood that customers make a purchase.
- Checkout: The checkout area of a retail store is critical to more than cash handling and payment processing. This space accommodates all customers and a variety of interactions, and is typically the last area to make an impression on customers. Depending on the store layout, the checkout area provides additional visual merchandising opportunities. Retailers use this space to encourage impulse purchases of complementary merchandise while customers wait to pay.
- Back-of-the-House Operations: The retail store layout should factor for store operations and activity like shipping and receiving, inventory storage and retrieval, and the employee’s overall workspace and break area. Storage options are essential to the overall store layout design because it impacts how much merchandise you will feature on the sales floor where customers navigate. Ebster recommends keeping the customer in a flow state and focused on shopping. Therefore, maintaining back-of-the-house operations concealed from customers is a visual merchandising strategy.
Retail Store Layout Design and Planning Resources
Store layout planning and design is a profession all its own. The design knowledge and planning skills required to develop an entirely new retail store, modify an existing floor plan, or even remodel a specific area of your store is a daunting task for retailers focused on attracting customers and earning revenue. The good news is that an entire network of design professionals, store planners, project managers, architects, contractors, and more operate and serve in the largest private sector employment category of the U.S. economy. The following resources are available to retailers looking to explore store layout design and planning:
- National Retail Federation (NRF) : The NRF is the world’s largest retail trade association. Operating in the U.S. and in 45 countries, their mission is “to advance the interests of the retail industry through advocacy, communications, and education.”
- Retail Design Blog: Architects, designers, visual merchandisers, retailers, brand managers, and fans submit pictures and projects about retail design. It includes store and exhibit design, fashion merchandising, visual merchandising content, and more.
- Store Design and Visual Merchandising: The website design:retail covers retail trends, products, and projects, and publishes an aggregate list of products and services.
- Retail Design Institute: The Retail Design Institute is the largest and oldest not-for-profit store planning and design organization. Founded in 1961, members include architects, graphic designers, lighting designers, interior designers, store planners, visual merchandisers, resource designers, brand strategists, educators, trade partners, trade media, and students of design. The website publishes a list of design resources .
- American Society of Interior Designers (ASID): ASID is a multi-disciplinary professional organization for interior designers, students, and retail manufacturers and suppliers that satisfy the organization's acceptance standards for accreditation. Members receive access to services by industry experts in legal assistance, human resources, liability and disability insurance, and more.
- NCIDQ Certified Interior Designer: NCIDQ Certification tests for industry design standards, and for public health, safety, and welfare. More than 30,000 people are NCIDQ certified, an international standard for interior design professionals by The Council for Interior Design Qualification (CIDQ).
- VMSD (Visual Marketing and Store Design) : The VMSD magazine and website provides retail professionals with “innovative retail design ideas, visual presentations, new products, merchandising strategies, and industry news and events.” VMSD hosts the annual International Retail Design Conference (IRDC)
- Pinterest : Explore store design concepts and ideas through photography and project images posted by a variety of sources.
Retail Store Layout Software
One application you can use to create diagrams of store layouts is Google Drawing, a free software application available in the Chrome Web Store . For store planners, retail consultants, design professionals, or the aspiring DIY retailer, there is a market for drawing and floor planning software to help you create professional retail store layouts.
The following list of solutions offers diagramming tools that let you customize existing store layout templates and explore different design ideas. Drawing software provides libraries of design elements for architecture, furniture, fixtures, and floor plan specific symbols. Like most SaaS (software-as-a-service) solutions today, some of the solutions listed below offer customer support and tutorials, cloud hosting features, and software integration with your existing store management software and standard operating systems.
- Microsoft Visio
- EDrawSoft Floor Plan Maker
- ConceptDraw PRO
- FloorPlanner
- Lucidchart Floor Plan Software
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Retail | How To
Planning Your Retail Store Layout in 7 Easy Steps
WRITTEN BY: Meaghan Brophy
Published March 1, 2023
Meaghan has provided content and guidance for indie retailers as the editor for a number of retail publications and a speaker at trade shows. She is Fit Small Business’s authority on retail and ecommerce.
This article is part of a larger series on Retail Management .
- Step 1: Decide on a Store Layout
- Step 2: Consider Traffic Flow & Customer Behavior
Step 3: Position Your Checkout
- Step 4: Use Smart Product Placement
- Step 5: Optimize Products with Fixtures & Displays
- Step 6: Add Comfort Zones & Customer Amenities
- Step 7: Ensure Your Store is Accessible to All
Bottom Line
Having a deliberate retail store layout is vital for maximizing revenue for brick-and-mortar stores. By crafting an effective layout plan, retailers can strategically direct shoppers to high-priority products, drive impulse sales, manage customer flow, stay organized, and create a positive customer experience.
Continue reading to learn how to create a sales-driving retail store layout in eight easy steps, or download our store layout guide to read later:
Download Free Store Layout Guide
Step 1: Decide on a Retail Store Layout
Large or small, most retail stores use one of six basic types of retail store layouts: grid, loop, free-flow/mixed, diagonal, forced-path, and angular. The type of layout you use depends on your space, the shopping experience you are trying to create, and the products you sell.
For example, grocery stores usually use grid layouts because they are predictable and efficient to navigate. On the other hand, boutiques typically use more creative layouts that allow businesses to highlight different products.
Choose a floor plan that works for your business and helps you maximize your profits and create a positive customer experience.
Remember, your retail store layout guides product placement, directs customer flow and defines the overall look and feel of your store, so it deserves plenty of thought. Many factors will affect your floor plan choice, including the size and shape of your sales floor, the types of products you sell, and even the customers you hope to attract. Consider these factors as we explore each floor plan option in detail.
A grid floor plan, also called a straight layout, uses a grid-like arrangement to create a series of parallel aisles and displays. They are great if you have a lot of merchandise, as they maximize every inch of available floor space, including the corners.
Grid plans are easy for customers to navigate and store owners to categorize. Plus, these layouts offer plenty of endcaps and feature wall exposure for promotional items and seasonal products.
- Commonly found in: Grocery, big box, and convenience stores, retailers requiring a lot of shelf-stocking space
- Best for: Shelf-stocked goods such as books, toys, specialty foods, hardware, and homewares
- Pros: Easy to navigate, can accommodate high foot traffic, established merchandising techniques, encourages browsing, maximize product space, fosters customer familiarity
- Cons: Unimaginative, moving things around can lead to frustrated customers, difficult to feature new products, can stimulate rushed shopping behaviors
A loop floor plan , sometimes called a racetrack layout, creates a guided shopping experience. It features a defined pathway throughout the store, exposing customers to every item on display.
This floor plan is highly customizable and provides an excellent base for combining layouts. In the loop layout, the central part of the store can utilize a grid or free-flow layout, or even a mix of the two.
Loop layouts work well for most types of small retail stores, such as apparel and accessories, toys, homewares, kitchenware, personal care, and specialty products.
- Commonly found in: Apparel and accessories stores, toy stores, homewares, kitchenware, personal care, specialty stores
- Best for: Maximizing wall space and leading shoppers along a set pathway
- Pros: Engaging shopping experience, guided shopping path, high product exposure, customizable
- Cons: Difficult to update displays, can lead to browsing rather than buying, does not maximize floor space, frustrating for customers in search of something specific
Free-flow (mixed)
A free-flow or mixed retail store layout uses different display types throughout the store—there is no set path, allowing customers to shop freely. This layout is the favorite among specialty retailers because it enables maximum creativity, is easily changed and updated, and fosters an exploratory shopping experience.
Free-flow plans create open sightlines throughout the store, making your wall space highly visible and poised for display features. The open sightlines also make it easy to funnel customers toward specific merchandise zones using eye-catching accent colors and product groupings.
The open look of a free-flow layout is ideal for all types of boutiques and upscale stores. It also works well for stores with smaller inventories since it highlights product groupings.
- Commonly found in: Gift shops, specialty stores, boutiques, retailers with limited inventory
- Best for: Creating customizable displays and promoting shopper exploration
- Pros: Uses different displays for different products, promotes exploration and product discovery, open sightlines, good for wall displays, works well in irregular spaces, easy to update
- Cons: Easily cluttered, can be difficult to navigate, customers won’t see the same things, encourages loitering, can be difficult to maintain
Diagonal floor plans are a variation of the grid layout, using aisles placed at angles to increase customer sightlines and expose new merchandise. They feel more open than grid layouts, which improves visibility and promotes more browsing.
A diagonal store design is ideal in electronic or technology stores, beauty and cosmetics retailers, specialty food stores, and any shop that encourages shoppers to test or sample products.
It lets customers move easily between aisles while providing store employees with good angles to view shoppers. Like free-flow store plans, diagonal layouts create open sightlines throughout the store, and this visibility is excellent for pointing customers toward a central sampling or demonstration area.
- Commonly found in: Self-serve kiosks, tech and electronic stores, and beauty and cosmetic retailers
- Best for: Maximizing employee visibility in retail stores with lots of product testing or self-service options
- Pros : Easy to navigate, high visibility for both employees and customers, maximizes display space, easy to implement theft protection measures
- Cons: Prone to narrow aisles, less room for creativity, difficult to change
Forced path
Forced-path or guided floor plans are store layouts with one pathway that guides customers throughout the store, ultimately dropping them off at the checkout area.
These layouts are often found in large spaces, like warehouses, and operate similarly to a guided tour or museum. IKEA is a great example of a forced path floor plan. The Swedish retailer uses arrows on its pathways to guide customers through all of its expansive showrooms and avoid traffic issues along the way.
Forced-path floor plans are ideal for retailers that want to create a specific, memorable shopping experience and are a good choice for showcasing many different product departments or design displays in large spaces. These floor plans do, however, require a lot of effort to keep shoppers interested throughout their journey. Demonstrations, different types of displays, and signage are all great tools that retailers can use to keep the forced path engaging.
- Commonly found in: Warehouses, large showrooms, experimental stores
- Best for: Guiding customers through a predetermined path and exposing them to every product
- Pros: Ample opportunity promoting impulse buys, immersive experience, lots of control over customer experience, promotes exposure to every product
- Cons: Can be frustrating when shopping for a specific item, risk of boring customers, difficult to design, can cause traffic jams if not well-regulated
Angular floor plans use many smaller displays in the center of the store to create a dynamic shopping experience that highlights a smaller number of products. Table displays automatically draw customer attention, which makes this layout highly engaging and promotes interaction with all the products on the floor.
However, angular plans typically have limited display space. As a result, you mostly find angular plans in showrooms, high-end boutiques, and designer stores with highly edited or curated collections.
Stores with angular floor plans need substantial inventory storage space for restocking items and holding additional sizes.
- Commonly found in: Stores with small or curated merchandise that also have large inventory storage spaces
- Best for: Showcasing a small number of products that you want customers to engage with
- Pros: Perception of higher value, draws attention to merchandise, promotes engagement, easily updated and changed
- Cons: Limited display space, difficult to manage traffic flows, not suited for a high volume of customers
Tip: Displays with softer or rounded lines create better traffic flow than squared fixtures in open spaces.
Also, don’t feel confined to one retail floor plan or another. You can always opt for a floor plan that combines two or more layout types within the same space.
Tip: Put it on Paper! Before you start arranging physical items and fixtures in your store, map out your layout on grid paper, a blueprint, or using a software program like SmartSheet. This is an essential space planning step to avoid crunching elements too close together or disrupting traffic flow.
Step 2: Consider Traffic Flow & Customer Behavior
Customer flow is one of the biggest things your store layout will impact. Your store layout should work with the natural ways shoppers flow through your space to avoid creating discomfort and evoke a positive customer experience. A layout that works with your customers’ natural shopping habits will help you create a layout that is both comfortable and natural and drives your sales.
The main customer behaviors you should understand and accommodate in your floor plan include:
Decompression Upon Entry
When customers enter your store, they need space to acclimate and get a lay of the land. To accommodate this and ensure your customers are not overwhelmed at entry, you should create a decompression zone in the first five to 15 feet of your entrance. Decompression is vital to any store layout as it allows customers to enter your business with a clear head, ready to shop.
Decompression Zone:
The space at the entrance of your store where your customer makes a mental shift from the outside world to your store environment. Upon entry, they take stock of your store, develop an opinion of your brand, and even make subconscious judgments about the pieces and prices they expect to find.
Avoid overwhelming customers and allow sightlines throughout your space by sparsely decorating your decompression zone. Some merchants will feature small displays with their bestselling products to reel people in, but you should keep your displays at one to two pieces to avoid clutter.
A decompression zone gives customers space to acclimate when they enter your store. (Source: MRGCM)
The Right Turn
Most shoppers in the US will automatically turn right when they enter a store. To avoid disrupting shoppers’ natural movement, you should:
- Highlight the right-hand side of your store : The right side of your store, especially the area just beyond the decompression zone, is best for promotional displays since this is where customers will look and shop first.
- Direct traffic counterclockwise : As customers will naturally drift to the right upon entry, you should arrange your store so that traffic flows based on this right-to-left pattern.
- Place checkouts at the end of the path : Checkouts and registers should be located to the left of the entrance so you can maximize the right side of your store for product exposure. The leftward placement will also make the counter fall along the natural exit path.
Customers are also more likely to stay on the floor they entered on rather than traveling up or down to other levels. Keep your best products on your main level to maximize exposure.
Customers typically turn right when they enter a store, so maximize their natural shopping path with a complementary retail store layout. (Source: Pinterest)
Personal Space
Customers do not like to feel cramped when shopping, so you should allow for ample space for movement. Aisles must be wide enough to invite customers to browse, not bump into other shoppers, and—most importantly—pick up and carry items for purchase.
Spacious pathways are a key aspect of good store planning. I recommend aisle widths of 3.5 feet or more to ensure that strollers and wheelchairs can fit comfortably and customers can browse on both sides without feeling cramped. You should also consider whether your customers will be using a cart or shopping baskets, so you can make extra space for traffic to pass both ways. Wide aisles also prevent the dreaded butt brush effect.
Butt Brush Effect:
When customers on opposite sides of an aisle brush up against one another with their backs turned due to a lack of aisle space. If customers see narrow aisles, they will often avoid them to dodge this uncomfortable encounter.
Create aisles that are wide enough to accommodate everyone’s personal space. (Source: Kitchn)
If your aisles aren’t wide enough, you could also be subject to complaints or lawsuits under the Americans with Disabilities Act (ADA). The ADA requires you to have aisles that are a minimum of 3 feet wide. If someone reports you as noncompliant, you could be fined if you don’t widen your aisles and remove obstructions. Don’t worry, we will look at more ADA rules and how you can stay compliant in Step 8.
To test your store’s pathways, I suggest rolling a large baby stroller or shopping cart through your store. If you can easily navigate all traffic pathways, your customers should enjoy a comfortable browsing experience.
A cash wrap, also known as a cash well or checkout counter, is the area that houses your point-of-sale (POS) system or cash register and where customers pay for their merchandise.
Your cash wrap is where customers pay and should be located on their natural exit path. (Source: Pinterest)
In general, the front left of a retail store is a good location for the checkout counter. Shoppers naturally drift to the right when they enter a store, loop around, and then leave on the left side. A checkout counter at the front left of your store puts the last step of the shopping experience on your customers’ natural exit path. Plus, this placement doesn’t distract people from shopping or take up prime product display space.
While the front left placement is best for most businesses, for some stores it makes sense to place your cash wrap at the rear of the store. This is great for larger retailers that have many in-store associates at a time as it frees up product space in the front of your store. However, placement in the back is not practical for small retailers with limited staff since this positioning can leave the front of the store unattended.
You can learn more about cash wraps, the different types, and how to set one up for your business with our cash wraps guide .
You also want to be sure you give enough space for your cash wrap. For smaller stores that don’t use carts, use a checkout counter large enough to hold products as customers continue shopping. Empty hands pick up more products, which leads to more sales. Also, make sure checkout counters are large enough to handle the checkout process efficiently and allow space for customers to put down a handbag.
Carve out enough space for your cash wrap and position it well. (Source: Pinterest)
Step 4: Use Smart Product Placement to Maximize Exposure
Once you have sketched out your floor plan, it is time to begin product mapping. When placing your products, do so in a way that promotes customer engagement, creates a positive experience, and drives your sales.
Product Mapping:
The process of determining where your products will go in your store.
There are several things that you should consider when mapping where your products should go.
- Identify top sellers or key products : You should know the products that are customer favorites or your brand’s signature pieces so you can display them prominently and use them to create interest in other products.
- Carve out a section for displaying sale merchandise: You want to be sure you have a designated area for sale merchandise. I recommend placing your sale section toward the back of the store and keeping it relatively small to draw people through your space and avoid taking attention from full-priced displays.
- Create a space for seasonal and limited availability products : You want to highlight new, limited, or seasonal items, so be sure you have a good space for these products that will draw the eye and promote engagement.
Retailers use product mapping to strategically place product categories in designated store areas. (Source: Gift Shop Magazine)
Click through the dropdown for principles to guide you through creating your product map as effectively as possible.
Implement Zone Design & Merchandising Strategies
In zone design, you categorize products into “zones,” such as kitchen and cooking, home decor, or skirts and pants. The quantities of products determine the size of each zone.
Zoning design makes it easy for shoppers to find what they are looking for, which will lead to more transactions and greater sales. Not only that, but your customers will also have a better experience shopping in your store.
Place Bestsellers in Primary Zones
Primary Zones are located in the back of the store and are where you display bestselling or essential products. For example, you will often find bread, milk, and cheese in the back of grocery stores. This arrangement will force customers to walk through your entire store, get exposed to new products, and even motivate impulse purchases.
Another popular way that retailers use bestsellers is by cross merchandising them with other items. This strategy works similarly to primary zoning in that the bestseller will reel customers in and then they will be exposed to new products in the same area.
Cross merchandising:
The practice of displaying items from different product categories together to incentivize customers to make multiple item purchases. Cross merchandising provides value to customers by reminding them of a need, sparking an idea, or saving them time from having to search the rest of the store.
Necessities like milk and dairy are often zoned to the back of the store. (Source: Crafty Coin)
Utilize Cross Merchandise Strategies to Increase Units Per Transaction
You should also use cross merchandising to make shopping easier for customers and to promote multiple item purchases.
For example, say you cross merchandise pasta and red sauce in the same aisle. Placing these items together makes it easy for customers to find everything they need for a pasta dinner and will help you sell through your items faster.
As you are laying out your store, consider what products work well together and how you can feature them together in a cross merchandising strategy. Zone your products so that customers can find things easily and complementary items are together, even if that means placing categorically different items in the same area.
This grocer cross merchandised items for a barbecue to make shopping easier and to promote multidepartment purchases. (Source: Dor)
Add Low-cost Impulse Products at Your Checkout
Place impulse items like small toys, candy bars, lip gloss, or other small, low-cost items near your register. When customers approach the register to pay and leave, you don’t want them to stop shopping. Placing low-cost impulse buy items near registers, as shown in the image below, encourages shoppers to add an item or two as they check out, which will drive your sales.
Tip : Items closer to the front of the store or around the register are more likely to get stolen because they are easier to get out the door, so place your most expensive items toward the back of the store and utilize mirrors and cameras to maintain visibility.
Zoning impulse buys at checkout will help boost your sales. (Source: Vendhq)
Use Power Walls to Peak Interest
A power wall is a wall in a high-traffic or key area of your store that you merchandise with items that attract attention and promote engagement. Typically, you place it on the right of your store, just beyond the entrance, so that it is one of the first things customers see when they enter your store and can draw people into your space.
Power walls can be anywhere throughout your store—just be sure that they are in a high-traffic area to get maximum visibility. Use them to showcase important departments and new and seasonal items, create vignettes, tell product stories, and feature high-demand, high-profit products.
However, you should remember that your power wall will need to change frequently, so plan for that. Outfit your power walls with hooks, shelving, or other fixtures that you can easily change to showcase various product groupings.
Create power walls at high-visibility points in your store. (Source: Pinterest)
Step 5: Optimize Products With Fixtures & Displays
Once you have an idea of your general store design and product mapping plan, it’s time to consider your store fixtures and displays.
- Fixtures : Permanent—fixed—parts of your store such as lighting, counters, fixed shelving units, wall mounted racks, and dressing rooms
- Displays : Pieces that hold product and tend to be mobile, versatile, and customizable—modular units, tables, slatwall, and free standing clothing racks
When it comes to outfitting your store with fixtures and displays, start by investing in quality fixtures, then add flexible displays that can be repurposed, and finally seek out affordable temporary displays from your product suppliers.
Choose versatile fixtures and displays that can display a range of products. Your business’s merchandise is constantly changing, and you want to be sure you don’t have to constantly buy new fixtures and displays to show them off.
Click through the drop-down menu for tips around fixtures and displays.
Invest in Fixtures That Define Your Brand
Your store’s walls, floors, fixtures, and displays should create a coordinated backdrop that defines your brand but lets your products pop. The ultimate purpose of fixtures and display units is to put your products front and center. At the same time, however, the overall look, styling, and finish of your fixtures and displays are your biggest branding opportunity.
Choose cohesive fixtures and display pieces that speak to your branding and coordinate with your product collections but don’t overpower them, like the successful looks below.
Invest in fixtures and display pieces that are in line with your brand and aesthetic. (Source: Pinterest)
Your displays and fixtures play a large role in crafting your store’s entire look. (Source: Decorist)
Your displays should be versatile and speak to your brand. (Source: Sonoma Magazine)
Use Displays That Enhance Your Unique Products
In addition to choosing displays and fixtures that enhance your brand, you should also select ones that enhance your products. Different products are better suited for different kinds of display strategies. For example, a clothing store will likely want to have hanging space, whereas a pottery store will likely want to stick with shelving and tables.
Use adjustable display options such as slatwall, gridwall, apparel racks, shelves, and tables so you can use them for many different products.
Additionally, your fixtures and displays must be able to handle products’ weights and sizes. Harder and heavier items should have sturdy and tough shelves, whereas lighter products can use floating shelves or furniture pieces.
These chic racks are not distracting and allow the pieces within them to stand out. (Source: Pinterest)
Tables and hanging displays are easy to update and do not take away from the store’s goods. (Source: Cherry Creek North)
A versatile display wall makes it easy to show off tools and swap in new items as they arrive. (Source: Blue Prop)
Save Money on Specialty Displays
Many manufacturers offer retailers low-cost or free specialty display fixtures designed to highlight their branded lines, like the one pictured below. These make great speed bumps or outpost display units for those on a tight budget. Your product line reps can tell you if they’re available, plus provide merchandising and display advice.
While you’ll likely want to splurge on your permanent fixtures and displays, you can opt for these free or low-cost displays for seasonal, temporary, and new products and point-of-purchase (POP) impulse displays.
Talk to your suppliers to see if they offer free POP displays. (Source: THIMM)
Use Displays & Fixtures to Create Speed Bumps & Control Customer Flow
While your store layout should accommodate shoppers’ natural behaviors, you can also use your layout to control customer flow and create certain behaviors. Speed bumps are a great way to slow your shoppers down, get them to engage with your products, and drive your sales.
Speed bumps:
Displays or fixtures designed to make your customers pause, so they engage with your products and slow down their shopping.
They help draw attention to surrounding products and create more customer interest. For example, at clothing stores, a cluster of mannequins by a table display will make customers more inclined to stop and look at the mannequins and subsequently explore the offerings on the table. Or a paper store might place a table of cards in the middle of the store, where shoppers will stop and look at all the options.
Speed bumps can look like anything from table displays to focal points to temporary POP displays. The thing that makes a design feature a speed bump is whether it causes people to slow down and engage.
This mannequin creates a speed bump where customers will stop and explore. (Source: Business Insider)
Your speed bumps should go in areas where there are not a lot of other displays; thus, there is low engagement. They are not typically fixed and can move when you better understand your customer flow and where those low engagement points are in your space. Play with different positioning and use an integrated POS system to track the effectiveness of your speedbumps.
Step 6: Add Comfort Zones & Customer Amenities
In addition to controlling customer flow, creating effective displays, and driving your sales, your retail floor plan is about welcoming your customers in, making them feel at home, and providing an experience that makes them want to return.
Thoughtful amenities like seating, dressing rooms, and customer service areas will make the shopping experience memorable for customers and encourage them to continue to engage with your business. Incorporate elements that provide customer comfort as you are creating your store layout.
Provide some type of seating for customers and anyone accompanying them. There were countless times in my experience when partners, friends, or relatives would spend their entire time in my shop seated in our chairs. Our seating options not only encouraged the shoppers in the group to stay longer since their party was comfortable, but it also gave everyone a positive experience.
Seating can be as simple as stools near the checkout, a lounge area near the dressing rooms, or an entry bench. In some cases, however, seating is not just comfort and is actually a part of facilitating easy shopping. For example, a shoe store should provide seating throughout its space, so customers have a spot to sit and lace up.
Consider how seating might be used in your space, whether just to provide a spot to relax or as part of shopping activities, and add chairs and other fixtures accordingly.
Tip: If you have fitting rooms, adding seating to the surrounding area is key.
Dressing Rooms
Fitting rooms are an increasingly important way for brick-and-mortar stores to compete with their ecommerce rivals. They offer a private place for customers to try on clothing and get up close and personal with your merchandise.
Carve out enough space for your fitting rooms so customers don’t feel cramped and uncomfortable. You should also outfit your fitting rooms with storage, seating, ample lighting, and hanging areas so customers can change easily and have a place for their personal items. Providing these features will ensure your customers can use your fitting rooms with ease and enjoy their experience in your store.
Want to learn more about creating the best dressing rooms? Read our guide to designing the best fitting rooms .
Customer Service Areas
Your customer service area is where customers can conduct returns, ask questions, and get assistance from store associates. In smaller stores with fewer customers, your customer service area is typically your checkout counter; in larger stores with heavier traffic, there tends to be a completely separate counter where customers can get assistance without clogging up the checkout lines.
Online Order Pickup
When mapping out your layout, you should also consider adding a space for employees to pick and pack online orders and a designated area for shoppers to collect their orders.
Though the popularity of click and collect shopping skyrocketed during the COVID-19 pandemic because of safety concerns, shoppers are still planning to use the service for the sake of convenience. Clearly mark the area with an “Online Pickup” sign and leave pickup instructions on your website to ensure customers know what to expect and that the transfer goes smoothly.
Learn more in our guide to click and collect for retailers.
Step 7: Ensure Your Store Is Accessible (ADA Compliance)
To ensure your space is accessible to all and to avoid any costly fines, you should be sure that you are following the guidelines set forth by the Americans with Disabilities Act. There are rules that retailers have to follow to ensure that spaces are navigable and comfortable for Americans facing disabilities.
The ADA has a comprehensive accessibility checklist specifically for retail establishments . It outlines all the items you need to include to be ADA compliant.
The main things that you need to account for in your retail store layout include:
- Parking and Entry : Keep parking areas clean and unobstructed and ensure that handicap spaces are available and occupied only by those with proper credentials. You should also have a wheelchair-accessible ramp or curb option that remains clear of obstructions and maintains enough space for wheelchairs to navigate.
- Navigable Store : Make sure your aisles are at least 3 feet wide and remain unobstructed. You should also keep enough space between displays, fixtures, and design elements for wheelchairs and scooters to pass. Also be wary of items on the ground and maintain a clear floor space without obstacles where people might trip.
- Restrooms, Fitting Rooms, and Elevators : Keep accessible bathrooms open during all business hours, remove items from fitting rooms that impede wheelchair access, and maintain your elevators so they are in working order during business hours.
- Customer Information : Ensure your customers know about your disability-friendly features by posting accessibility information on your website and educating staff so they can provide in-store assistance.
Planning your retail store layout is no small task, but many small retail store owners do it all themselves with great success. Take it slow, follow our steps, and remember to put the customer first. With the ideas in this guide and a little elbow grease, you’ll soon be on your way to mapping out a retail store that’s easy to navigate, welcoming to customers and, best of all, profitable.
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Meaghan Brophy
Meaghan Brophy is the Retail Expert at Fit Small Business focusing on small business retail and ecommerce content. Meaghan’s 10+ years of retail experience includes working at local book and dance supply stores, handcrafting gifts at an eco-friendly manufacturer, developing private label brands, and managing a team of more than 40 sales and service professionals at a local spa.
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Location planning checklist for retailers
We don’t need to tell you that thorough location planning can make or break the success of your new outlet.
There are so many variables to consider when selecting a site for a new retail outlet, and effectively collating and analysing all the data you need to make a final decision can become a major challenge.
Use this checklist to assess potential sites for your next location.
Signs of a promising location
If you spot any of these factors developing in a market, it is probably worth looking at it in more detail:
- Existing and potential customers are buying from competitors’ stores
- The local transport network is set to be upgraded in the near future
- A new residential or retail development has been granted planning permission
Indicators that a location could perform well
These are some of the clearest signs that your new store could be successful in a particular location:
- Sufficient numbers of existing customers are based locally to justify opening a new store
- Existing customers feel the store they currently use is over-capacity or difficult to access
- People living and working locally match your customer personas
Competitors
- This location would set your company apart from competitors
- There aren’t enough local competitors to satisfy the market
- Other local competitors are unable to match the standard of your product/service
- Existing competition has not saturated the market
- Opening a new store locally would help you move ahead of competitors
- The locality has established public transport and/or personal transport options
- The transport network is easy to access from the proposed site
- There is sufficient space for customers to park and for goods to be unloaded conveniently
- The proposed location benefits from decent footfall
- Local residents have an educational and financial profile that would make them fit with your preferred employee demographic
- Staff can access nearby transport options conveniently
Points to watch out for during location planning
Just as there are many indicators of a good location, there are several that suggest a poor fit. If you’re able to tick any of these off your checklist, you might want to consider an alternative site for your new store:
- Customers you plan to target would find it easier to travel to the store they are currently visiting
- You would need to offer extra incentives to persuade existing customers to travel further
- Competitors have a more advantageous position than the one you’re considering
- Competitors offer a more comprehensive service in a nearby store
- Existing staff would have to be incentivised to move to this area for work
- Local residents with the skills required to work for you are in short supply
As you can see, there are many questions that need answering before you commit to a new site. Collating the relevant data through this checklist is a great start, but you need to put it all together to pinpoint the very best location for your new outlet.
With advanced location planning software like Periscope®, you can:
- Visualise potential store locations, customer demographics, competitors and transport links on an intuitive map
- Import existing customer data to create true-to-life supply and demand estimates
- Build profiles of your ideal customers, and identify the best locations to attract them
- Find new areas that match the demographic make-up of your best performing stores
- Compare the specifics of similar locations side-by-side to make a final decision with confidence
Find out how Periscope® can provide you with a level of insight that will help make your next location a great success.
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Marketing91
Retail Store Location: Importance, Types, & Tips to have a Good Location
September 14, 2019 By Hitesh Bhasin Filed Under: Retailing
Having a good location for retail is one of the crucial impacts in the case of the marketing strategy of retail because many of the associated long-term decisions and commitments depend on the location of the retail. Having a good location is one of c primary element in attracting prospects and customers.
At times a good location can also lead to an excellent competitive advantage because in retail marketing mix location is one of the crucial parameters and unique which cannot be copied by competitors in any way.
Table of Contents
Importance of a good retail store location
A good retail location as a competitive advantage which cannot be copied by the competition. One location can occupy one retail store, and time also plays a crucial role along with the location.
For example, the retail store of Gucci opens up in a particular neighborhood then, and for a couple of months, that is the store which is going to be the only purchase point of all the Gucci products for a neighborhood.
If Nike shows up in the same neighborhood after a couple of months, it won’t be possible for Nike to occupy the same location as of Gucci. Nike store has to be located either very close, which entirely depends on the availability of the location, or it has to be placed very far from the Gucci store thereby targeting a different neighborhood and different customers.
Customer proximity is another concern for most of the retail businesses. Several stores can be opened away from the city with a cheaper budget, but it won’t be possible for the retailers to bring customers to that particular neighborhood.
Hence the retailers have to think the way customer would think and open a store which would be convenient for the customers. Since geographically, peoples are spread out at every possible location, retailers cannot open a store in every neighborhood and instead they have to think of a Central location which would be accessible by most of the neighborhood within a particular diameter of the circle.
The retail store should be close to the place of customers. The word to use here has no quantification, and it cannot be quantified at the store should be located within 1 mile or ten miles of the customer, and it is a dependent on the locality in the country and the probability of the retailer.
Having a convenient retail store helps the organization to make supply chain and distribution arrangements easy for a particular outlet. This reduces the cost of the organization as brothers when it comes to meeting the immediate demands of the customer and fulfilling the urgent orders the retail outlet will not have any difficulty in doing so.
Because the transportation cost is reduced, it reduces the overall cost of supply chain management and operations that by everything the retail store and the retail corporation to go close to the six sigma process.
Having many retail stores nearby also enables the retail corporation to store and bed storage houses at one convenient place from which most of the retail outlets can be created within no time. This reduces the wait time and also reduces the ‘No Stock’ incidences in stores.
A well placed retail store can also help to influence the buying habits of the customers. Customers will always prefer their brand, but most of the times, customers also referred to avoid a hassle to get to their store and compromise on other brands as well.
For example, a die-hard fan of Pepsi lives in a particular neighborhood, and the availability of Pepsi is ten blocks away from his place.
Since the person is a die-hard fan of Pepsi, he will make sure to stock up his home with Axis Pepsi, but there will be times when we will have to walk those blocks or take a suitable means of transportation to the place and by Pepsi for himself.
Couple of days later results is that there is a store which is just one block away from his place but has Coca-Cola. One fine day that customer tired of walking down ten blocks research to go for Coca-Cola and why is it from the place which is one block away from this place.
He tries Coca-Cola and finds it on the same level as Pepsi and decides to stop buying Pepsi and switches to Coca-Cola.
There are few of the types of business operations that can be considered by retailers depending on the nature of the business, and the customers they serve.
Types of Retail Store location
The primary three types of retail locations that can be considered depending on the nature of the business.
1) Solitary sites
These are single small outlets of shops which are separated from different writers, and they are positioned near other retailers on the roads on the way to shopping centers. Many of the food and non-food retailers use this type of solitary sites.
The primary advantage of having a solitary site is that it is away from the competition and provides the services to the customers, which help the customer to zero down on the product offered by that particular retailer.
However, the shortcomings of having a solitary site are the pedestrian traffic will always be so as compared to a shopping center or a convenience store and the visibility will also business along with the huge amount of investment since the site will be solitary.
2) Unplanned shopping areas
These are the locations of retail stores which have evolved over a long period of time and have multiple outlets in nearby proximities. These are further divided into:
Central business district such as the downtown areas in major cities
Secondary business districts on main or high Street
District neighborhood
Location switch on the street or on the motorway which is also known as strip locations.
The advantages of having unplanned shopping areas are that there is very high pedestrian traffic during working hours and also because of my residential areas. This ensures a constant pull of customers.
The disadvantage of having unplanned shopping area is that there is a threat of shoplifting because of which high security is required. Also, it may cause inconvenience to other customers, and there are high chances of traffic blocking because of the unavailability of parking facilities.
3) Planned shopping areas
The retail locations which are well planned according to the architecture and provide multiple out that are under the same roof are called as planned shopping areas. They have huge land spaces and the collection of major retail brands. Malls, Speciality, and Lifestyle centers are classified under planned shopping areas.
High visibility to customers and harmful of customers is a major advantage of planned shopping areas. But the disadvantages are that why security is required, and the cost of occupancy is also high.
Tips to have a good retail location:
Choosing the right education is crucial in terms of business, as stated above. As such, there are different rules which govern choosing of location for retail store depending on the nature of the business and the target audience.
However, the following are a few of the steps which can be applied by almost all the retailers in order to find the right retail location.
1) Market analysis:
The company has to analyze the market in terms of their product and industry along with the nature of competition and the presence of competition. The company also has to consider how old are there in the market and how many some other businesses are there in the current location.
They have to check and analyze the market to know how far is the competition been successful in satisfying the customers. The company also has to analyze how convenient is the location in terms of supply chain management and warehousing in order to make the products available on a daily basis.
2) Demographics of the market:
The demographics of locality is essential to be considered in order to choose the retail location. The age group of the customer, profession, Lifestyle, profession, religion income groups, etc.
3) Market potential evaluation:
The paying capacity of the population plays an important role in the evaluation of the potential of the market, along with the impact of the competition and the product estimation and demand. The retailer should also have the knowledge of regulations and laws of the country in which the store is being operated.
Other things such as communal festivals which have an impact on the demand should also be considered by the business such as Christmas.
4)Identification of alternatives:
Most of the times it so happens that the retailers in hurry of starting the business finalize a location which costs them a fortune within fact a similar location with similar business potential would’ve been available somewhere very close which was neglected or overlooked.
In such cases, the retailer should not carry on finalizing the retail location and should also go out for alternatives and evaluate that location with similar parameters as stated above.
5)Allocation of marketing budget:
A retail store should have a marketing budget depending on the cost of the location, which is in the third to build the brick and mortar place. The store which is occupying a prime location and has a good inflow of customers has indeed cost a fortune for the retailer.
In such cases, the marketing budget will be very less since the story is visible to most of the customers and passers-by. On the contrary, a store which is located away from the main street should use more marketing campaigns and spend on marketing collaterals in order to attract more customers to the store.
With the advent of social media marketing, the store has become even cheaper. People can advertise about their Store on Google with a very small budget and can ensure every I reach to potential customers not only across the neighborhood but also across other neighborhoods as well.
How to measure the success of Retail Location
Once the rigorous process of selecting the location is followed, and the retail outlet is opened on a selected location it is very important to keep track of how good the location has turned out to be the business. Apart from this, the retailer should carry out a few assessments of locations:
1) Macro location evaluation
As the name suggests, this is the type of evaluation which is carried out to measure the success of retail location at National level and is conducted by the company when it wants to start the spelling of its product and open a retail business internationally.
Following are the few steps which are carried out to conduct the retail location assessment:
Detailed auditing of the market is carried out by analyzing the locations and the macro environment, which is abbreviated as PEST, which is Political, Economic, Social, and Technical and is also known as PEST analysis.
Other important factors such as the spending capacity of the custom nature of the competition and the location availability are defined at a minimum acceptable level, and the countries are right against each other.
2) Micro-location Evaluation
Many of the factors are analyzed and assessed at this level, such as:
Population – approximate number of people from the locality is taken into consideration. This number represents the people who shop at that particular retail store.
Store outlet – competing stores in the nearby vicinity are identified and the stores which reduce the attractiveness of the location and the stores which increase the attractiveness of the location.
Infrastructure – the accessibility of the story is energized with respect to potential customers.
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About Hitesh Bhasin
Hi, I am an MBA and the CEO of Marketing91. I am a Digital Marketer and an Entrepreneur with 12 Years of experience in Business and Marketing. Business is my passion and i have established myself in multiple industries with a focus on sustainable growth.
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How to Open a Retail Store
Narrow down your target market before opening a retail location.
In today’s world, many consumers think about online shopping when they hear the term “retail.” While smaller retailers are finding success online, there’s still a market for brick-and-mortar retail stores. Most of these businesses also maintain a web presence, but there’s something about the in-person shopping experience that can’t be replicated online.
Several studies suggest that in-store purchases aren’t a thing of the past, and online and in-store retail can coexist. If you’re interested in opening a retail business, planning for the event is important. We spoke with experts in the industry to learn more about how to open a retail store.
Generate an idea and business plan
The first step to opening a retail store is developing your idea and a business plan. You’ll want to start by determining what store you want to open. You’ll want to answer each of the following questions:
- What will your business sell?
- Who is your target customer?
- What type of prices will your business set?
- Who are the competitors in your industry and local area?
- Who will be on your team?
There are dozens of other questions that need to be answered, but opening a retail store is like opening any other business. You must determine what you want to sell and who makes up your target audience. It’s important to create a retail store that satisfies a need of your customers.
“Know your competition,” said Juli Lassow, founder and principal of JHL Solutions , a retail business management consulting firm. “No ideas today are fully original. Understand what options your customers have to you and your offering. The option might be doing nothing at all.
Once you understand your competition, build out your strategy to compete. Will it be on price? On quality? On service? On variety? Be specific on what your competitive advantage is. Know how to communicate that to your customers through marketing and presentation.”
As Lassow mentions, it’s important to understand your competitive advantage and what makes your business unique. Retail is competitive, and you need to be clear on your plan to find success. Identifying how your business helps your target market is arguably the most important aspect of opening any business.
Lassow said being lost in the crowd is a common risk associated with opening a retail location.
“You risk not standing out in a crowded marketplace,” she said. “Consumers have so many options today to learn about products. They have options in where to shop. They have options for how to buy. Your retail strategy of product and marketing must reach your consumer. It must resonate with them.”
Other basic factors to consider include business funding and marketing ideas. Will you need to use business loans ? Will you take on investors? What types of marketing channels will you use? Does your team need people specifically for social media marketing? What online channels do your customers use?
Marketing and business funding are both important considerations that should be addressed in your business plan. For funding, it’s a good idea to research business loans and how to attract investors . For marketing, you should be familiar with online marketing channels .
Consider all of your costs as well. Create a list of the fixed and variable costs that may affect your business. It’s easy to brainstorm a potentially successful idea only to forget about hundreds of thousands of dollars in costs. You may find in your research that the cost of starting a brick-and-mortar store is too much for you to handle, and, instead, you should start an online business before eventually saving up and opening a small physical location.
You may also generate new ideas upon learning about inventory costs and other business items. Thinking through how to create your retail business in detail will help you find success when it’s time to open your store. For instance, you’ll need a point-of-sale system and a way to process credit card transactions. And you’ll want to invest in the right accounting software for your business.
Choose a name for your retail store
In addition to the other basics that go with creating a business plan , take time to find a good business name. When contemplating how to create a good business name , you should consider a few factors.
- Meaning – There should be some meaning to the name from the customer perspective. That meaning may be developed over time, but you’ll want a brand name that is recognizable to customers.
- Simplicity – Look for names that are relatively short and easy to say. Apple, Google, Facebook and Nike are all major brands that are easy to say. If your brand is a mouthful, it’s probably not the best name for branding purposes.
- Uniqueness – Don’t opt for a name that’s close to that of your competitors. Look for something original and authentic that encapsulates your business. Try to draw your own inspirations for names without looking at other brands.
The name doesn’t determine the success of your business, so it shouldn’t be the focus when opening a retail store, but you do want to at least put some thought into naming your business entity.
It’s also important to check that the name isn’t already trademarked or taken. You can start with a quick Google search for the name before taking a deeper look at state databases of unavailable business names.
Cover your legal basics
Covering your legal basics includes choosing a business structure, following any regulations and obtaining the right licenses and permits.
“If you are opening a retail store for your business, you will need a few common business licenses and permits in order to stay in operation and remain in compliance,” said Deborah Sweeney, CEO of MyCorporation .” A few of the basics include:
- A basic business operation license, which allows you to operate your business in the city, county, or state you do business out of.
- An employer identification number (EIN), which is a federal tax ID that allows you to hire employees to work at your storefront and ensures your business collects payroll tax.
- A seller’s license. This depends on what kinds of items your retail storefront sells. It’s recommended you check in with your state’s government office to determine whether or not you need it.”
When it comes to selecting a legal structure , you follow the same process as most businesses. For retailers, however, becoming a sole proprietor can be risky. Taking on a business structure that doesn’t place liability solely on the individual owner is a good way to mitigate your risk, should the business fail.
It’s common for retailers to become limited liability corporations (LLCs) or corporations . Both of those options help limit personal liability.
Find the right location
If you’re opening a brick-and-mortar retail business, you must focus on finding the best retail space.
Picking out a prime retail space for your business needs to be a focal point. While it can be tempting to try to pick a cheap location and hope your business generates a steady flow of customers through its marketing efforts, sometimes, there’s no substitute for being in a busy part of town. Picking a location downtown might be pricier than an option a few miles away from town, but the pricier option might bring in thousands more customers per year.
“First-time retailers need to be wary of trying to save money on rent if they are not a true ‘destination retailer,'” said Bethany Babcock, founder of Foresite Commercial Real Estate. “Poor access or awkward positioning in the center can keep clients away. The retail real estate business is very psychological, and the price [of real estate] is usually one of the last considerations for most retailers.”
When determining a location, find where your customers spend their time. If your customers live primarily outside of town, opening a downtown location might be more expensive and bring in fewer customers. Try to place your retail location in an area where your target audience spends its time. While that tip may seem simple, businesses often focus on finding a location they think is fantastic, rather than trying to narrow down where their target market resides.
You may also have a location with additional space to store inventory. If you expect to have a lot of inventory, because you sell a lot of items at affordable prices, you may want additional space. Other stores may sell a few high-end items and don’t need a large space to keep inventory. Keep inventory in mind when selecting a location.
Create a personalized experience
Finding success in retail often comes from adding value that competitors are not. This frequently comes in the form of personalization. Many retail stores find success by allowing customers to try the products. Whether it’s free samples at a food shop or dressing rooms at a clothing store, brick-and-mortar retailers can offer personalized experiences like that, while online retailers struggle to find the same level of personalization. [Are you interested in improving your customer relationship management system ? Check out our best picks and reviews of software that can help.]
With the convenience of online shopping, physical stores need to offer a reason for customers to visit. Personalization and a quality in-store experience are important ways to consistently attract customers.
Marco Castelán, co-founder of The Navio Group , a retail business consulting firm, said, “I think the biggest question an entrepreneur needs to ask himself/herself is simple: Can I provide the customer a new experience? It doesn’t matter that you are selling items that can be bought elsewhere – the biggest way to differentiate yourself is by creating a unique experience for the customer because you are creating value that cannot be replicated.”
Your focus when selecting a location and the size of your shop should always be your customer. Find a place where you can create a unique experience that fits the model of your business and your customers. In-store decision-making should emphasize creating an experience for your customers.
Build vendor relationships
Developing relationships with vendors becomes critical when opening a retail location. Small business owners face challenges, and it’s important to consistently please customers despite those challenges. Building strong relationships with vendors is a good way for business owners, especially retail shop owners, to prevent potential issues.
If you can quickly develop relationships with vendors, it will set your business up for success. This can prove difficult if you’re using overseas vendors.
“The global supply chain is changing rapidly,” said Lassow. “Current trade uncertainty makes it difficult to build global relationships that will provide you with the goods and services you need. If you plan to fully or partially source your products from outside of the U.S., get support. Be sure that part of your operations planning includes partnering with experts in sourcing, logistics, customs and tax.”
Explore marketing opportunities
Marketing is an important part of building a successful retail store. If you already own an online retail business and want to expand to a physical store, you may want to experiment with pop-up shops. These shops open in temporary locations for a short amount of time. For example, your clothing store may open a pop-up shop at a downtown event for the one-day event.
Pop-up shops allow your business to move around or offer a physical location to attract new customers. Opening pop-up shops can be a good test of whether your online retail shop will translate to a brick-and-mortar location.
Even if you don’t already own an online retailer, pop-up shops can still be a good idea. If you open your brick-and-mortar location, you may open a pop-up shop once every few months to expand your customer base to new locations.
Opening a shop every few months in a town 20 to 30 minutes from yours may pique the interest of customers in that new town. If they love your products, they may drive 20 to 30 minutes to visit you or decide to buy from you online. Creating a pop-up shop is a good way to generate buzz around your business for a few days or weeks.
Other marketing opportunities may come from social media or in-store discounts. Sales can be a good way to draw customers into your store. For example, offering 30% off select items during a holiday weekend may increase foot traffic in your store. You can get creative with the different marketing opportunities as well. You could decide to sell your products at a 10% discount from Dec. 20 to 24 in hopes of attracting more
On the flipside, you could sell holiday items at a discount from Dec. 26 to early January to cash in on customers looking to purchase items well in advance of the next holiday season.
Regardless of your marketing and sales tactics, it’s important to be creative. Find ways to reach your customers through creative marketing ideas. Running a retail business is a year-long endeavor, and finding success requires quality marketing campaigns. [Are you interested in using direct mail to market your store? Check out our small business guide to direct mail .]
Plan for a grand opening
If you’re opening a retail store, go big for the grand opening. This doesn’t necessarily mean you need to spend excessively on your grand opening, but you do want to make it an event. Reach out to local media outlets and share when your store is opening, as media coverage is a good way to get the word out about your business for free. Share a pitch with journalists as to why your store matters and how it fits into the local community. Be sure to follow proper etiquette when pitching journalists.
In addition to securing media coverage, plug your business’s grand opening through social media and other marketing channels weeks in advance. Don’t wait until a few days before your business opens to get people excited. You want to start off strong and have a good first few days to get your business into people’s minds. That requires a successful grand opening event.
It doesn’t need to be over the top, but your grand opening should be an event you take seriously when trying to win over the local community. Consider timing as well. Opening a store on a Tuesday at 2 p.m. probably doesn’t make much sense, but opening on a Saturday morning of a busy retail day could be a perfect plan.
The grand opening doesn’t make or break your business, but you want your business opening to excite customers.
The bottom line
To open a retail store, you should first narrow down your target audience. Once you decide who you’re selling to and what you’re selling to them, start looking for a location and checking off legal requirements. Upon finding a location and fulfilling legal and financial obligations, look at different marketing channels that might work best for your business. Plan a grand opening, and your retail operation will be open for business.
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- 1. Retail Location Planning, Retail Site Location Dr. Parveen Nagpal
- 2. Retail Location • Location is one of the most influential considerations in a customer’s store- choice decision. • Location decisions have strategic importance because they can be used to develop a sustainable competitive advantage. If a retailer has the best location i.e. the location that is most attractive to its customers, competitors cannot easily copy this advantage. • Location decisions are risky. When retailers select a location, they either must make a substantial investment to buy and develop the real estate or must commit to a long-term lease with developers. Retailers often commit to leases for 5 to 15 years.
- 3. Types of Retail Location • There are several types of location choices available for retail stores, each type with its own strengths and weaknesses. • The basic types of location are: I. Freestanding (unplanned) II. City or Town business district (unplanned) III. Shopping Center or IV. Nontraditional location such as in an airport or within another store. • Choosing a particular location type requires evaluating a series of trade-offs, such as the size of trade area, occupancy cost of location, pedestrian and vehicle customer traffic generated, restrictions placed on store operations by the property managers, customer convenience etc.
- 4. Types of Retail Location I. Isolated Store/ Free Standing Location (Unplanned) • Retail locations for an individual, isolated store unconnected to other retailers; however, they might be near other freestanding retailers or a shopping center. • The advantages of freestanding locations are: Convenience for customers (easy access and parking) High vehicular traffic and visibility to attract customers driving by Modest occupancy costs Fewer restrictions on number of hours, or merchandise, as are imposed in shopping centers. Low rents Ample parking
- 5. Types of Retail Location • These locations are popular for gas stations, hotels on highways, fast-food restaurants, such as McDonald’s etc. • However, freestanding locations have a limited trade area. There are no other nearby retailers to attract customers interested in shopping at multiple outlets on one trip. • Freestanding locations may have higher occupancy costs because they do not have other retailers to share the cost of outside lighting, parking lot maintenance, or trash collection. • Freestanding locations may have little pedestrian traffic, limiting the number of customers who might drop in because they are walking by. • Outparcels enable retailers to have a drive-through window, dedicated parking, and clear visibility from the street. (Outparcels are stores that are not connected to other stores in a shopping center but are located on the premises, may be in a parking area.)
- 6. Types of Retail Location II. City or Town Locations (Unplanned) • Urban locations have lower occupancy costs than enclosed malls and often have high pedestrian traffic. • However, vehicular traffic is limited due to congestion in urban areas, and parking problems reduce consumer convenience. • Unlike freestanding locations, store signage can be restricted in these locations. • Young professionals and retired empty-nesters are moving into these areas to enjoy the convenience of shopping, restaurants, and entertainment near their residence. • Many urban areas are going through a process of Gentrification - the renewal and rebuilding of offices, housing, and retailers in deteriorating areas, coupled with an influx of more affluent people that displaces the former, poorer residents.
- 7. Types of Retail Location a. Central Business District (CBD) • Main center of commerce and trade in the city. • A hub for public transportation, high level of pedestrian traffic • Good accessibility in terms of transport from all parts of the city. • Large number of residents living in the area. • Limited parking and longer driving times can discourage suburban shoppers from patronizing stores in a CBD. • Shoplifting is a concern, requiring increased security costs. • Lack of planning (One block may contain upscale boutiques, next may have low-income housing. Consumers may not have access to enough retailers that they can visit in one shopping trip)
- 8. Types of Retail Location b. Main Street (called High Streets in the United Kingdom) • Traditional shopping area in smaller towns within a larger city • Main Streets share most of the characteristics of a CBD, but their occupancy costs are generally lower. • Main Street locations do not draw as many people as CBD because fewer people work in the area and the fewer stores generally mean a smaller overall selection. • Main Streets do not offer the range of entertainment and recreational activities available in CBDs.
- 9. Types of Retail Location c. Inner City • The term ‘inner city’ in the United States refers to a high density urban area that has higher unemployment and lower income than the surrounding metropolitan area. • Generally retailers avoid opening stores here because it is riskier and achieves lower returns than other areas. As a result, inner-city consumers have to travel to the suburbs to shop, even for food items. • Retailing can play an important role in inner-city redevelopment activities by providing needed services and jobs for inner-city residents, as well as property taxes to support the redevelopment. • Because of the potential of this untapped market and incentives from local governments, developers are increasing their focus on opportunities in the inner city.
- 10. Types of Retail Location III. Shopping Centers (Planned) • A group of retail and other commercial establishments that are planned, developed, owned, and managed as a single property. • By combining many stores at one location, the development attracts more consumers to the shopping center than would be the case if the stores were at separate locations. • The developer and shopping center management carefully select a set of retailers that are complementary to provide consumers with a comprehensive shopping experience, including a well-thought-out assortment of retailers. • The shopping center management maintains the common facilities such as the parking area - an arrangement referred to as common area maintenance (CAM) - and is responsible for providing security, parking lot lighting, outdoor signage for the center, advertising and special
- 11. Types of Retail Location • Retailers in the center pay a portion of the CAM costs for the center according to the size of their store’s space. • Shopping center management generally place restrictions on the operating hours, signage, and even the type of merchandise sold in the stores. • Most shopping centers have at least one or two major retailers, referred to as anchors, that are specially called by the center’s developer because they attract a significant number of consumers and make the center more appealing for other retailers. • To get these anchor retailers to locate in a center, developers give them special deals, such as reduced lease amount.
- 12. Types of Retail Location a. Neighborhood and Community Shopping Centers • Also called strip shopping centers, are attached rows of non-enclosed stores, with on-site parking usually located in front of the stores. • Smaller centers (neighborhood centers) are anchored by a supermarket or a drugstore and designed for day-to-day convenience shopping.
- 13. Types of Retail Location • The larger centers (community centers) are anchored by at least one big-box store such as a discount department store or an off-price retailer. • The main advantages are that they offer the customers, convenient locations and easy parking and have relatively low occupancy costs. • Disadvantage is that smaller centers have a limited trade area due to their size, and they lack entertainment and restaurants. • There is no protection from the weather. As a result, neighborhood and community centers do not attract as many customers as larger, enclosed malls do.
- 14. Types of Retail Location b. Power Centers • ‘Retail Park’ (U.K., Ireland) or ‘Power Center’ (North America) are the terms used among retailers to describe a shopping complex, generally 250,000 to 600,000 sq. ft in area, that primarily consists of collections of big-box retail stores, such as full-line discount stores, off-price stores, warehouse clubs, and specialty store. • Although these centers are “open-air,” unlike traditional strip centers, power centers often include several unconnected anchors and only a minimum number of small specialty store tenants. • Power centers may be larger than some regional malls and have trade areas as large as regional malls. • Power centers offer low occupancy costs and modest levels of consumer convenience and vehicular and pedestrian traffic.
- 15. Types of Retail Location Vertical power center with big box Retail Park in France stores on multiple floors in Toronto
- 16. Types of Retail Location c. Shopping Malls • Enclosed, climate-controlled, lighted shopping centers with retail stores on one or both sides of an enclosed walkway. • Parking is usually provided around the perimeter of the mall. • Shopping malls are classified as either regional malls (less than 800,000 square feet) or superregional malls (more than 800,000 square feet). • Super-regional centers are similar to regional centers, but because of their larger size, they have more anchors, specialty stores, and recreational opportunities and draw from a larger geographic area, and are considered tourist attractions.
- 17. Types of Retail Location Advantages of Shopping Malls • Attract many shoppers and have a large trade area because of large number of stores and the opportunity to combine shopping with entertainment. • Provide an inexpensive form of entertainment. • People can socialize • Since they are enclosed, customers can conveniently shop during all seasons. • Mall management ensures a level of consistency that benefits all the tenants. For instance, most major malls enforce uniform hours of operation
- 18. Types of Retail Location Disadvantages of Shopping Malls • Shopping mall occupancy costs are higher than those of strip centers, freestanding sites, and most central business districts. • Some retailers may not like mall management’s control of their operations, such as strict rules governing hours of operations, window displays and signage. • Competition within shopping centers can be intense. Several specialty and department stores might sell similar merchandise and be located in close proximity. • Freestanding locations, strip centers, lifestyle centers, and power centers have convenient parking facilities.
- 19. Types of Retail Location d. Lifestyle Centers • Shopping centers that have an open-air configuration of specialty stores, entertainment, and restaurants, with design ambience and amenities such as fountains and street furniture. • They resemble the main streets in small towns, where people stroll from store to store, have lunch, and sit for a while on a bench talking to friends. Thus, they cater to the “lifestyles” of consumers in their trade areas. • Lifestyle centers are particularly attractive to specialty retailers and can be anchored by department stores. • People are attracted to lifestyle centers not only because of their shops and restaurants but also because of their outdoor attractions such as a pop-up fountain, ice cream carts, balloon artists, magicians, face painters etc.
- 20. Types of Retail Location • Due to the ease of parking, lifestyle centers are very convenient for shoppers, and the occupancy costs, like those of all open-air developments, are considerably lower than those for enclosed malls. • They have less retail space than enclosed malls and thus may attract fewer customers than enclosed malls. • Many lifestyle centers are located near higher-income areas, so the higher purchases per visit compensate for the fewer number of shoppers.
- 21. Types of Retail Location e. Mixed-use developments (MXDs) • Mixed-use zoning allows for horizontal and vertical combination of land uses in a given area, combining two or more uses within a building, site or block that can be organized vertically, horizontally, or a combination of the two. • Shops or other commercial premises at ground floor with apartments or offices above are a common example of a vertical mixed use development. • MXDs combine several different uses into one complex including retail, office, residential, hotel, recreation, or other functions. • They are pedestrian - oriented and therefore people can live, work and play.
- 22. Types of Retail Location • MXDs provide a pleasant, pedestrian environment and are an efficient use of space. • MXDs make use of space productively. For instance, land costs the same whether a developer builds a shopping mall by itself or an office tower on top of the mall or parking structure.
- 23. Types of Retail Location f. Outlet Centers • Shopping centers that contain mostly manufacturers’ and retailers’ outlet stores. • Outlet center rent rates are lower than those at shopping malls. • Some outlet centers have a strong entertainment component, including movie theaters and restaurants to keep customers on the premises for a longer period of time. • Tourism represents 50 percent of the traffic generated for many outlet centers. Thus, many are located with convenient interstate access and close to popular tourist attractions.
- 24. Types of Retail Location g. Theme/ Festival Centers • Shopping centers that employ a unifying theme carried by the individual shops in their architectural design and, to an extent, in their merchandise. • Shopping centers are very appealing to the tourists. • These centers are generally located in urban areas or in a place of historical interest, or may simply replicate a historical place, or create a unique shopping environment. • The centers do not have large specialty stores or department stores. • Theme/festival centers can be anchored by restaurants and entertainment facilities.
- 25. Types of Retail Location h. Larger, Multiformat Developments - Omnicenters • New shopping center developments are combining enclosed malls, lifestyle centers, and power centers. Such places are commonly referred to as ‘omnicenters’ • They represent a response to several trends in retailing such as: including the desire of tenants to lower common area maintenance charges spreading the costs among more tenants function inside larger developments that generate more pedestrian traffic and longer shopping trips. Facilitate the growing tendency of consumers to cross-shop.
- 26. Types of Retail Location The Omni Centre Business Park, one of the few professional business campus environments in the Omaha/Council Bluffs metropolitan area (US), is a unique business environment which is comprised of 2 multi-story office buildings, a main mall promenade, a garden courtyard and a four-level covered parking structure all within a 4-block square area. With nearly 400,000 total square feet of rentable office and light retail space, it has over 100 tenants. Tenants, including medical, legal, investment, insurance and state agencies have come together in an exciting and new concept of modern business environments. Located in a strategic enterprise zone, it has set itself apart as a downtown destination for business and services to grow and prosper.
- 27. Types of Retail Location IV. Other Non-Traditional Location a. Pop-up Stores • Stores in temporary locations that focus on new products or a limited group of products to create a long term, lasting impression with potential customers. • Retailers and manufacturers are using these spaces to create buzz or test new concepts, connect with customers and increase sales. • Pop up stores may stock merchandise related to fashion to tech gadgets and food items. • Such stores are even popping-up on college campuses. For instance, Kiehl’s pop-up store at the University of Colorado, is the fashion brands’ latest attempt at developing brand loyalty among college students.
- 28. Types of Retail Location b. Stores within a Store (Shop - in - Shop) • Here the retailer acts as a host, allowing one or more other brands to operate independently within the store. • Retailers, particularly department stores, have traditionally leased space to other retailers, such as sellers of fine jewelry, or high-end designer brands. • Grocery stores have store-within-a-store concept with service providers like coffee bars, bank ATMs etc. • Store-within-a-store retail gives brands the power to manage their own inventory, determine the prices of their products, and independently develop their own marketing campaigns. • Shoppers enjoy the store-within-a-store model because it maximizes convenience, encourages variety and enhances their shopping experience.
- 29. Types of Retail Location • This model also helps brands save money by removing much of the overhead it costs to run an independent store. If the host retailer generates a lot of foot traffic, brands within their store also end up selling more. • The versatility of this model gives retail stores and storekeepers the opportunity to service different market segments, create a more comfortable shopping experience, and introduce new and exclusive products.
- 30. Types of Retail Location c. Merchandise Kiosks • Small selling spaces, located in the walkways of enclosed malls, airports, college campuses, or office building lobbies. • They are 'mini-stores' and are also known as Mall Kiosk, Island Retail Unit, Shop-in-shop, Vending Kiosk and so on. • Some merchandise kiosks are staffed and resemble a miniature store or cart that could be easily moved, others are 21st century versions of vending machines, such as the Apple kiosks that sell iPods and other high-volume Apple products. • For mall operators, kiosks are an opportunity to generate rental income in otherwise vacant space and offer a broad assortment of merchandise for visitors.
- 31. Types of Retail Location • Mall kiosks can be changed quickly to match seasonal demand. • When planning the location of kiosks in a mall, operators are sensitive to their regular mall tenants’ needs. They are careful to avoid kiosks that block any storefronts, create an incompatible image, or actually compete directly with permanent tenants by selling similar merchandise.
- 32. Types of Retail Location d. Airport Location • A high-pedestrian area that has become popular with national retail chains is airports. • Passengers arrive earlier for their flights than they did in the past, leaving them more time to shop. • Sales per square foot at airport may be higher than at regular mall stores. • However, rents are higher, costs can be higher - hours are longer, and because the location is often inconvenient for workers, the retailers may have to pay higher wages to employees. • The best airport locations tend to be ones where there are many connecting flights (Atlanta and Frankfurt) and international flights (New York’s Kennedy and London’s Heathrow), because customers have downtime to browse through stores.
- 33. Types of Retail Location • The Centre for Asia-Pacific Aviation (CAPA) estimates that the duty-free spend at Indian airports will reach $1.6 billion by 2021 - an eight-fold increase, spread across a decade. • A spokesperson from Mumbai International Airport highlighted, “Today’s millennial generation is not only travelling further and more frequently, it is also exploring more of the world and as a result more informed and conscious of reputed brands even when it comes to making impulse purchases. With the upgradation and privatization of airports across the country, travel retail has been growing at a fast rate and we expect the growth to further accelerate in the coming years. The Mumbai International Airport has witnessed a double digit growth year-on-year in travel retail.”
- 34. Location and Retail Strategy • The selection of retail type must reinforce retailer’s strategy. The location decision needs to be consistent with the shopping behavior and size of the target market and the retailers positioning in the target market. I. Shopping Behavior of Consumers in the Target Market • One of the critical factors affecting the type of location that consumers select to visit is the ‘Shopping Situation’ in which they are involved. • The types of shopping situations are: 1. Convenience Shopping: Here the consumers are primarily concerned with minimizing their effort to get the product/ service they want. They are relatively insensitive to price and indifferent about which brands to buy. Thus they want to make quick purchases. Example: buying bread, milk etc. Such stores are located at customers convenience and are easily accessible.
- 35. Location and Retail Strategy 2. Comparison Shopping: Here the customers may have an idea about the type of product/ service they want but not a well developed preference for a brand or a model. The purchase decisions are more important to them, so they seek information and compare alternatives, especially for purchase of furniture, appliances, apparels, cameras etc. The competing retailers are located next to each other im order to facilitate comparison shopping and attract customers. Enclosed malls offer the same benefits to consumers interested in comparison shopping for fashion apparels.
- 36. Location and Retail Strategy 3. Specialty Shopping: When customers go specialty shopping, they know what they want and will not accept a substitute. They are loyal to the brand as well as retailer and don’t mind spending more, for example, while buying organic food items, buying a high quality oven etc. The retailers they patronize when specialty shopping also are destination stores, which may be inconvenient locations. II. Density of Target Market: A good location has many people in the target market who are drawn to it. III. Uniqueness of Retail Offering: The convenience of location may not be a relevant factor for retailers with unique, undifferentiated offerings.
- 37. Legal Considerations in Retail Location I. Environmental and Sustainability Issues The environmental issues that affect retail stores are: • Construction material used • Hazardous material stored The best options available to retailers is: • To stipulate in the lease that the lessor is responsible for the removal and disposal of any such material, if found. • Retailer can buy insurance that specifically protects it from these risks New retail developments are using energy-efficient building materials, water efficient landscaping, natural lighting etc.
- 38. Legal Considerations in Retail Location II. Zoning and Building Codes Zoning determines how a particular site can be used, for instance, which zone can be used for residential purpose, retail users etc. Building Codes are similar legal restrictions that specify the type of building, signs, size and type of parking lot etc. that can be used at a particular location Signs – Restrictions on the use of signs can affect a particular site’s desirability. Sign sizes and styles may be restricted by building codes, zoning ordinances or the shopping center management.
- 39. Retail Site Location I. Evaluating Specific Areas for Retail Location In the United States, retailers often focus their analysis on a metropolitan statistical area (MSA) because consumers tend to shop within a MSA and media coverage and demographic data for analyzing location opportunities often are recognized by MSA. A MSA is a core urban area containing a population of more than 50,000 inhabitants, together with adjacent communities that have a high degree of economic and social integration with the core community. A micropolitan statistical area (MiSA) is a smaller unit of analysis, with only about 10,000 inhabitants in its core urban area. The best areas for locating stores are those that generate the highest long – term profits for a retailer. These factors are: Economic conditions, Competition, Strategic fit of the areas population with the retailers target market, costs of operating stores.
- 40. Retail Site Location • Economic Conditions: Locations involve commitment of resources over a long time period thus it is important to examine an areas level and growth of population and employment. A large, fully employed population could mean high purchasing power and high levels of retail sales. • Competition: The level of competition in an area affects the demand for a retailer’s merchandise. • Strategic Fit of the Areas Population with the Retailers Target Market: Population level, growth and competition may not be sufficient, the area needs to have consumers who are in the retailer’s target market – who are attracted to the retailer’s offerings and interested in patronizing its stores. Thus the area must have right demographic and lifestyle profile. • Costs of operating stores: Costs can vary across areas. Operating costs are also affected by the proximity of the area being considered to other areas in which retailer operates stores.
- 41. Retail Site Location II. Number of Stores in an Area Having selected an area in which to locate the stores, retailers next decision is how many stores to operate in an area. When making the decision about how many stores to open in an area, retailers must consider the trade – offs between lower operating costs and potential sales cannibalization from having multiple stores in an area. • Economies of Scale from Multiple Stores: Most retail chains open multiple stores in an area because promotion and distribution economies of scale can be achieved. Multiple stores in an area are needed to justify the cost of building a new distribution center. Having so many stores concentrated in one area also facilitates promotion activities.
- 42. Retail Site Location • Cannibalization: Although retailers gain economies from opening multiple locations in an area, they also suffer diminishing returns associated with locating too many additional stores in an area. Cannibalization is the reduction of the sales of a retailer’s own outlets as a consequence of its introduction of another similar outlet. Foe example, suppose the first four stores opened in a MSA by a specialty store retailer generate sales of $2 million each. Because they are located far apart from one another, customers consider patronizing only the store nearest to them, and there is no cannibalization. When the retailer opens a fifth store close to one of the existing stores, it anticipates a net sales increase for the area of $2 million, the new store should generate the same level as the four existing stores.
- 43. Retail Site Location Instead, the increase in sales is only $1.5 million because the sales in the nearest existing store drop to $1.7 million and sales from the new stores are only $1.8 million because its location is only the fifth best in the area. Thus because of the new store cannibalizes sales from the closest store, it only contributes sales of $1.5 million. Because a primary retailing objective is to maximize profits for the entire chain, retailers should continue to open stores only as long as profits continue to increase or, in economic terms, as long as the marginal revenues achieved by opening a new store are greater than the marginal costs.
- 44. Retail Site Location Evaluating a Site for Locating a Retail Store 1. Characteristics of the Site • Traffic flow and Accessibility • Location Characteristics – Parking, Store visibility, Adjacent retailers • Costs associated with locating 2. Characteristics of Trading Area for a Store 3. Estimated Potential Sales Generated by a Store at the Site
- 45. Trading Area • A trade area is the adjacent geographic area that accounts for the majority of a store’s sales and customers. • Knowing the boundaries of trading area helps a retailer to estimate the potential customers who may patronize the retail store. • Accordingly the retailer can gather information about the demographics and lifestyle of people and estimate sales. • Understanding the trade area also helps retailers formulate suitable promotional and communication strategies. • Thus defining the trade area is one of the most important steps in market analysis.
- 46. Trading Area Trade areas can be divided into three zones: Retail Store Primary Trade Area Secondary Trade Area Tertiary Trade Area
- 47. Trading Area 1. Primary Trading Area It is the geographic area from which the shopping center or store site derives 50 to 70 percent of its customers. 2. Secondary Trading Area It is the geographic area of secondary importance in terms of customer sales, generating about 20 to 30 percent of the site’s customers. 3. Tertiary/ Fringe Trading Area It includes the remaining customers who shop at the site but come from widely dispersed areas. These customers might travel an unusually long distance because they do not have comparable retail facilities closer to home, or they may drive near the store or center on their way to or from work.
- 48. Trading Area • In USA, most retailers define the three zones based on driving time rather than distance. • In smaller cities, the primary trading area might be defined as customers within 5 minutes’ driving time of the site; the secondary trading area, as customers with a 10-minute drive; and the tertiary zone, as customers more than 15 minutes away from the site by car. • In bigger cities where driving times are lengthy, such as Los Angeles, the primary trading area may be 15 minutes; the secondary trading area, 40 minutes; and the tertiary trading area, more than 1 hour. • However, it is much easier to collect information about the number of people and their characteristics in the different zones by geographic distance than by driving time. • Some other retailers may also define the zones by distance - such as 3, 5, and 10 miles from the site - rather than driving time.
- 49. Trading Area Retailers can determine the trade area for their existing stores by customer spotting. Customer Spotting is the process of locating the residences of customers for a store on a map and displaying their positions relative to store location. The addresses for locating the customers residences are obtained by asking them and recording the data. A Parasite Store is the one that does not create its own traffic and whose trade area is determined by the dominant retailer in the shopping center or retail area. For instance, a dry cleaner would be a parasite store to a Walmart store because people tend to stop at the dry cleaner on the way to or from Walmart and other stores.
- 50. Estimating Sales Potential of New Store The three approaches for using information about the trade area to estimate the potential sales for a store at the location: (1) The Huff Gravity Model (2) Regression Analysis (3) The Analog Method
- 51. Huffs Gravity Model • The Huff Gravity Model (or Huffs Law of Shopper Attraction) was introduced by David Huff in 1963, for estimating the sales of a retail store, is based on the concept of gravity. • It states that - Consumers are attracted to a store location, just like Newton’s falling apple was attracted to the Earth. • In this model, the force of the attraction is based on two factors: i. the size of the store (larger stores have more pulling power) ii. the time it takes to travel to the store (stores that take more time to get to have less pulling power). • In other words, it is a model that recognizes the correlation between patronage and distance from the location of the store. • A larger size is generally more attractive to consumers because it means more merchandise assortment and variety.
- 52. Huffs Gravity Model
- 53. Huffs Gravity Model • The formula indicates that the larger the size (Sj) of the store compared with competing stores’ sizes, the greater the probability that a customer will shop at the location. • A larger size is generally more attractive in consumers’ eyes because it means more merchandise assortment and variety. Travel time or distance (Tij) has the opposite effect on the probability that a consumer will shop at a location. • The greater the travel time or distance from the consumer, compared with that of competing locations, the lower the probability that the consumer will shop at the location. Generally, customers would rather shop at a close store than a distant one
- 54. Huffs Gravity Model • The exponent (^) reflects the relative effect of travel time versus store size. When (^) is equal to 1, store size and travel time have an equal but opposite effect on the probability of a consumer’s shopping at a store location. • When (^) is greater than 1, travel time has a greater effect, and when l is less than 1, store size has a greater effect. The value of (^) is affected by the nature of the shopping trips consumers generally take when visiting the specific type of store. • For instance, travel time or distance is generally more important for convenience goods than for shopping goods because people are less willing to travel a great distance for a bread than they are for a new pair of shoes. • Thus, a larger value for (^) is assigned if the particular store specializes in convenience shopping trips rather than comparison shopping trips. The value of (^) is usually estimated statistically using data that describe shopping patterns at existing stores.
- 55. Huffs Gravity Model • A small town has two communities, Rock Creek and Oak Hammock. • The town currently has one 5,000-square-foot drugstore with annual sales of $8 million, $3 million of which come from Oak Hammock residents and $5 million from Rock Creek residents. • A competitive chain is considering opening a 10,000-square-foot store. • The driving time for the average Rock Creek resident to the existing store is 10 minutes, but it would be only five minutes to the new store. • In contrast, the driving time for the typical Oak Hammock resident to the existing drugstore is 5 minutes and would be 15 minutes to the new store. • Based on its past experience, the drugstore chain has found that l equals 2 for its store locations.
- 56. Huffs Gravity Model
- 57. Huffs Gravity Model Using the Huff formula, the probability of a Rock Creek resident’s shopping at the new location
- 58. Huffs Gravity Model • A small town has two communities, Rock Creek and Oak Hammock. • The town currently has one 5,000-square-foot drugstore with annual sales of $8 million, $3 million of which come from Oak Hammock residents and $5 million from Rock Creek residents. • A competitive chain is considering opening a 10,000-square-foot store. • The driving time for the average Rock Creek resident to the existing store is 10 minutes, but it would be only five minutes to the new store. • In contrast, the driving time for the typical Oak Hammock resident to the existing drugstore is 5 minutes and would be 15 minutes to the new store. • Based on its past experience, the drugstore chain has found that l equals 2 for its store locations.
- 59. Huffs Gravity Model • Huffs Gravity Model does not account for other factors (such as having unique product or service, that they cannot get elsewhere) that may affect a customer patronizing the store. • Even though the Huff Gravity Model considers only two factors affecting store sales—travel time and store size—its predictions are quite accurate because these two factors have the greatest effect on store choice.
- 60. Regression Analysis • The Regression Approach provides a way to incorporate additional factors (other than travel time and store size) into the sales forecast for a store under consideration. • This approach is based on the assumption that factors that affect the sales of existing stores in a chain will have the same impact on stores located at new sites being considered. • When using this approach, the retailer employs a technique called “multiple regression” to estimate a statistical model that predicts sales at existing store locations. • The technique can consider the effects of the wide range of factors, including site characteristics, such as visibility and access, and characteristics of the trade area, such as demographics and lifestyle segments represented.
- 61. Analog Model • Regression Model can be developed by a retailer using data about the trade area and site characteristics from a large number of stores. • Small chains cannot use the regression approach hence they use a similar but more subjective analog approach. • The creator of this model, William Applebaum, focused on the study of existing retail stores to identify potential retail sites. Customers of these existing stores were interviewed to determine where they lived, allowing Applebaum to define primary trade areas for these stores. • He used existing store sales levels to project sales potential of future locations. • In order to determine the likely performance of the planned store, he performed a systematic comparison of the characteristics of the proposed store with the characteristics of the existing ‘analogue’ store.
- 62. Analog Model • When using the analog approach, the retailer describes the site and trade area characteristics for its most successful stores and attempts to find a site with similar characteristics. • One advantage that the Analog Model has over other methods is its adaptability to assess virtually all types of retail stores. On the other hand, the Gravity Model is used primarily with supermarkets and drug stores. However, the Analog Model has two weaknesses: • It is highly subjective and does not work well without an experienced analyst • Developing and maintaining the database through a well-trained staff has a relatively high cost.
- 63. Analog Model The steps involved in Analog Model are: • Competitive Analysis • Define Present Trade Area • Analyze Trade Area Characteristics • Match Characteristics of Present Trade Area with Potential Sites.
- 64. References 1. Michael Levy & Barton A Weitz, “Retailing Management”, 8th Edition, Tata Mc Graw Hill. 2. Swapna Pradhan, “Retailing Management – Text and Cases”, 5th Edition, Tata Mc Graw Hill.
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Please note you do not have access to teaching notes, convenience store location planning and forecasting – a practical research agenda.
International Journal of Retail & Distribution Management
ISSN : 0959-0552
Article publication date: 10 April 2007
This paper aims to compare the accepted techniques of location analysis in the food sector with the realities of “real world” forecasting in convenience store (c‐store) retailing. To offer a conceptual framework for c‐store operators intending to become more strategic in their small store location planning but currently lacking established expertise or extensive research budgets.
Design/methodology/approach
Outlines potential best practice based on industry experience, and contact and discussion with location analysts and retail consultants, as well as a wide ranging examination of the academic literature in this area.
Finds that the traditional techniques of market analysis for large‐scale food stores will become largely redundant; that neighbourhood retailers are likely to manage their location decision‐making by incremental steps; that the requirements of convenience store forecasting inevitably read to a “back to basics” approach to market analysis; that the use of site visits in combination with more quantitative techniques will provide the most effective solutions; and that reconciling human institutions and their environment is key to effective site research decision‐making.
Originality/value
Academic conceptualisations of location planning in the convenience store sector are largely absent from the literature. This paper adopts a practical perspective.
- Stores and supermarkets
- Geographic information systems
- Convenience stores
- United Kingdom
Wood, S. and Browne, S. (2007), "Convenience store location planning and forecasting – a practical research agenda", International Journal of Retail & Distribution Management , Vol. 35 No. 4, pp. 233-255. https://doi.org/10.1108/09590550710736184
Emerald Group Publishing Limited
Copyright © 2007, Emerald Group Publishing Limited
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Retail Inventory Management: What It Is, Steps, Practices and Tips
Inventory management is one of the pillars of a successful retail operation. Retail inventory management techniques help stores and ecommerce sellers satisfy customers, reduce costs and increase profits.
What Is Retail Inventory Management?
Retail inventory management is the process of ensuring you carry merchandise that shoppers want, with neither too little nor too much on hand. By managing inventory, retailers meet customer demand without running out of stock or carrying excess supply.
In practice, effective retail inventory management results in lower costs and a better understanding of sales patterns. Retail inventory management tools and methods give retailers more information with which to run their businesses, including:
- Product locations
- Quantities of each product type
- Which stock sells well and which doesn’t, by location and sales channel.
- Profit margin by style, model, product line or item
- Ideal amount of inventory to have in back stock and storage
- How many products to reorder and how often
- When to discontinue a product
- How changing seasons affect sales
What Is the Importance of Inventory Management in Retail?
Inventory management is vital for retailers because the practice helps them increase profits. They are more likely to have enough inventory to capture every possible sale while avoiding overstock and minimizing expenses.
From a strategic point of view, retail inventory management increases efficiency. The practice:
Decreases Inventory Costs: When you know how much stock you have and how much you need, you can pinpoint inventory levels more accurately, thereby reducing storage and carrying costs for excess merchandise. Other savings include shipping, logistics, depreciation and the opportunity cost that comes from not having an alternative product that might sell better.
Minimizes Out-of-Stocks: To avoid disappointing customers and missing sales, retailers want to avoid running out of inventory. Retailers can use inventory management tools to determine how much stock is “just right” to have on hand, neither too much nor too little. This amount will be larger for bestsellers than for unpopular products. Also, with real-time information on sales and stock, retailers can react quickly by reordering, transferring stock from another location or drop shipping to the customer.
Improves Profit Margins: With lower inventory costs and enough supply to fill every order, retailers improve profitability.
Prevents Spoilage and Obsolescence: Inventory management helps retailers address another costly inefficiency that happens when products expire or become obsolete. This phenomenon can apply to perishables that have a limited shelf life, such as milk and meat, or a non-perishable that becomes obsolete because consumer tastes and technology change. For example, season collections or holiday-specific packaging. Or when a piece of consumer technology adds a popular new feature, the old models may face plummeting demand: Consider how the rise of smart televisions sunk demand for models that weren’t capable of streaming content.
Improves Multi-Channel and Omnichannel Performance and Order Fulfillment: If you are selling via physical stores, your website and third-party merchants, it can be difficult to keep correct inventory counts across all channels. Having accurate inventory data across selling channels lets you use your inventory more efficiently, ultimately getting the product to consumers faster.
Simplifies Processes and Facilitates Growth: Strong inventory management also reduces friction in your systems as sales grow. Shipping, receiving and order fulfillment run more smoothly, and you minimize errors, customer complaints and staff stress.
Reduces Shrinkage: Shrinkage is inventory loss due to shoplifting, product damage, vendor mistakes or fraud, employee theft and administrative errors. According to a survey by the FMI food industry association , the average supermarket loses up to 3% of sales through shrinkage. A National Retail Federation survey puts average shrinkage for its members at 1.4% of sales in 2019. This data suggests that most losses stem from incorrectly recording inventory on intake, miscounting it or misplacing it. Stronger retail inventory management could reduce shrinkage by at least half.
Eases Supply Chain Management: Having a firm grip on inventory and sales trends helps you manage your supply chain better. You can use the replenishment system that works best for you, whether that’s just-in-time ordering or fewer, bigger orders. Retail inventory management helps you determine your economic order quantity (EOQ), which is the ideal order size to minimize inventory costs including holding, shortage and ordering expenses. The EOQ formula, which factors in demand in units, ordering costs such as shipping charges and holding costs, works best when these variables remain consistent over time. Learn more about the EOQ formula .
Improves Customers Satisfaction: When customers get the products they want faster with fewer mistakes or out-of-stocks, it increases customer loyalty.
Improves Forecasting: You can use data such as historical sales results and available inventory to project future sales, growth and capital needs. These forecasts are vital to your budgeting and guide spending for marketing, product development and staffing.
How Does Retail Inventory Management Work?
Retail inventory management works by creating systems to log products, receive them into inventory, track changes when sales occur, manage the flow of goods from purchasing to final sale and check stock counts.
The information from these systems helps you achieve the benefits of retail inventory management, such as lower costs and higher profit margins.
10 Basic Steps in Retail Inventory Management
The 10 basic steps in retail inventory management verify the goods you have, their quantity, location and other specifics such as expiration date. This stock data is useful for maximizing profits by understanding demand, costs and other variables.
You can integrate these procedures into a retail inventory management system, which can be as simple as a paper ledger or a spreadsheet but typically involves an electronic solution.
The following is a breakdown of the steps in retail inventory management.
Create a Centralized Record of All Products: List all the products you carry in one place with these details:
- Product name
- Stock-keeping unit (SKU)
- Variables such as size, retail price, product category, lot number, location and expiration date.
- Vendor and vendor SKU
- Wholesale cost
- Minimum reorder amount
- Economic order quantity (EOQ)
- Case quantity amount
- Inventory on hand
- Reorder lead time
Add product images and descriptions to help staff identify products. This step is key if you sell by ecommerce. When you add new products, put them into your inventory record. Whenever information such as a vendor or wholesale cost changes, update it. Establish policies for entering inventory, including who is responsible and when to do it. Having rich data helps unlock the power of a retail inventory management system.
Identify Stock Location: If you are a small business with just one store, recording your inventory’s location is straightforward. Items are probably either on display or in the stockroom. But retail chains with multiple sites and omnichannel sellers might have inventory in warehouses, distribution centers, transit, stockrooms and on store shelves. Within those destinations are more specific locations such as section, shelf and rack. Misplaced and overlooked products represent missed sales and lost revenue. Retail inventory management practices help prevent this. Use radio frequency identification (RFID) tags, bar codes and labels that contain category and department codes to fully or partially automate the mapping of your inventory.
Do Regular and Accurate Stock Counts: You need to count your inventory periodically to ensure it is accurate. Take into account shrinkage, damage, defects and returns to avoid errors. A retail inventory management system makes this process easier because you only need to double-check your data, rather than start from scratch. So, you can primarily focus on deviations. The frequency of counts depends to an extent on your business’s complexity, scale and the type of inventory management system you use. Nonetheless, experts recommend counting inventory once a quarter or once a year at absolute minimum. Some businesses count individual parts of their stock daily. Several counting techniques exist, including physical counting and cycle counting .
Combine Sales Data With Inventory Data to Simplify Reporting: A retail inventory management system can integrate sales and inventory data. This picture shows you which goods are turning over fastest (a metric called sales velocity) and which are lagging. Use the product data to decide when and how much to reorder and when to offer promotions or discounts.
Create a Purchasing Process: Schedule times to review data and place orders, so you don’t get caught behind seasonal trends or risk stock outages. With an electronic system, you can set stock levels for individual products that trigger alerts for reorder. These levels should include a buffer that allows sales to continue at normal levels. If you’re using a manual system, review which items are sold out or at reorder points, and add them to your purchase list. Prioritize purchases based on an item’s profitability, popularity and lead time. Then, create a purchase order.
Establish a Process for Markdowns and Promotions: Product sales can fail to live up to expectations for several reasons, such as a cooling trend, obsolescence or seasonal factors. If you offer markdowns, be disciplined about discounting and moving slow sellers, which can generate cash and make room for more profitable products. Additionally, create a strategy ahead of time for promotions to ensure that you have enough stock on hand to meet demand.
Create a Stock Receiving Procedure: During the receiving process, you’ll verify incoming orders and enter goods accurately into an inventory system. Without an established procedure, any supplier error or damage in transit can result in problems like unexpected stock outages, overpayment to vendors and dead stock. Check each delivery against the purchase order to verify the contents match the order. Count cartons and pallets, confirming product type and numbers and noting mistakes, damage or shortfalls. Follow up with vendors on any issues. Then, enter the new products into inventory counts and store the goods. Depending on your needs, you might add price tags or bar codes to the stock. Perpetual inventory management, the simplest way of managing inventory, involves counting goods as soon as they arrive. Read the article on perpetual inventory to learn more.
Create a Procedure for Returns: Without an inventory management process for handling customer returns, you face an increased risk of holding unsellable stock or missing an opportunity to put a sellable item back on display. When a customer makes a return, check to see if the item is damaged or defective, and route it for repair, write-off or return to the vendor as appropriate. If the product is sellable, add it to your inventory counts, and put it in its correct place (in a physical store, ecommerce inventory, etc.).
Determine a Dead Stock Procedure: Excess inventory ties up capital and weighs on profitability. Dead stock includes damaged items, incorrect deliveries and leftover seasonal products. First, record items that fall into this category and remove them from inventory. Designate a place to hold dead stock, and handle it regularly (weekly, monthly or in a timeframe that’s right for your business). Ship merchandise that you can return to vendors for credit, called pullbacks, promptly. Note any deadlines for the return shipment. Return damaged and defective goods to suppliers, or document and notify suppliers, according to their policy. Depending on your product line, you can deal with the remainder by selling to outlets, donating, recycling or disposing of it.
Pick Your Inventory KPIs: To gauge the success of your process, pick and track some key performance indicators (KPIs). Profitability, inventory value, sell-through rate and turnover rate are essential metrics for retailers. Learn how to calculate these, and see examples in the in-depth guide to KPIs for inventory management .
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Inventory Management Methods for Retailers
Inventory management methods help retailers generate maximum profits by reducing costs, improving efficiency and understanding sales drivers. These methods optimize quantities purchased from suppliers, fine-tune fulfillment processes, strategically locate products, account for inventory and analyze demand and sales patterns.
The following are some of the key inventory management methods for retailers, organized by category. You can learn more about many of these in the “ Essential Guide to Inventory Control .”
Inventory Ordering Techniques for Retailers
These methods will help you determine demand. Inventory management software can automate this planning.
Economic Order Quantity (EOQ): Use this formula to calculate the ideal order amount. The equation takes into account demand, ordering costs and carrying costs. Where D is demand in units, S represents ordering costs per order such as shipping, and H represents holding costs such as storage expense, the formula is:
EOQ = √ (2 × D × S / H)
Open to Buy (OTB): This plan-ahead technique tells a retailer how much merchandise to buy in dollar terms for a fixed period. The goal is to ensure there’s adequate supply and to generate positive cash flow. The formula is:
Planned sales + projected end-of-period inventory on hand, in transit and on order - planned beginning of period inventory = OTB at retail cost
Safety Stock and Par Level: Safety stock is the amount of inventory you order to serve as a buffer to prevent running out of stock. You carry this additional quantity in case of incorrect sales forecasts or unexpected consumer demand.
Par level = safety stock + the minimum inventory required to meet customer demand
If inventory falls below par level, it is time to reorder.
Reorder Point: Using sales data and the lead time for new merchandise to arrive from vendors, retailers can calculate the reorder point, or the inventory threshold that should trigger reorder. The formula is:
( Average daily unit sales x average lead time in days ) + safety stock in units = reorder point in units
Just in Time (JIT): With this method, retailers receive new inventory exactly when they need it, rather than in advance. Japanese automakers pioneered this approach, which minimizes tying up capital in inventory and storage costs. JIT is easiest to implement with high-cost, low-volume goods like cars and appliances. The savings on low-margin, high-volume products, when compared to the risk of stock-outs, may not be enough to merit the extra complexity.
Inventory Fulfillment Methods for Retailers:
These methods offer ways to reduce the cost of getting products to customers or holding inventory. They also increase handling efficiency.
Drop Shipping: With this method, the retailer does not hold the products it sells. When a customer makes a purchase, the retailer buys it from the vendor, who ships it to the customer. This decreases the retailer’s costs for handling and storage as well as its investment in inventory.
Consignment: In this arrangement, the wholesaler or supplier still owns the merchandise, but the retailer stocks it in inventory. When the product sells to the end customer, the retailer pays the vendor, thereby reducing upfront expenses for the retailer.
Cross Docking: The goods in incoming deliveries are directly put onto outbound trucks without ever entering storage. The outbound goods may be going to customers or retail outlets and distribution centers. This technique reduces handling and warehouse space.
Pick and Pack Process: The way a retailer fills ecommerce orders from the warehouse will influence efficiency, volume, error rate and other factors that impact customer satisfaction and profitability. Methods include individual order picking (each order filled one at a time), batch picking (gathering multiples of the same item at one time for different orders), wave picking (filling groups of similar orders at the same time) and zone picking (workers pick only products in their assigned zone of the warehouse).
3PL: Some retailers benefit from outsourcing inventory handling and order fulfillment to third-party logistics services. They can save the retailer money and scale more easily.
Inventory Accounting Techniques for Retailers
Use one of these methods to determine the cost of your inventory and goods sold for accounting purposes. Both techniques impact profits, taxes and the usefulness of financial reports. They are strictly for the accounting of physical inventory. They do not require you to identify and track the age of each item sold.
First In, First Out (FIFO): This method assumes you sell the oldest products in your inventory first. This option is the easiest to understand and use. This technique tracks the natural lifecycle of goods: Retailers usually prefer to sell older products first, before they spoil, become obsolete or lose value in another way. FIFO, the most popular choice for retailers, is thought to be a more accurate reflection of real business conditions than LIFO.
Last In, First Out (LIFO): This technique assumes you sell newer inventory first. These goods often have a higher cost than older stock, which reduces stated profits and taxes. LIFO carries a risk of allowing inventory to remain on the books indefinitely and become undervalued or overvalued relative to market costs. LIFO accounting is more susceptible to manipulation, so it is less trusted.
To learn more about inventory costs, read “ The Key to Using Inventory Cost Accounting Methods in Your Business .”
Inventory Analysis and Forecasting Methods for Retailers
Retailers use techniques in this category to understand their performance. For example, they identify products that sell best so they can prioritize them. Stores also use these to determine their return on inventory investment and estimate the value of their stock.
ABC: ABC analysis divides inventory into three groups:
- A is for your most valuable products, typically the 20% of inventory that accounts for 80% of sales or profits.
- B represents the greater number of mid-range products that do not fit in either A or C.
- C is for the largest number of products that sell the least or contribute least to profitability. Retailers use this information to improve how they manage—how much they hold and their purchasing strategy—inventory in each group. ABC analysis data can also guide marketing efforts and other strategic activities.
FSN: This method, which stands for fast, slow and non-moving analysis, is similar to ABC in that it categorizes inventory into three groups. Here, the division focuses on sales velocity (the speed at which you generate revenue). Fast-moving items might be able to support price increases. Similarly, a store owner might consider discontinuing non-moving items. An online retailer could also organize a warehouse, so F products are the easiest and fastest to pick because they are closest to packing stations and on the most accessible shelves.
XYZ: This technique also sorts products according to variability in demand and difficulty in forecasting sales. X products have steady demand, Y items have strong variability, and Z goods have erratic and hard-to-predict demand. Retailers can even combine the ABC and XYZ systems to segment their inventory for more precise ordering and stocking practices. For example, your reordering policies for an AX product, which is a strong contributor to your bottom line and has steady demand, would likely be quite different than for a CZ product, which contributes least to your business and faces unpredictable demand.
Batch Tracking: The objective of this segmentation technique is quality control. This method groups goods into sets of products that were manufactured or processed together using the same raw materials. Retailers monitor information about products, such as expiration dates, place and date of manufacturing, origin, recall status, defect rates and purchaser, by batch or lot. For example, a grocery store chain wants to keep an eye on all the milk expiration dates in its inventory. A paint retailer would make sure that all the cans in a customer’s purchase came from the same lot to avoid shade variation. Meanwhile, some goods such as medication need an audit trail.
Gross Margin Return on Investment (GMROI): This formula shows retailers how much gross profit they earn for each dollar invested in inventory. Many stores look at this value by department. The formula is:
Gross margin return on investment = gross margin / average inventory cost
Inventory Turnover Rate: This calculation tells a retailer how many times it sells its entire stock of inventory in a year, which is an indicator of financial health and liquidity. There are a few ways to figure this out. One is the cost of goods sold/average inventory value. Calculate average inventory by adding the beginning and ending inventory values and dividing by two. The second formula is the sales value/inventory value. Across all types of retail, inventory turnover rates average around eight. If your rate is higher or lower than your peers or makes a significant move, you may want to try inventory turnover rate optimization techniques. These include steps such as being more aggressive about putting items on sale and ordering more or less of a product. Knowing your turnover rate also helps you plan orders for long lead-time goods.
Retail Inventory Method: This technique is a fast way to estimate the ending inventory value. Since the result is an estimate, the number is not usable for financial statements, and you should confirm it against inventory counts. Follow these steps:
- First, get the cost-to-retail percentage (inventory cost/retail price).
- Determine the cost of goods available for sale (cost of beginning inventory/cost of purchases).
- Figure out the cost of sales for the period (sales x cost-to-retail percentage).
- Calculate the ending inventory (cost of goods available for sale – cost of sales during the period).
Retail Demand Forecasting: Use these techniques to predict how much your customers will want to buy. This one is tricky; there are many qualitative and quantitative methods. Among the common quantitative methods are moving average and time-series analysis—which take historical sales and seasonality into account. Predictive analytics software can perform this kind of forecasting by incorporating multiple methods. Having a good idea of demand can boost profitability by helping you determine staffing, purchasing needs and the optimal inventory to hold.
Inventory Audit Methods for Retailers
These techniques double-check inventory counts, helping retailers avoid stock outages and dead stock. Inventory errors, mistakes and miscounts are prevalent even when using RFID and barcode tagging. Inaccuracies cause inefficiencies, lost sales and budgeting and forecasting difficulties. A 2019 study for the ECR retailer-manufacturing working group found that about 60% of retailers’ inventory records were inaccurate .
Inventory audit methods include:
Physical Inventory Audit: This process matches financial records with counts of physical goods. In a formal audit, an accountant observes the physical count. Oftentimes, companies will pause operations so no items are moving during the audit. For large companies, physical inventories require a lot of resources, time and planning. On the positive side, a physical inventory is an excellent way to control for inventory shrinkage.
Spot Checking: This option involves doing a periodic check of a particular department or store location. Spot checking is a good method to identify issues in inventory procedures before they become larger problems. Managers should regularly perform inventory spot checks— especially after implementing a new plan or big change to the inventory management plan.
Cycle Counting: This technique calls for a retailer to count part of its stock daily. You don’t need to stop operations for this type of count, although retailers typically still do a full physical inventory periodically. Cycle counting is excellent for companies with a lot of inventory who cannot disrupt operations to perform full physical inventory checks. This method may be difficult for companies that are not able or willing to use inventory management software. To cycle count, companies need to keep an accurate record.
Best Practices and Expert Tips for Retail Inventory Management
Retailers that follow inventory management best practices lay the foundation for greater stock accuracy, lower costs, less shrinkage and higher profit margins. Strive to meet industry standards and follow the advice of inventory experts.
Flex Your Ordering Muscles: Do everything you can to ensure you order the ideal amount of stock at the right time to satisfy demand and delight customers. This means setting data-backed levels for your safety and par stock, knowing reorder thresholds, optimizing order sizes with economic order quantity (EOQ) and using the open-to-buy technique to plan purchases.
Be Proactive with Your Supply Chain : Share sales and product forecasts with vendors, and ask for precise lead times. Track suppliers’ service levels, such as the percentage of complete orders and fulfillment times. Communicate with vendors that need to improve, and explain the concrete actions required to meet your needs. Do contingency planning to identify alternative suppliers of your most important items in case your primary supplier cannot deliver.
Crunch Your Numbers: Keep close tabs on your KPIs. Track which products are your best and worst performers using ABC, FSN or XYZ analysis. Understand indicators of customer demand and seasonal fluctuations, and know your turnover rate and GMROI. Actively try to improve the quality of your customer demand and sales forecasts.
Maximize Efficiency: Never stop trying to make every part of your inventory management more efficient. Arrange your warehouse strategically, and keep it organized. Here are other ways to improve efficiency.
- Use the picking process that best matches your order volume and product types.
- Store items as close as possible to regions and communities where they are in the highest demand.
- Analyze whether using drop shipping or a third-party logistics provider would make your retail inventory management more efficient.
- Combat shrinkage with loss prevention programs, and monitor incoming goods.
- Use SKU management to analyze carrying costs.
- Make sure you are offering the right number of products and identifying your highest-velocity items.
- Document all your processes, such as receiving, to ensure standardization.
Prioritize Accuracy: Perform regular inventory audits and counts. Train staff in inventory management, and set goals for performance. Build a culture that prizes the pursuit of accuracy.
Use an Inventory Management System: By leveraging technology, you can automate many tasks and instantly make progress on goals such as accuracy and efficiency. By choosing the right tool, you can integrate your point-of-sale (POS) system with inventory management, eliminating the need for manual data entry, which will reduce errors and generate richer data. An automated system can also send notifications for stock alerts and simplify your efforts to coordinate inventory in multiple locations.
Why You Should Invest in a Retail Inventory Management Solution
A retail business will quickly outgrow using pen and paper or spreadsheets to track stock. Retail inventory management solutions automate your administration and documentation, raise accuracy, improve the customer experience, reduce costs and reveal valuable trends.
The benefits include:
- Accurate receiving and shipping records
- Real-time, reliable inventory counts
- Merchandise traceability using bar codes or RFID
- Simplified returns
- Better forecasting
- Performance measurement with KPIs
- Insights into sales trends
- Easier implementation of promotions and discounts
- Support for dynamic and strategic pricing
- Custom notifications
- Easy report generation
If you operate an ecommerce, multichannel or omnichannel business, managing inventory is virtually impossible without an automated solution. See this article about the key features of inventory management systems to learn more about how this technology can transform your retail operations.
How POS Systems Can Help with Retail Inventory Management
Integrating a point-of-sale system with your inventory management process puts more information at your fingertips. You can use the data to improve many aspects of your retail business, such as purchasing, overhead costs and merchandise sell-through.
Here are some example benefits:
Less Guesswork: With real-time and historical sales information to make your sales forecasts more accurate. This data gives you a strong basis for reorder decisions. You can also see which products and SKUs are selling well, so you can prevent stock-outs. Data on slow-moving products can trigger discounts and promotions, so you don’t end the season with dead stock. Additionally, real-time data helps keep inventory counts accurate.
Lower Overhead: With more accurate ordering, you can rationalize storage and reduce warehouse costs along with related expenses such as labor, taxes, insurance, dead stock and opportunity cost.
Happier Customers, More Sales: You can delight a store customer whose size or preferred color is out of stock at one location by using the POS system to check whether the item is available at another store or warehouse. The customer can pay for the item, and you can ship it to their home, saving a potentially lost sale. According to one survey on millennial purchasing habits, 39% of in-store shoppers leave without purchasing because of out-of-stock items.
Retail Inventory Management FAQs
Some retail inventory management topics crop up frequently:
What Are Retail Inventory Costs?
This retail inventory method, also known as cost-to-retail, estimates the ending inventory value by using the ratio of inventory cost to the retail price. This accounting technique shows how much the cost of the good represents of the merchandise’s retail price.
So, if you are selling dresses for $100 and your wholesale cost is $25, your cost to retail ratio is 25%.
From another perspective, retail inventory costs consist of more than the wholesale price of the merchandise. You have to factor in costs such as storage, insurance, transportation, shrinkage, handling and more.
How Are Inventory Levels Monitored in Retail Stores?
Keeping track of inventory in stores can be challenging, so most retailers use multiple techniques to monitor inventory levels. First, they integrate a POS system with an inventory management system, so the stock reflects every sale or return.
Retailers also put RFID tags and bar codes on merchandise to gather information on stock quickly, keep track of inventory location and update inventory records. They also make sure to record shrinkage. Store staff or managers update the POS system when products are damaged and stolen, which adjusts inventory counts. Implementing loss prevention measures , such as visible security guards, helps keep inventory counts accurate by deterring theft.
In addition, stores conduct physical inventory counts periodically and check these findings against inventory records. Any mismatch requires an adjustment. Finally, training staff on procedures such as exchanges and returns and stressing the importance of putting them into the system helps retailers maintain oversight of inventory levels.
What Is a Good Inventory Turnover Rate for Retail?
Inventory turnover rate measures how many times inventory sells in a year. Generally, a higher number is better. The average U.S. retail inventory turnover rate was about eight in 2019, according to CSIMarket, so a number above that qualifies as good.
For example, in 2019, Walmart’s inventory turnover ratio was 8.48 turns. This means that Walmart sold and restocked their inventory about 8.48 times in 2019, or every one to two months, to meet customer demand. This rate is most useful for comparing companies.
But turnover varies widely by store type, so retailers should compare their rate to their peers’.
For example, the Retail Owners Institute found RV dealers had an average inventory turnover of 2.4 in 2019, while bakeries averaged 52. Typically, CPG products will have higher turnover, while higher ticket items generally have a lower turnover rate. You can learn more about turnover by reading “ Inventory Turnover Primer: Calculations, Rates and Analyses .”
Remember that the turnover rate does not tell the whole story. A store that has a much higher turnover rate than its counterparts may not be purchasing enough. The retailer may not be optimizing order size, incurring higher shipping costs or missing quantity discounts.
Moreover, turnover does not show how many sales a store missed because an item was out of stock. So, a seemingly positive turnover rate could mask underlying problems. Similarly, a store with a lower turnover number may be over-ordering or have too many slow-selling products and spending too much on inventory storage.
Low-margin, high-volume stores depend on rapid turnover to make a profit. Grocery stores had turnover rates around 17 in 2019, according to CSIMarket. Yet retailers that sell expensive products, especially those that take a long time to manufacture, can thrive on low turnover rates.
What Is Retail Inventory Control?
Retail inventory control is the process of managing retail goods from order to final sale. The goal is to ensure a retailer has the ideal amount of product available when customers want it while keeping costs at a minimum.
The retail inventory management methods described earlier, along with technology and other systems, work together to achieve retail inventory control. Learn more in the “ Essential Guide to Inventory Control .”
Transform Your Retail Inventory Management With NetSuite
The right technology is crucial to achieving maximum efficiency in retail inventory management. You need to be able to see all products, across all channels, in a single view and apply intelligent order management to your purchasing to provide customers with an exceptional shopping experience. The right solution scales with your business and supports unlimited expansion.
NetSuite offers a suite of native tools for tracking inventory in multiple locations, determining reorder points and managing safety stock and cycle counts. Find the right balance between demand and supply across your entire organization with the demand planning and distribution requirements planning features. Learn more about how you can use NetSuite to help plan and manage retail inventory automatically, reduce handling costs and increase cash flow.
What is Inventory Management? Benefits, Types, & Techniques
In this article, learn about inventory management and its related disciplines from inventory experts. At the end, you will find an FAQ list on inventory.
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Everything You Need to Know About Opening a Second Location for Your Business
- by Kaleigh Moore
- Open a Retail Store
- Mar 3, 2022
- 13 minute read
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You’ve successfully launched your brick-and-mortar store, you’ve navigated the roadblocks of finding your perfect customers and nailing down your sales and marketing channels.
Pretty soon, you’ll start thinking: What comes next?
For many retailers, expanding to a second location seems like the next logical step. But that doesn’t mean it’s an easy call.
In this article, we’ll explore the pros and cons of expanding your retail business to a second location, look at how to know when the right time to expand is, and the steps you’ll need to take to begin the process.
Table of Contents:
4 reasons to open a second location
Potential pitfalls of retail store expansion.
- When's the right time to open a second location?
How to open a second location
While shopping online is convenient, many consumers still prefer to discover and see products for themselves. Opening a second retail store helps you serve more customers who want to see your products in-person.
“We’ve seen such a great response to our brick-and-mortar stores ," explains Ariel Kaye, Founder and CEO of Parachute. "Customers love to touch and feel products for the home — especially linens, towels, and other fabrics they’ll be using frequently."
"I believe that giving customers the option to interact with these kinds of products, without any pressure to purchase, is so valuable in the long-term.”
Opening a second store location can be a boon for any retailer. A few reasons you might consider expanding include:
1. Higher profits and reduced costs
A second location can help increase your operational capacity, with larger product orders resulting in lower per-unit pricing. This helps increase profit margins, providing a potential financial boost to your business.
2. Increased customer base
When you enter a new market in a buzzing location with less competition but high demand, you’re likely to attract footfall and enhance brand awareness , leading to more visibility and an increase in customers.
One of the reasons we opened a second store is because we built a strong brand and have loyal customers who travel a fair distance to see us. A second location helps us serve them better and reach customers who haven’t experienced our stores yet. Mike Anderson, Co-Owner, BlackToe Running
3. More efficient management
Opening a second location doesn’t have to mean reinventing the wheel. You already know what works (and what doesn’t) and how to manage your store to see success. You can build on your previous experiences, double down on what worked, and duplicate successful strategies.
4. Operational and competitive advantages
Choose your second location strategically and you can unlock access to wider pools of talent, vendors, and production equipment, giving you an operational and financial advantage. You can double (or more) your production capacity with two locations.
Opening a second location might seem like a no-brainer next step, but expanding before your business is completely ready can be a risky undertaking. Be sure to consider these potential pitfalls that come with adding another retail store location.
Higher expenses
Doubling your footprint usually means doubling your rent, and if you’re planning to open your store in a high-footfall location like the retail heart of New York, it’s going to be expensive: the average retail rent there is almost $57,333 per month. Add to that the additional employees, equipment, software, raw materials, and storage space, and you’re spending much more money every month (keep in mind that some equipment might be tax deductible through section 179 ).
Before opening a second location, retailers should negotiate their lease terms and do the math on cash turnover. Stores can take up a lot more cash upfront than many smaller retailers realize. Monish Datta , Vertical Ads Solutions, TikTok
Potential supply chain management issues
Operating two locations means ensuring their individual supply chain management systems are streamlined. With a larger business, you’ll need rock-solid systems that don’t create bottlenecks leading to delays or losses.
Reduction of in-store shopping
Since the pandemic, in-store shopping has seen a sharp decline. With everyone locked down at home, consumers have resorted to online shopping and still prefer it over in-store, even when restrictions have eased. Research shows 66% of consumers now prefer online shopping, and although ecommerce sales rose by 35% year over year , in-store shopping has only seen a 10% YoY growth.
When’s the right time to open a second location?
While there’s no black or white answer to exactly when a business should open a second location, there are some indicators that can suggest you’re ready.
Pursue opening a second location when your business is primed for growth and can support expansion. This includes your processes, workforce, and supply chain. Shawn Moreau, Founder, Gapstow
Before you sign on the dotted line and open your second retail store, there are some important questions to consider:
1. What is your goal with a second store?
Understand what you’re looking to achieve with a second location. Are you aiming for more revenue? A greater presence and a more diverse customer base? To expand production capacity? To test a new market?
This goal will help you structure the launch plan for your store, align your team with the vision, and help you implement steps that lead you to this end goal.
When Ariel Kaye founded Parachute, she knew textiles and bedding were a category that historically were largely purchased in-store versus online. And while she knew some customers would easily transition to a digital shopping experience, she was certain others would benefit from shopping in-store and seeing the quality first-hand.
Image source
"Our strategy for retail was to provide a new type of shopping experience compared to what the customer expected," explains Ariel. "Our stores are set up to look more like homes rather than storefronts, offering design inspiration and allowing customers to touch, feel, and engage with products in an authentic setting."
Parachute has seen a conversion rate that is up to 50% higher in cities with stores and our goal is to have a total of 30 retail stores across the country by the end of 2022. Ariel Kaye, Founder and CEO, Parachute
2. Do you have access to capital?
While you can gather capital from external sources, it’s essential you have savings or a percentage of profits you can use to fund your expansion. Aside from this, you can easily expect a slow ramp up with a second store, so your finances should be healthy enough to support the second store until it can pay for itself with the revenue it generates.
"Be careful with investors," explains Kristoffer Reiter, Principal at CohesiveWhole . "Their perspective of success should be the same as yours or you'll be in trouble. Brick-and-mortar retail is a long game, not an overnight success."
💡 PRO TIP: Try Shopify Capital to get the funds you need to open a retail store, invest in staff, inventory, and marketing, and pay it off as a flexible percentage of your sales.
3. What legal structure will you choose?
You may have opened your first store as a sole proprietor, but it might be wise to have a different structure for your second location, as it will define your path and business plan forward. You can choose to open this second location in partnership with someone who has a similar vision as you, franchise it, or turn it into something more prominent, like a corporation or an LLC.
4. How will it impact your current store?
Opening a new location will inevitably steal your focus from the first one. It’s important to draw a line and define how involved you’ll be in the building, launching, and managing the second store and how that will impact your role in the first one.
You could choose to be fully involved and appoint another manager for the first store, be partially involved and define your role there, or completely hand it off to another leader (appropriate if you’re entering into a partnership).
"Brick-and-mortar retailers—especially single-site ones—have a competitive advantage that's hard to contend with: their customer relationships," explains Chris Vanderkolk, Demand Generation at Marsello .
"Retailers built lasting relationships with their customers by being present in the community, understanding their preferences, having deep product knowledge , and establishing trust with through face-to-face communication."
The hardest part of opening a second site is replicating and maintaining customer relationships when owner-operators aren’t behind the till. Look for ways to create consistency across all stores. Chris Vanderkolk, Demand Generation, Marsello
5. How will you hire and train employees?
The second location will require a new set of employees who have no idea of how you operate, your vision, what you want to achieve, and your overall company culture. Document how you want to hire and train them so your processes and operation procedures become second nature.
Consider these questions:
- Will the first store’s management team train them?
- Will you hire someone externally to train the new team?
- How will you document your procedures to offer as resources and enable them constantly?
A solid and trusted management team can act as a support pillar for both your locations, overseeing operations and making decisions when needed.
Opening a second location needs a planned strategy to rule out the guesswork and proceed with a head-on approach.
Here’s a step-by-step strategy on how your business can open a second location:
1. Perform market research
Many of the same strategies that worked for you with your first location will carry over to your second, but certain variables like customer demand and the market will be different. It’s important to assess the state of the market before you step into a new location to maximize your chances of success.
- Perform a location and competitor analysis to assess the market demographics, current competitors, how you fare against a competitor, and where you’ll stand in the market.
- Evaluate the demand for your product in the new location, customer demographics, buying patterns and power, and what makes them tick.
- Find out the availability and pricing of resources you need to run your business, like raw materials, transport, labor, and warehouse facilities.
2. Write a business plan
If you had a business plan for your first store, build on that to create one for your second location. Factor in everything that worked and didn’t work for your business to help ensure brand consistency and translate your previous store’s success to this one.
Here’s what your expansion plan should include:
- Clearly defined goals and objectives. Get your first location’s team together and discuss what goals you want to achieve and which objectives will lead you there. Everything you implement, from how you launch your second store to how you interact with customers, will depend on this crucial first step, so get everyone on board early with the vision and goals.
- Potential challenges and a mitigation plan. Identify the things that failed in your first location and create a plan to address the challenges you might face as you open your new store.
- Systems and processes for management. Decide who will be responsible for what aspects of the business, which team members will migrate or manage a part of the other store, and which software you’ll use to streamline work.
- Funding and financial needs. Forecast your expenses, profits, and expected revenue for the first six to 12 months to decide how you’ll fund your business and make money.
- Marketing. Decide how you’ll launch your store, spread the word, invest in paid and organic media, participate in PR activities, and drive customers to your store.
3. Find the right location
For a brick-and-mortar store, location plays a prime factor in defining success. You already know which elements are most important for running your business from your first location. For example, if you’re a cosmetics brand, you want to be in a location where electricity and air conditioning are not an issue.
When opening a second location, brands should consider proximity to the first location, optimize inventory allocation, and create consistency between store experiences. That becomes more difficult as you open stores. Rebekah Kondrat, Founder and CEO, Kondrat Retail
Here are some best practices to find a great second location for your store:
- Scan all recent corporate real estate newspapers, online property listing directories, and magazines to shortlist locations.
- Consider posting an ad or query on an online real estate group or community.
- Spread the word in your network, ask your employees to seek contacts, and let your vendors know you’re looking for a new location.
- Post on social media and get influential people to share it—even if it’s for a minimal cost.
Once you find some potential store locations, vet them against your non-negotiables and pick the one that best aligns with your needs, gives you an advantage over your first location, and would be an excellent fit for your product and target market.
4. Anticipate your expenses and secure capital
Opening a retail store is quite expensive—the rent and infrastructure alone can add up. For most, it isn’t feasible to run a second store on a small amount of savings from a previous store. You need considerable cash flow to launch your second location and set things in motion.
Make sure you anticipate your expenses, including hidden costs, taxes, and inflation . For a retail store, this means store rent, infrastructure, warehouse rent, transportation, production, raw material, equipment, technology, and staff expenses.
You also need an accounting system, preferably with an accountant or finance officer, to process payments, manage accounts and see how you’re faring with capital, profit, and loss.
Once you’ve ironed out your expenses and set up accounting, it’s time to seek funding: liquid cash, angel or VC investments, loans, lending options, crowdfunding , friends, or family. Choose the path that will provide you with the capital you need to launch your business successfully.
📌 GET STARTED: Get the funding you need to open a physical store with Shopify Capital . Avoid lengthy application processes, paperwork, and credit checks, and receive funding within days of accepting an offer.
5. Hire employees
Hiring the right set of people is crucial when expanding, as you won’t be actively involved in every aspect of both your stores.
Here's how you should proceed with hiring:
- Think about your existing workforce. Can you promote and migrate someone internally to the second location as the manager or move some part of your staff there? Since these employees have experience running the first location, their support will help get the second store on its feet.
- Decide which positions you need to fill—operations, inventory management , customer success, and sales. Create hiring criteria for each role to ensure you vet all candidates properly and can build a strong team that will be an asset to your business, especially in your absence.
- Decide how you'll train the new staff. Since you’ve done this before, you likely have a set of standard procedures to follow. You can bring the heads of departments from the previous store as trainers to get the new team up to speed with how you operate, the software you use, the company culture, and the values and vision you follow.
6. Buy inventory
Make a list of the equipment, supplies, and raw materials you need for production or inventory for selling (if your manufacturing happens somewhere else).
If you can, find local vendors who can provide quality materials (preferably at a lower price point). You can ask around for local vendors, do your own research or ask the vendors from your previous location for references.
💡 PRO TIP: Shopify POS comes with tools to help you control and manage your inventory across multiple store locations, your online store, and warehouse. Forecast demand, set low stock alerts, create purchase orders, know which items are selling or sitting on shelves, count inventory, and more.
Launch your second location
Once all this is done, it’s time to plan your launch. Prepare a realistic timeline for the launch to ensure all items reach the new store location well before the operations begin. Decide if you want to go big and invite media to cover the event or keep it small with a soft launch
Start creating buzz around your opening by spreading the word in your network, letting your existing customers know, posting on social media, running ads, and even advertising in your first location.
"Brands should tread the second store just as special as the first," explains Rebekah. "Opening a store is not a set-it-and-forget-it exercise."
Customer behavior evolves, as do traffic patterns and market conditions. The more a brand can pay attention and listen to the feedback of the frontline teams, the more likely it’ll be to make the adjustments needed to succeed. Rebekah Kondrat, Founder and CEO, Kondrat Retail
Scaling with a second business location: worth the effort
Business expansion comes with its fair share of challenges, but if your risk pays off, a second store can take your business to a whole other level.
If you’re planning to scale your business with a second location, consider all the factors listed above, assess the pros and cons, and use our roadmap to embark on this new and exciting journey.
Open your second store with Shopify
Shopify POS is the easiest way to unify online and in-person selling and open more stores with confidence. Have all the tools you need to manage your business, market to customers, and sell everywhere in one easy-to-understand back office.
Second retail location FAQ
How do i start a second retail location.
- Conduct Market Research: Before you open a second retail location, it’s important to conduct market research to determine if the area is a good fit for your business. Look at demographic information, median income, competition and potential customers in the area.
- Secure Funding: You will need to secure funding for your second retail location. This could include a loan or other forms of financing.
- Choose a Location: Once you’ve identified a potential area for your second retail location, you will need to secure a physical location. Consider factors such as rent, square footage, parking, signage, and visibility.
- Set Up Your Store: Once you’ve secured a location, you will need to set up your store. This could include stocking merchandise, setting up displays, and setting up systems for payment and inventory tracking.
- Promote Your Store: You will need to promote your store to attract customers and drive sales. This could include advertising, digital marketing, and in-store promotions.
What are the three types of retail locations?
- Brick-and-Mortar: Physical stores located in a shopping center, mall, or street.
- Online Retail: Selling products through an online website or platform.
- Mobile Retail: Selling products through a mobile app or mobile website.
What do you mean by retail location?
About the author.
Kaleigh Moore
Kaleigh Moore is a freelance writer who helps SaaS and e-commerce companies create intelligent, value-packed blog content. In her free time, she shares her insights on freelancing and writing at www.KaleighMoore.com.
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How Retailers Can Make the Most of Their Store Portfolios
Gather customer data to inform the location, format and design of your store portfolio
Prioritize the needs of your local customer-base, use the halo effect of your stores to power omni-channel marketing and sales, determine the specific purpose of each and every store, identify which format best suits the purpose of your store.
The retail sector is undergoing a period of unprecedented change, with increased online competition, recent developments in new technology and rapidly changing consumer expectations and behavioral patterns all having a profound impact on business as usual.
To meet the demands of modern consumers, leading retailers are revisiting their traditional location and positioning models to include more attention-grabbing flagship, small-format and popup approaches, alongside using virtual queuing software and appointment booking apps to ensure convenience and speed are placed at the forefront of their offering.
Here are a number of location strategies retailers are using to engage modern consumers:
Use customer data to power your retail location strategy
Before you can properly understand where to position your stores, you need to understand where your brand fits into the lives of your target audience, and to do that accurately, you need customer data.
Retailers are now experts in data gathering – or, they are when it comes to gathering data about their online audiences. But when it comes to stores, many retailers still only gather the basics – sales figures, footfall traffic, HR data on their store associates – however, there is so much more stores can do to understand their audience.
For instance, what drives your customers to enter your stores – what are they looking for? How long do they spend in-store? What channels do they use? What is their experience like?
Find out how to gather in-depth business intelligence in your stores.
This is one of the many reasons why leading retailers are investing in experiential stores. Sure, they’re great for attracting and engaging consumers, but they’re also incredibly valuable for gathering data.
Take apparel retailer Lululemon ’s 20,000-square-foot experiential store in Chicago. The store has yoga and meditation studios, a restaurant and bar, and an area where local businesses can showcase their goods – it even allows customers to use its products during classes free of charge to see if they like them.
Source: Lululemon
It’s a great branding exercise, but just think of all that data they’re gathering about their target audience. The brand is known for its high-quality yoga pants and exercise apparel, and with this new experiential store, it has access to HOW people use its products. For instance, they’d now know what time customers prefer to workout and how exercise fits in with their daily schedules. They’d have a strong understanding of the classes that customers love the most and why (the Chicago store has a number of unique classes, such as hip-hop yoga). And they have a fair idea of what people think about its products and where they could make improvements. All imperative insights that would power their product, marketing and operations strategies on a global scale.
Design your stores around the needs of local customers
These days, even the biggest brands are starting to think small – and by that I mean local. In our increasingly hectic world, location and convenience are becoming more and more important. On the one hand, modern consumers want to be wowed and entertained with incredible experiences – but on the other hand, if they want something now, they want it NOW! (part of the reason why Amazon is so successful).
As a result, retailers are adjusting their approach from mass market to localized – focusing their attention on engaging with the people who live, work or pass through the local area.
Hypothetically speaking, let’s say a fashion retailer decided to invest in an in-store fashion advice and styling service across its entire portfolio of stores and discovered the service was only used in certain locations, by certain people and at certain times. Rather than trying to keep all stores consistent, the retailer would be able to improve service and productivity by only offering the personal styling service in stores where it resonates the most, and then identifying what resonates well with other stores such as efficiency and convenience.
The Nike by Melrose store in LA is a brilliant example of a localized store offering. The store is exclusive to Nike Plus members, and gives its customers a local flavor by using data gathered by its customers in the neighborhood (buying patterns, app usage and engagement) to adapt its offering.
As a result, new apparel, footwear and accessories are specific to the needs of its local customers regardless of the brand’s broader seasonal priorities. The store is filled with new products on a bi-weekly basis and sometimes even exclusive products – which is a Nike first.
Another great example is MM to Go – a new small-format store by apparel brand M.M. LaFleur. Based in New York’s financial district, the store is focused on the specific needs of consumers in the local area. It’s products are workwear focused and ready to take away then and there (most M.M. Lafleur stores don’t hold stock), which is ideal if you happen to have a wardrobe malfunction. It also stocks a helpful range of products for life emergencies: stain removal kits, plasters for blisters and deodorant wipes.
Consider the halo effect when positioning your stores
For many retailers, the e-commerce store still operates like a store of its own – part of the existing portfolio of stores rather than a channel that connects them all together. It has its own digital team who look after it, the physical stores take care of themselves, and there’s very little interaction between the two channels.
But in this day and age, the purpose of a store isn’t solely to sell. Take the share volume of digitally-driven brands investing in physical stores as evidence of this fact. Despite the sharp increase in online sales, the “clicks-to-bricks” movement has seen a number of high profile digitally native brands open physical stores (at least 850 brick-and-mortar locations will open in the US in the coming years).
Amazon is the perfect example of this. The e-commerce giant has changed the way we shop in so many ways, yet it has invested in physical store environments such as Amazon Books and Amazon Go convenience stores and supermarkets.
Stores not only generate revenue, they also build stronger customer relationships that convert across channels and keep your brand font-of-mind – which is where the halo effect comes into play.
Research by CACI shows retailers see web sales increase by an average of 106% within the catchment area of a physical store. In fact, a number of reports claim that physical stores are essential to building a long-term viable retail business. A report by Simon Property Group found unsustainable customer acquisition and shipping costs erode margins, which means scale is essential but hard to acquire.
A great way to drive more customers in-store is by enabling customers to book appointments with in-house experts, such as style or beauty experts or technical gurus, through online appointment scheduling software .
Determine the purpose of the store
When creating a location strategy for your retail portfolio, it’s crucial that you establish the purpose of the individual store and how it fits in with your existing stores. Ask yourself, why would a customer bother to step foot inside your store?
For example, in several sectors “click and collect” or in-store pick-up is proving a popular and increasingly efficient means of serving customers. More than 50% of Walmart’s online sales and around 40% of Best Buy’s are picked up in stores, according to McKinsey & Company .
Some of the most common reasons why people visit stores are:
- Convenience : they’re in a rush and need a product or service right away
- Efficiency : your store is on their existing journey and is easy for them to visit, such as collecting a pick-up item on their way home
- Inspiration : they want to find something that changes their life in some way, like a new product or idea
- Guilty pleasure : it’s a place to make impulse purchases and get things they want right then and there
- Problem-solving: they need the answer or solution to a common problem and could do with some expert advice
- Entertainment : they see stores as places where they can be entertained and have fun
- Community: they want to meet like-minded people who share their interests and world views
- Brand: they like the look of your brand and want to see what you’re all about.
Identify which store format best suits your store
The days of trying to have your brand on every main road, mall or shopping district in the country/world are done. For instance, a number of prominent retailers on New York’s famous Fifth Avenue are closing up shop – Calvin Klein, Ralph Lauren and Henri Bendel have already left while Gap and Versace are reportedly on their way out – and vacancy rates have climbed to a 27.5% high from 49th to 60th street on Fifth Avenue.
This has largely been brought on by changes to the way consumers shop. Being seen on the main road or high street is a marketing tool – but this no longer gives the return on investment it once did. In response to its departing Fifth Avenue flagship stores, the parent company of Calvin Klein and Tommy Hilfiger, PVH Corp, said the restructure was to “evolve the traditional luxury fashion model” for the digital age.
Retailers need to be more creative in their approach to their store portfolio. According to a recent retail report from PwC , successful brick-and-mortar formats will look markedly different from one another in the years to come. Most major retail outlets will operate a multitude of physical footprints, all aimed at pleasing their target customer in a variety of shopping modes.
Here’s some examples of different store formats:
Pop up stores
Temporary store models used to be commonplace with small and somewhat niche retailers who couldn’t afford a permanent fixed location – now it’s a highly effective way for retailers to meet customers in convenient locations and in exciting new ways. Take mattress company Casper’s The Dreamery in New York. The pop up allows consumers to book 45 minute naps in their sleeping pods – it’s fun, convenient and a brilliant way to reach an entirely new market of consumers who might not necessarily be on the lookout for a new mattress but could easily be persuaded.
Source: dreamerybycasper.com
Small store formats
You might sell thousands of products, but that doesn’t mean you need to occupy thousands of square feet. In fact, you might be better off investing in small store formats that meet your target audience in locations that better suit them, such as inner-city locations. For instance, Target has realized that smaller store concepts are equally as valuable (if not more) to its customers than larger stores. With over 100 small store formats, they are supposedly twice as productive as larger stores, says Target’s CEO, Brian Cornell, as it means more efficient operations and stock allocation.
Stores within stores
Placing a small-format store into a larger, existing store is by no means a new concept – in essence, it’s something department stores have been doing for decades. But being available to customers during their existing journeys, like on their weekly visit to the supermarket, is a great way to meet your customers halfway. A good example is Microsoft and Samsung, who both have mini stores inside many Best Buy stores.
Experiential stores
These act as places where consumers can interact with your products, people and brand – we like to call them brand interaction hubs. They’re exciting, innovative and experience-focused rather than transactional. Samsung KX in London’s King’s Cross is a great example, with a host of new technology on display such as a digital graffiti wall, VR racing, AR messaging boards, alongside a series of in-store events and workshops.
Mobile stores
It might not make business sense to have a store in every far-flung town or village, but that doesn’t mean you can’t pay them a visit every now and then. That’s why a growing number of retailers are establishing mobile stores that can travel through rural areas and meet customers at their convenience. This approach is particularly popular with retail banks such as NatWest , who enable customers to pre-book appointments with its bankers online or meet them face-to-face as they are passing through.
24/7 stores
While dissimilar to the other concepts, it’s worth pointing out that today’s marketplace operates around the clock, so while your stores might be closed, it doesn’t mean they have to stop offering value. A rather innovative example is cosmetics retailer Lush and its store in Shinjuku, Tokyo. The store provides a visual display outside that operates 24/7 and allows consumers to use the Lush Labs app to shop as well as display the mood of the local area with specific products.
The best and most profitable retail location strategies combine data-based customer insights, a strong understanding of omni-channel purchasing behavior and an-depth understanding of your store serves the local area.
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To design successful strategies retailers must take into account not only the marketing environment confronting them today but also anticipate possible competitive and demographic changes. This article presents a procedure to help retailers formulate a strategic location plan in a dynamic environment. The procedure involves a model for assessing site desirability, a criterion for selecting among alternative sites, and a heuristic to facilitate the computational procedure. A key element is the use of competitive equilibrium concepts to provide desirable strategies under a variety of future scenarios.
The Journal of Marketing (JM) develops and disseminates knowledge about real-world marketing questions relevant to scholars, educators, managers, consumers, policy makers and other societal stakeholders. It is the premier outlet for substantive research in marketing. Since its founding in 1936, JM has played a significant role in shaping the content and boundaries of the marketing discipline?
Sara Miller McCune founded SAGE Publishing in 1965 to support the dissemination of usable knowledge and educate a global community. SAGE is a leading international provider of innovative, high-quality content publishing more than 900 journals and over 800 new books each year, spanning a wide range of subject areas. A growing selection of library products includes archives, data, case studies and video. SAGE remains majority owned by our founder and after her lifetime will become owned by a charitable trust that secures the company’s continued independence. Principal offices are located in Los Angeles, London, New Delhi, Singapore, Washington DC and Melbourne. www.sagepublishing.com
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Unit 7: Capacity Planning and Facility Layout
7.2: facility location and layout, ids355: operations management wikispace: “chapter 8: location planning and analysis”.
Review #1 Location Cost-Volume-Profit Analysis, which should help you to understand the financial aspects of choosing a location. In addition consider the factors that influences the location of a new facility. This is important because a poor choice can make it very difficult to meet demand and manage costs effectively.
Ch. 8 Location Planning and Analysis
Location Planning Every firm must use location planning techniques. There are many options for location planning. Corporations choose from expanding an existing location, shutting down one location and moving to another, adding new locations while retaining existing facilities, or doing nothing. There are a variety of methods used to decide the best location or alternatives for the corporation. Methods such as identifying the country, general region, small number of community alternatives, and site alternatives.
Several factors that influence location positioning include the location of raw materials, proximity to the market, climate, and culture. Models for evaluating whether a location is best for an organization consist of cost-profit analysis for locations, the center of gravity model, the transportation model, and factor rating.
This chapter discusses the decision to relocate a facility by considering costs and benefits. If you are planning on moving or acquiring a new facility, there are many factors to consider: the size, the geographic area, culture, transportation costs and others. After a location or locations have been chosen a cost-profit-volume analysis is done.
The main factors that affect location decisions include regional factors, community considerations, and site-related factors. Community factors consist of quality of life, services, attitudes, taxes, environmental regulations, utilities, and development support.
EVALUATING LOCATION ALTERNATIVES (Page 385) – There are three specific analytical techniques available to aid in evaluating location alternatives:
- Fixed costs are constant.
- Variable costs are linear.
- Required level of output can be closely estimated.
- There is only one product involved.
- Total cost = FC = v(Q)
where FC=Fixed Cost, v=Variable Cost per Unit, Q=Number of Units (Also shown below but not in the same format)
- Determine relevant and important factors.
- Assign a weight to each factor, with all weights totaling 1.00.
- Determine common scale for all factors, usually 0 to 100.
- Score each alternative.
- Adjust score using weights (multiply factor weight by score factor); add up scores for each alternative.
- The alternative with the highest score is considered the best option.
- Minimum scores may be established to set a particular standard, though this is not necessary.
- This technique is used in determining the location of a facility which will either reduce travel time or lower shipping costs. Distribution cost is seen as a linear function of the distance and quantity shipped. The Center of Gravity Method involves the use of a visual map and a coordinate system; the coordinate points being treated as the set of numerical values when calculating averages. If the quantities shipped to each location are equal , the center of gravity is found by taking the averages of the x and y coordinates; if the quantities shipped to each location are different , a weighted average must be applied (the weights being the quantities shipped).
Company Relocating There are many factors that contribute to a company relocating. Some of the reasons include expanding the market and diminishing resources. For an existing company to relocate, they must weigh their options when planning to relocate elsewhere. They can expand their existing facility, add new ones and keep their existing facilities open, move to another location and shut down one location, or keep things the way they are and not do anything. Globalization has led many companies to set up operations in other countries. Two factors that make relocation appealing are advances in technology and trade agreements. By going global, companies will expand their markets and be able to cut costs in labor, transportation, and taxes. They also have gained ideas for new products and services.
IDENTIFYING A COUNTRY, REGION, COMMUNITY, AND SITE (Page 376) · factors that influence location decisions are: Manufacturing : o Availability of energy and water o Proximity to raw materials o Transportation cost Service: o Traffic patterns o Proximity to markets o Location of competitors ·Once important factors have been determined, an organization will narrow down alternatives to a specific geographic region. These factors that influence location selection are often different depending on whether the firm is a manufacturing or service firm. When deciding on a location, mangers must take into account the culture shock employees might face after a location move. Culture shock can have a big impact on employees which might affect workers productivity, so it is important that mangers look at this.
v IDENTIFYING A COUNTRY o A decision maker must understand the benefits and risks as well as the probabilities of them occurring
v IDENTIFYING A REGION- 4 major considerations o Location to Raw Materials: The three most important reasons for a firm to locate in a particular region includes raw materials, perishability, and transportation cost. This often depends on what business the firm is in. o Location to Markets: Profit maximizing firms locate near markets that they want to serve as part of their competitive strategy. A Geographic information system(GIS) is a computer based tools for collecting, storing, retrieving, and displaying demographic data on maps. o Labor Factors : Primary considerations include labor availability, wage rates, productivity, attitudes towards work, and the impact unions may have. o Other : Climate is sometimes a consideration because bad weather can disrupt operations. Taxes are also an important factor due to the fact that taxes affect the bottom line in some financial statements.
v IDENTIFYING A COMMUNITY o There are many important factors for deciding upon the community in which move a business. They include facilities for education, shopping, recreation and transportation among many others. From a business standpoint these factors include utilities, taxes, and environmental regulation.
v IDENTIFYING A SITE o The main considerations in choosing a site are land, transportation, zoning and many others. When identifying a site I]it is important to consider to see if the company plans on growing at this location. If so, the firm must consider whether or not location is suitable for expansion. There are many decisions that go into choosing exactly where a firm will establish its operations. First, a company must determine the driving factors that will influence which areas are suitable locations. After these factors have been determined, the company will identify potential countries and examine the pros and cons of establishing operations in these countries. After looking at pro and cons of the different countries and deciding on a country, then decision makers will identify a region within the country. When identifying a region, decision makers must take the four major factors explained above into consideration. The last two stages of the search include choosing a community and a site.
Note: The above part is way too lengthy for this assignment. Summary below..
Summary : There are several ways that are very helpful in evaluating location alternatives, such as locational cost-profit-volume analysis, factor rating, and the center of gravity method. First, let’s take a look at Location Cost-Profit-Volume Analysis.
This analysis can be done numerically or graphically. The procedure for locational cost-profit-volume analysis involves these steps:
1. Determine the fixed and variable costs associated with each location alternative. 2. Plot the total-cost lines for all location alternatives on the same graph. 3. Determine which location will have the lowest total cost for the expected level of output. Alternatively, determine which location will have the highest profit.
This method assumes the following: 1. Fixed costs are constant for the range of probable output. 2. Variable costs are linear for the range of probable output. 3. The required level of output can be closely estimated. 4. Only one product is involved.
Here’re a couple of important formulas to remember:
Total cost = Fixed cost + Variable cost per unit * Quantity or volume of output
Total profit = quantity(revenue per unit – variable cost per unit) – fixed cost.
In most situations, other factors besides cost must also be considered. We will now consider another kind of cost often considered in location decisions: transportation costs.
Transportation costs sometimes play an important role in location decisions. The company can include the transportation costs in a locational cost-volume analysis by incorporating the transportation cost per unit being shipped into the variable cost per unit if a facility will be the sole source or destination of shipments. When there is a problem with shipment of goods from multiple sending points to multiple receiving points, and a new location is to be added to the system, the company should undertake a separate analysis of transportation. In this case, transportation model of linear programming is very helpful. The model is used to analyze each of the configurations considered, and it reveals the minumum costs each would provide. Then the information can be included in the evaluation of location alternatives.
Multiple Plant Manufacturing Strategies (page 381-382) -When comapnies have several manufacturing facilities t here are several different ways for a company to organize their operations. These ways include: assigning different product lines to different plants, assigning different market areas to different plants, or assigning different processes to different plants. These strategies carry their own cost and managerial implications, but they also carry a certain competitive advantage. There are four different types of plant strategies:
- Product Plant Strategy
- Products or product lines are produced in separate plants, and each plant is usually responsible for supplying the entire domestic market.
- It is a decentralized approach as each plant focuses on a narrow set of requirements that includes specialization of labor, materials, and equipment along product lines.
- Specialization involved in this strategy usually results in economies of scale and, compared to multipurpose plants, lower operating costs.
- The plant locations may either be widely scattered or placed relatively close to one another.
2. Market Area Plant Strategy
- Here, plants are designed to serve a particular geographic segment of a market.
- The individual plants can produce either most, or all of the company’s products and supply a limited geographical area.
- The operating costs of this strategy are often times higher than those of product plants, but savings on shipping costs for comparable products can be made.
- This strategy is useful when shipping costs are high due to volume, weight, or other factors.
- It can also bring the added benefits of faster delivery and response times to local needs.
- It requires a centralized coordination of decisions to add or delete plants, or to expand or downsize current plants because of changing market conditions.
3. Process Plant Strategy
- Here, different plants concentrate on different aspects of a process.
- This strategy is most useful when products have numerous components; separating the production of components results in less confusion than if all the production were done in the same location.
- A major issue with this strategy is the coordination of production throughout the system, and it requires a highly informed, centralized administration in order to be an effective operation.
- It can bring about additional shipping costs, but a key benefit is that individual plants are highly specialized and generate volumes that brings economies of scale.
4. General-Purpose Plant Strategy
Plants are flexible and have the ability to handle a range of products
- It allows for a quick response to products and market changes, but can be less productive than a more focused approach.
- A benefit to this approach is the increase in learning opportunities that happens when similar operations are being done in different plants. Solutions to problems as well as improvements made at one plant can be shared with the other plants
Question 1: From a company standpoint, which factors determine the desirability of a community as a place for its workers and managers to live? A) The amount of parking spaces B) Retail stores C) Schools D) Locals attitudes towards the company. E) Both C and D.
answer is c. (found on page 191)
Question 2: What is NOT a risk a corporation must consider when planning a location? A) Political B) Exporting C) Economic D) Cultural E) Economic
Answer: B. Pages 373-374.
Question 3: What do banks, fast-food chains, supermarkets, and retail stores view locations as? A) One in many intricate decisions for their organizations B) A crucial part of the marketing strategy. C) An easier way to distribute their product or service. D) New ideas for future investments. E) A second home.
Answer: B. Page 369
Question 4: What is the third step when making location decisions? A) Evaluate the alternatives and make a selection. B) Identify important factors. C) Decide on criteria for evaluating alternatives. D) Develop location alternatives. E) None of the above.
Answer: D. Page 376.
Question 5: What is the center of gravity method? A) A method that determines the location of a facility that will minimize shipping cost and travel time to various destinations. B) A method that determines the location of a facility closest to the most number of consumers. C) A method that determines the location of a facility closest to the main supplier D) A method that determines the location of a facility in the middle-point of all suppliers. E) none of the above
Answer: A. Page 388
1.) Location analysis assumes that both qualitative and quantitative factors are important in determining an ideal location when using: a. The Transportation Model b. The Center of Gravity Method c. Factor Rating d. Cost-Profit Analysis e. None of the above
Page 379 9th Ed.
2.) The transportation model can be applied to solve factors including: I. Cost II. Profit III. Capacity IV. Management a. I only b. I and II only c. I, II, and III only d. II, III, and IV only e. II and IV only
Page 391 9th Edition
3.) The Transportation Model uses the following information to determine costs: a. A list of shipping origins b. Demand of destinations c. Unit costs d. None of the above e. All of the above
e. All of the above
4.) Which is a TRUE assumption needed to perform Cost-Profit Volume Analysis? a. Fixed costs are exponential b. Variable costs are logarithmic c. All costs are linear d. At least 2 products are being compared e. Revenue is NOT included in the analysis
*9th Edition says that variable costs are linear, and fixed costs are constant. *
5.) In the Factor Rating Method of location analysis, which of the following is NOT a managerial choice? a. Assigning weight to the importance of aspects being compared b. Adding the applied (weight x value) of various categories to get a composite for a location c. Determining the ultimate choice for the location d. Assigning information gathering on a location e. All of the above are managerial choices
Question 5 needs an answer, also needs page numbers where answers are found
1) What does GIS stand for? A. General Information Systems B. Great Information Systems C. Geographic Information Systems D. General Institutions E. None of the above
2)The primary consideration for identifying a site is? A. Location B. Zoning C. Transportation D. None of the Above E. All of the above
3) What are the common techniques used to evaluate location alternatives? A. Locational cost-profit-volume analysis B. Factor ratings C. Center of gravity method D. Transportation model E. All of the above
4) What is a general-purpose plant strategy? A. A general approach to evaluating locations that include qualitative and quantitative inputs. B. A way to evaluate rating of geographic area C. A general approach to evaluating locations that include regional inputs. D. A way of being capable of handling a wide range of different products. E. None of the above
5) Method for locating a distribution center that minimizes the distribution costs. A.Location cost-pofit-volume analysis B. Method for finding balance between company culture and geographic culture. C. Method that compares costs to benefits D. All of the above. E. None of the above
1) What is a primary factor in the regional level of location decisions? A. Location of raw materials or supplies B. Quality of life C. Location of markets D. A and C E. None of the above
Answer: D page 365 (9th edition)
2) In a geographic information system (GIS), which is NOT involved in the data? A. Age B. Incomes C. Quality of life D. Type of employment E. Type of housing
Answer: C page 366 (9th edition)
3) What is a disadvantage of globalization? A. Transportation costs B. Security costs C. Unskilled labor D. Import restrictions E. All of the above
Answer: E page 373 (9th edition)
4) Mining operations, farming, forestry, and fishing are all examples of which primary reason for firms locating near or at the source of raw materials? A. Necessity B. Perishability C. Transportation costs D. Processing E. None of the above
Answer: A page 365 (9th edition)
5) Which of the following would you establish a composite value for? A. The transportation model B. Factor rating C. The center of gravity method D. Locational Cost-Profit-Volume Analysis E. Geographic information system
Answer: B page 379 (9th edition)
1. Which of these is a computer-based tool for collecting, storing, retrieving, and displaying demographic data on maps? A. Geographic Data System B. Geographic Information System C. Demographic Data System D. CAM E. none of the above
Answer: B page 379
2. Which is a major consideration when choosing to operate in a region? A. the minimum wage rate B. identifying a community C. location to raw materials D. possible sites available E. none of the above
Answer: C page 378
3. Considering global expansion, decision makers need to be absolutely clear on the benefits and risks and the likelihood of their occurrences when deciding upon identifying: A. a continent B. a site C. a community D. a country E. none of the above
Answer: D page 378
4. A dominant factor that influences the location decision of a manufacturing firm is: A. Climate changes B. Location to competitors C. Proximity to markets D. Transportation cost E. none of the above
Answer: D page 376
5. Which of the following is Not a primary consideration when identifying a site for operations? A. Land B. Transportation C. Zoning D. Future expansion E. All of the Above
Answer: E page 381
1 . When using the Center of Gravity Method, what are the two differing variables for equal and unequal quantities shipped, respectively? a. n 1 ; n 2 b. n;Q c. n; n i d. e; u e e. n; Q i
Answer: e ( pages 388-89 )
2. Which location alternative technique involves viewing the problem in economic terms? a. Factor Rating b. CVP c. GIS d. Center of Gravity e. Transportation Model
Answer: b ( page 385 )
3. When considering foreign locations, crime, and the threat of terrorism fall under which category? a. Safety b. Cultural Differences c. Market d. Financial e. Customer Preferences
Answer: a ( page 378 )
4. When using the factor rating method of location alternative evaluation, which of the following could be considered relevant factors? a. Location of market b. Water supply c. Parking facilities d. Revenue potential e. All of the above
Answer: e ( page 387 )
5. Which of the following is not a step in the general procedure for making location decisions? a. Develop location alternatives b. Evaluate the alternatives and make a selection c. Gain government approval of location alternatives d. Decide on criteria for evaluating alternatives e. Identify important factors (e.g., location of markets)
Answer: c ( page 376 )
The location of a business is crucial to it’s growth. There are many factors that come into play when choosing a suitable location. Usually it is one or a few factors that dominate the decision making process. For example, a change in market supply and/or demand, perhaps even if inputs used by the business have run out. A business can suffer greatly if the right location is not chosen. Therefore a business should evaluate all their options very carefully before making a final conclusion.
There are generally four options a manager has with regard to location planning. The first option would be to take the current facility and make it bigger. The second would be to keep the current facility and just create a (or many) new one(s). The third would be to close down the current facility entirely and build a new one. The last option would be to keep things the way they are.
Questions: Questions need to be multiple choice format.
1. What is the name of the computer-based tool used for collecting, storing, retrieving, and displaying demographic data on maps?
A: Geographic Information System (GIS)
2. True or False: Most organizations try to find the one best location.
3. What are the three primary regional factors involved in location decision making?
A: raw materials, markets, and labor considerations
4. Name three trade agreements mentioned in this chapter.
A: North American Free Trade Agreement (NAFTA), the General Agreement on Tariffs and Trade (GATT), and the U.S. – China Trade Relations Act
5. What are five disadvantages to having global operations?
A: Transportation costs, security costs, unskilled labor, import restrictions, and criticisms.
6. Suppose that the operating costs of a company has a weight of .20. There are three possible location choices. The first location has a score of 60/100. The second location has a score of 50/100. The third location has a score of 80/100. What are the weighted scores of each location possibility?
7. What are some benefits associated with a company moving it’s operation’s globally?
A: Market expansion, financial savings, legal, etc.
8. What is the center of gravity method used for?
A: Locating a distribution center that minimizes distribution costs.
9. Find the center of gravity with the information provided below.
A: x = 21/4 = 5.25 y = 15/4 = 3.75 The center of gravity is located at (5.25, 3.75)
10. Determine the center of gravity based on the following information:
A: x = [7(700) + 5(500) + 8(800) + 6(600) + 2(200)] / 2,800 = 6.36 y = [6(700) + 3(500) + 6(800) + 4(600) + 2(200)] / 2,800 = 4.75
11. Use the table below and the cost-profit-volume analysis to determine the B Superior range approximation.
A: Total Cost of C = Total Cost of B 350,000 + 25Q = 150,000 + 50Q 200,000 = 25Q Q = 8,000
12. Use the table from Question 12 and the cost-profit-volume analysis to find the C Superior range approximation.
A: Total Cost of A = Total Cost of C 250,000 + 20Q = 350,000 + 25Q 5Q = 100,000 Q = 20,000
Use the following information to answer question 1-3. A firm paid $2000 for rent, $300 for maintenance fee in January. They sold 2000 units in the month and the cost per unit was $5. The price for the product is $10 per unit.
1. What is their total costs for the month?
a. $2300 b. $10000 c. $12300 d. $2000 e. none of the above
Answer: c. page 376
2. What is the firm’s total revenue for the month?
a. $20000 b. $10000 c. $2300 d. $2000 e. none of the above
Answer: a. page 378
3. What is the firm’s profit for the month ?
a. $20000 b. $10000 c. $12300 d. $7700 e. none of the above
Answer: d. page 378
4. If two alternatives yield comparable annual costs, management would be indifferent in choosing between the two in terms of _.
a. total revenue b. total costs c. total profit d. total variable costs e. total fixed costs
Answer b. page 378
5. The transportation cost must be converted into cost per unit of in order to correspond to other variable costs if raw materials are involved.
a. input b. output c. initial input d. both a& b e. none of the above
Answer: b. page 378
6. Which of the following is NOT a governmental factor when locating in a foreign region? a) Import restrictions b) Currency restrictions c) Liability laws d) Local product standards e) all of the above
Answer: E, pg. 378
Unit 7 Discussion
Choose a business that you would be interested in opening in your community. How would you decide where to locate that business? What would you be most concerned about in making this choice?
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Single-Family Development Guide
- Single-Family Guide
Coordinated between the Community Development and Public Works Departments, this guide is a resource for property owners and residents regarding development regulations for single-family homes in the residential zoning districts (without Home Owners Associations). For questions regarding this information, contact the following Departments Monday through Friday (excluding holidays) from 8 a.m. to 5 p.m.:
- Planning Division: (650) 903-6306
- Building Division: (650) 903-6313
- Public Works Department: (650) 903-6311
An accessory dwelling unit (ADU), also referred to as a companion unit, in-law unit or granny flat, is a dwelling unit that provides complete, independent living facilities on the same lot as a single-family or multi-family dwelling. Independent living facilties includes permanent provisions for living, sleeping, eating, cooking and sanitation (restroom/wash facilities). These units can be detached from an existing dwelling or attached to an existing dwelling. For more information and current regulations, visit the ADU webpage .
ADUs do not require a Planning permit, but do require a building permit. Planning staff encourages a property owner, or architect, to have their proposed plans preliminarily reviewed by a Planner prior to submitting for building permits. This is to ensure the ADU complies with the development standards and that plans include all necessary information. No appointments or fees are required for informal review, as they are completed on a first-come, first-serve basis at the public counter or by email .
- Description An accessory structure is considered any secondary structure or equipment located on a property, including (but not limited to) the following: Detached garage; Detached structure (i.e. studio, shed, etc.); Trellis, arbor or gazebo; Spa, pool; BBQ, outdoor kitchen, chimney, fire pit; and Any other structure in the side or rear yard.
- Development Standards Like your home, an accessory structure has specific development standards regarding setbacks from property lines, size limitations, separation requirements between structures, height limitations, etc. Unless otherwise identified, all accessory structures count towards the permitted floor area allowed on a given property. Accessory structures may be conditioned (heated) living space and may include a full bathroom (up to 3 plumbing fixtures and a water heater), if desired, but are not permitted to have a kitchen or be rented out as a living unit. Once a structure is deemed habitable or conditioned space, fire sprinklers are required.
Any accessory structure over 120 sq. ft. in size, measured at the foundation, with or without electricity, plumbing and/or mechanical (heating/cool) equipment requires building permits. Structures and sheds which are 120 sq. ft. or less in size without any utilities do not require a building permit, but are still required to comply with accessory structure development standards. Any structure closer than 5 feet to the property line may be required to meet fire rating requirements. For questions on building and fire requirements, please contact the Building Division at (650) 903-6313 or [email protected] .
Most trees located at a single-family home are private trees, which are not regulated by the City. However, there are two types of trees – Heritage Trees and Street Trees – which are regulated by the City and require permits by the City of Mountain View’s Forestry Division to remove or plant. For more information, visit the Trees and Landscaping page .
No permits are required for installation of new or modified landscaping at a single-family home in the R1, R2 or R3 zoning districts, unless a Planning permit is required for other aspects of development and 1,000 sq. ft. or more of new or modified landscaping is being installed. Additional information regarding landscaping is available on this page .
- Fences Fence regulations are important as they ensure consistency within a residential neighborhood and safety for drivers, pedestrians and bicyclists. All fence regulations for single-family homes are available online .
- Neighbor Challenges Though we encourage neighbors to have open communication and resolve conflicts peacefully and thoughtfully, we understand that sometimes help from a third party is needed. The Mountain View Mediation Services is a free and confidential program provided by Project Sentinel to assist residents in disputes. Mountain View Mediation Services can be reached by phone at (650) 960-0495 or by email at [email protected] .
- Does the City of Mountain View issue permits for the placement of PODS or other storage units on the roadway? No, the City of Mountain View does not allow the placement of PODS or other storage units on the public roadway. They do not meet Section 670 of the California Vehicle Code therefore they are not allowed to be parked on the street. Placement of units in the public right of way may result in a citation and fines.
- Requirements The parking requirement for a single-family home is, at minimum, one (1) covered parking space and one (1) uncovered parking space. A parking space is identified as a 9 feet wide by 20 feet deep unobstructed space with a height clearance of 7 1/2 feet for vehicle storage. The unobstructed space cannot contain any equipment (i.e. washer/dryer, water heater), storage or have a door open within it.
- Covered Parking The covered parking space can include either a carport or a garage. If the covered parking is attached to the house, then it must comply with the development standards of the house. If it is detached from the house, as a separate structure, then it must comply with the accessory structure development standards.
- Uncovered Parking The uncovered parking space can include either a driveway or dedicated pad for vehicle parking and can be located within the front setback. Allowable driveway materials include paving, asphalt, tire-track paving, and gravel cups. No loose sand, rock or granite filings are allowed as they clog the storm drain system.
- Street Parking Most streets accessing single-family homes are public streets, owned and maintained by the City. As such, street parking on a public street is permitted and cannot be regulated by adjacent private property owners. If a suspicious car is parked for an extended period of time, 72 hours or more, or someone is blocking access to your driveway, please contact the Police Department’s non-emergency phone line at (650) 903-6395.
- Informal/Preliminary Review City staff encourages all property owners and architects to share preliminary/informal plans of any addition or new construction with Planning and Public Works staff prior to drafting plans for building permit review. Initial review by a Planner and Public Works Engineer can save time and money, as city staff will verify the proposed work complies with the required development standards and ensure the proper information is included on the plans. This informal review is free of charge and can typically be done in a single visit to City Hall, though may take additional time if a property has a unique feature that requires additional staff review. No appointment is required, as your plans will be reviewed on a first-come, first-serve basis at the counter.
The City of Mountain View does not have discretionary design review for single-family home development nor requires noticing of adjacent neighbors of construction activity, as an effort to reduce costs, time and process for homeowners. As long as a remodel, addition or new construction of a home complies with the development standards of the zoning district in which the property is located, then no permit is required by the Planning Division, except for the cases listed below. Development standards include required setbacks from the property lines, height restrictions, floor area restrictions, minimum yard requirements, etc.
Permits are required by the Planning Division in the following cases:
- For an exception to the development standards, including variances and floor area ratio exceptions;
- For any conforming addition to a nonconforming home;
- For an addition or new construction of a home with a lot of 10,000 sq. ft. or more located adjacent to a creek ;
- For any exterior changes or additions to a historic home;
- For a new flag-lot development; and
- For a new subdivision of 5 or more homes.
More information on Planning application materials and permit fees is available here .
Even if a planning permit is not required, your plans will need to be reviewed by a planner at the public counter before you can submit for building permits. You should always have a Planner and Public Works Engineer review preliminary plans of your project prior to drafting plans for Building permit review to limit issues from arising when you are trying to submit for building permits.
Building permits are required for most construction activities to confirm the work being completed is built to the current California Building Code and City standards. Permits are not required for some minor repairs or modifications, such as repairing dry wall, painting and carpeting. However, permits are required for work that involves installing/replacing equipment and upgrading or replacing structural or building components of the home, such as, but not limited to, reroofing, replacing a porch, installing an AC unit, replacing a water heater, installing new windows, etc.
Call to confirm if a building permit is needed for your project at (650) 903-6313.
Specific information and materials are required to be submitted to the Building Division for building permit review. For information on requirements and review timelines for single-family homes, visit the Building Division's single-family home new construction page or addition/remodel page.
- Construction Thresholds Construction thresholds for additions, remodels and new construction, which may add additional cost or scope to your proposed project include: For a new single-family home or any addition of 500 or more habitable sq. ft. to an existing single-family home may be subject to school impact fees. Properties are given credit for existing legally-constructed building square footage. Any addition, or equivalent remodel, of 600 sq. ft. is subject to Public Works review, where one or more of the following improvements may be required (some of which may require a sidewalk or excavation permit if located in the public right-of-way): Inspection and replacement of the sanitary sewer lateral; Replacement of the driveway apron to meet accessibility requirements; Reconstruction of a portion of sidewalk, if there are major cracks or breaks; Upsizing the water service and meter, if a fire sprinkler system is installed. Any addition of 1,000 sq. ft. or more must comply with the Mountain View Green Building Code. Any new living unit (new construction of a single-family home) may be subject to the Park Dedication In-Lieu fee collected by the Public Works Department. The fee ranges between approximately $15,000 to $30,000. To determine if your new construction is subject to the fee and for a fee estimate contact the Public Works Department at (650) 903-6311. A residential fire sprinkler system is required with: (1) any new construction home, (2) any addition that results in a total size of 4,100 sq. ft. (new + existing sq. ft.), and (3) any addition which doubles the size of an existing home. Any new addition or remodeling of an existing home built pre-1978, where children or pregnant women reside during construction, must comply with the US EPA regulations for prevention of lead poisoning.
The City does not maintain records of the physical location of your property boundaries. To determine the exact location of your property lines, you will need to hire a land surveyor (civil engineer). Fences are not typically located on a property boundary, so they should not be used as an accurate reference of where your property line is located.
A land survey is not required to submit for a planning or building permit, but may be required during construction should questions or concerns arise about the property boundaries.
Some single-family properties have an easement on-site. Easements could allow access to utility lines and waterways located on or nearby the property or ones that grant pedestrian access along or through the property. Utility easements are the most common for single-family properties and are often for PG&E or the Santa Clara County Water District to operate and maintain utilities or access to a creek. A description of the easement boundaries is located in the legal description of your property, as part of the Title Report or Grant Deed. A property owner should be aware of any and all easements located on their property as it may restrict permitted development, since no structures can be built within an easement area. The city does not keep records of easements on private property. For further questions regarding easements, please contact the Public Works Department at (650) 903-6311.
The City utilizes the Santa Clara County Tax Assessor Maps (SCCTA) as a general reference, which provides basic information about your lot dimensions (width and depth) and existing building square footage. The Assessor map and data are good starting points to identify basic information about your property and are available online at the SCCTA website .
Every property within the City is located within a specific zoning district, which identifies allowable land uses and establishes development standards for all properties. Most single-family residential homes are located in the R1 (Single-Family Residential) district. However, a portion of single-family homes are located in other residential districts, including the R2 (One- and Two-Family Residential) district and the R3 (Multiple-Family Residential) district. Knowing which zoning district your property is located is important as it will identify the specific development regulations applicable to your property.
To identify the zoning for your property, please visit our interactive zoning map where you can search by address.
- Development Standards For more information on zoning, including a Zoning Map and development standards for zoning districts, click here .
Some residential properties in Mountain View are located within flood zones, known as Special Flood Hazard Zones. The Federal Emergency Management Agency (FEMA) identifies and manages flood zones throughout the US. While construction is permitted in these zones, there are special construction requirements and standards when substantial improvements are being made to the home, including new construction, remodels or additions. To determine if your property is within one of these zones visit the City's flood zone website or contact the Public Works Department at (650) 903-6311 or by email . All flood zone maps are available online at FEMA’s Map Service Center .
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Nordstrom Closing All Canada Stores & Nordstrom Rack Locations: See the List
Ashley Rushford
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On Thursday, Nordstrom announced the closing of all its Canada stores.
The Seattle-based retail giant currently has six Nordstrom stores and seven Nordstrom Rack stores in Canada. According to the retailer, it will close all 13 stores as it winds down operations in the country. There are 2,500 workers at the locations. Nordstrom’s e-commerce operations in Canada have stopped operating on March 2 and the in-store wind down is expected to be completed by June.
The Nordstrom and Nordstrom Rack stores in Canada include:
- Calgary: The Chinook Centre and Deerfoot Meadows
- Edmonton: South Edmonton Common
- Langley, British Columbia: Willowbrook Mall
- Ottawa: Train Yards and The Rideau Centre
- Toronto-area: Heartland Town Centre , Sherway Gardens , The Toronto Eaton Centre , Yorkdale Shopping Centre , One Bloor and Vaughan Mills
- Vancouver: Pacific Centre
Nordstrom first announced plans to expand to Canada in 2012 and opened its first store in Calgary at CF Chinook Centre in September 2014.
Nordstrom Closing Canada Stores, Reports Q4 Earnings Decline
Done deals: kurt geiger to launch swimwear + more news, target ceo lays out the 'new normal' for the big-box retailer in a post-pandemic world.
Nordstrom chief executive Erik Nordstrom stated that the company entered Canada in 2014 with a plan to build and sustain a long-term business.
“Despite our team’s best efforts, including multiple initiatives to improve our outcomes, our Canadian business has not been profitable. The impact from Covid drove further losses, with no realistic path to sustainable profitability,” Nordstrom said.
Nordstrom’s move will result in a decline of about $400 million in net sales for the fiscal year. Following the announcement of the Canada closures, the retailer posted a deeper-than-expected decline in sales in its latest quarter. Net income rose to $119 million, compared with $104 million from a year earlier.
Nordstrom expects to report approximately $300 million to $350 million of pretax charges related to the exit in the first quarter of fiscal 2023, the three months that end in April.
Pete Nordstrom, president and chief brand officer, said that the incremental markdowns impacted the margins, but the company is better positioned for a stronger 2023.
“Our actions have given us increased flexibility to react more quickly to changing customer demand and provide the newness and fashion our customers love. We want to thank our teams for all their hard work helping our customers feel good and look their best,” Nordstrom stated.
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The interior retail store layout has two important components: Store Design: The use of strategic floor plans and space management, including furniture, displays, fixtures, lighting, and signage. Website designers and user experience (UX) researchers use space management techniques and web design principles to optimize e-commerce websites.
Store layouts are the foundation that will guide the experience of your retail space. There are many store layouts to consider. Here are 10 to get you started: Grid Herringbone Loop, or racetrack Free-flow Boutique Straight, or spine Diagonal Angular Geometric Multiple, or mixed
Step 1: Decide on a Retail Store Layout Large or small, most retail stores use one of six basic types of retail store layouts: grid, loop, free-flow/mixed, diagonal, forced-path, and angular. The type of layout you use depends on your space, the shopping experience you are trying to create, and the products you sell.
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With advanced location planning software like Periscope®, you can: Visualise potential store locations, customer demographics, competitors and transport links on an intuitive map. Import existing customer data to create true-to-life supply and demand estimates. Build profiles of your ideal customers, and identify the best locations to attract ...
The retail locations which are well planned according to the architecture and provide multiple out that are under the same roof are called as planned shopping areas. They have huge land spaces and the collection of major retail brands. Malls, Speciality, and Lifestyle centers are classified under planned shopping areas.
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Purpose. This paper aims to compare the accepted techniques of location analysis in the food sector with the realities of "real world" forecasting in convenience store (c‐store) retailing. To offer a conceptual framework for c‐store operators intending to become more strategic in their small store location planning but currently lacking ...
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The first option would be to take the current facility and make it bigger. The second would be to keep the current facility and just create a (or many) new one (s). The third would be to close down the current facility entirely and build a new one. The last option would be to keep things the way they are.
I. Plans shall be drawn to a recommended scale of ¼ inch = 1 foot and shall include: 1. A "Vicinity Map" showing the building location with at least two major cross streets. 2. A floor plan of the entire facility. 3. A floor plan showing equipment layout, including elevation drawings of equipment.
Any addition of 1,000 sq. ft. or more must comply with the Mountain View Green Building Code. Any new living unit (new construction of a single-family home) may be subject to the Park Dedication In-Lieu fee collected by the Public Works Department. The fee ranges between approximately $15,000 to $30,000.
There are 2,500 workers at the locations. Nordstrom's e-commerce operations in Canada have stopped operating on March 2 and the in-store wind down is expected to be completed by June.
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