Chains add space for sales to grow - Taking Stock

Discount Store News, July 8, 1991 by Arthur Markowitz

Retailing doesn't involve just the purchase and sale of merchandise. Another vital element is space--the physical area in which to execute merchandising plans.

How space in all its dimensions is used is oftimes vital to a retailer's success. Space impacts retailing in at least three ways.

The first is shelf space. Determining how many facings to devote to an item and where the product--and its different sizes--is to be spotted on a gondola is the key to maximizing sales.

Most merchants now use planograms to insure that stores carry out buyers' marketing plans for each department and all of its sku's. The more adept retailers today use computerized space management programs to develop planograms, going so far as to tailor the allocation of facings and mix of products and sizes for individual stores.

The use of technology has refined merchandising shelf space from a seat-of-the-pants art to a science--and the result is a more productive assortment that produces higher sales on lower inventories.

The second is the size of the store. Once the goal was to hold down the size of the store, use less space and you pay less rent and contain costs. This tight space meant narrow aisles, crowded stores and a disagreeable shopping environment.

The leading retailers today are opting for bigger stores, using the added space for more shopping room for customers, rather than to expand their assortment. These merchants have found that consumers like wider aisles, will spend more time shopping and buy more merchandise. Eventually, as customers buy more merchandise in these larger stores, sales per square foot and gross profit per square foot rise.

Tight stores epitomize merchandising for accountants; roomy stores denote marketing to consumers. You have to spend a little more in higher rents to make a lot more in higher sales.

The last is space for chain expansion. It's a retailing axiom that the more stores you have, the more successful you will be. Today's leading merchants are each striving to achieve their manifest destiny of being the largest retailer in the nation. Finding market space and then opening more stores, is seen as the key to sales growth.

What happens when you have stores everywhere? The few chains that have achieved that goal aren't focusing on adding more units. Rather, they have found it's more important to update, remodel and/or relocate current stores to enhance the investment they previously made in the use of space.