A wise man once said, “Good things come in small packages.” Actually, I am not sure how intelligent he was, but the colloquialism still rings true today, especially concerning gift-giving.
Many of the best and most expensive presents come in pretty, little Tiffany blue (or insert another color) boxes and envelopes. The expression also applies to people. So, does the saying apply to retail stores as well?
For decades, the American public has praised all things large and extravagant. I have witnessed our love affair with BIG box stores and MEGA supermarkets. Think about how difficult finding a conventional supermarket can be in many cities. Almost half the grocery stores are massive conglomerations selling food, clothing, electronics, toys and tires.
People will travel thousands of miles to see the Las Vegas Strip with its large, flashy hotels. After all these years, folks still brave bitter Minnesota winters to visit the Mall of America, its 500-plus retail stores and restaurants and its in-house theme park. The Mall of America is retail’s version of shock and awe.
For many, bigger equals better.
Of course, a population subsection never bought into the mindset about bigger being better. These people truly value traditional retail and realize that more crucial shopping experience elements exist beyond square footage. For these consumers, a thoughtfully curated product mix, knowledgeable staff and friendly customer service are far more critical than store size.
So, we get back to the original issue. Determining whether large retail stores are better than smaller ones is highly subjective and depends on various factors and perspectives.
Larger retailers have more shelf space, so they often offer a wider product range, giving consumers more choices and convenience in one location. Additionally, bigger stores, especially those with solid organizations, can benefit from economies of scale. These benefits enable larger stores to negotiate better deals with suppliers and potentially offer lower prices to customers.
Sometimes, large stores have bigger marketing budgets, more staff and other resources. Using these additional resources, bigger stores can invest in the physical space’s look and feel to create visually appealing environments, which enhance the shopping experience.
Smaller retailers, however, generally provide more personalized and attentive customer service, as they have fewer customers to assist. As in the TV show “Cheers,” sometimes you want to go where everybody knows your name and they’re always glad you came. Smaller stores can focus on specialized markets and products. These stores can attract customers who prefer niche items.
Lastly, smaller stores tend to have better local market and customer preference insight, enabling the stores to select a product and service mix tailored specifically to their community.
Ultimately, the “better” option depends on the retailers and their consumers’ specific needs and preferences.
Some consumers may prefer large retail stores’ convenience and variety. Others may value smaller establishments’ personalized service and local focus.
To achieve success, retailers must understand their target market and adapt their strategies to meet consumers’ expectations. Efficiency is a far more relevant retail shop measurement than square footage. If an organization fails to reach its sales and profit goals, no other space characteristics matter, anyway.
For this reason, I recommend using key performance indicators (KPIs) to measure the overall operational store health and provide valuable management insights.
My favorite metric is sales per square foot, which measures the average revenue generated for every square foot of sales space. To calculate this metric, divide total sales revenue by the total store square footage. A higher ratio indicates the store is generating more revenue from its available space.
The focus here is to ensure every inch of the store is productive. A few other commonly used KPIs include:
- Sales Revenue: This KPI measures the total revenue the store generates. The KPI evaluates the business’ overall operation.
- Sales Conversion Rate: This KPI measures the percentage of potential customers who buy products. The KPI gauges marketing promotions’ effectiveness in converting guests into customers.
- Average Transaction Value: This KPI measures the average dollar amount customers spend per transaction. The KPI finds opportunities to increase sales.
- Inventory Turnover: This KPI measures how quickly inventory is sold and replaced. The KPI assesses the store’s inventory management program efficiency and identifies growing and declining products and categories.
- Gross Margin: Finally, this metric calculates the difference between sales revenue and the cost of goods sold, expressed as a percentage. The KPI evaluates store products’ profitability.
Use KPIs to ascertain a retail operations’ success, identify improvement areas and make data-driven decisions regarding store layout, pricing strategies, marketing activities and product assortment.
There is no canned answer to determine the perfect or ideal store square footage. In fact, the answer will be different for various business types.
The sales space must be sufficient to create a positive and comfortable shopping experience. Adequate space should be allocated for customer browsing, aisles and checkout areas. Of course, the space must be ample enough to install shelving and displays to present merchandise in its best light.
In a practical sense, the store’s available budget and location are real-world considerations. Given the ever-increasing land and rental rate costs, business owners must find a balance between space and affordability.
To discuss new ways to enhance your retail parts and accessories store, contact your NTP-Stag sales consultant or the sales team at your distributor of choice.
Val Byrd is NTP-Stag’s customer merchandising manager. She has worked in the RV aftermarket for the past 20 years and is a leading RV retail expert on store layout/design and aftermarket product display.
