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How to turn an unprofitable store into a profitable one
11.10.2022 1872

How to turn an unprofitable store into a profitable one

Last year, we published several materials by our regular author and speaker of the business program of the EURO SHOES exhibition, Evgeny Danchev, in which the expert analyzed cases from his practice in detail. These are real stories of the Russian retail shoe business, which experienced certain problems, was inefficient, but managed to overcome difficulties and the point of unprofitability, and reached a new level. These materials received a great response from our readers, so we continue the topic. Evgeny Danchev shares his experience and gives recommendations on how to make a loss-making store profitable.

Evgeny Danchev Evgeny Danchev -

director of WConsulting, coach, retail consultant.

@evgenydanchev, www.wconsulting.su



In this article I talk about how a shoe store that has been unprofitable for many years (the owner was faced with the question of closing it with an edge) was not only saved, but also made profitable. So, let's get into the details and nuances.

Brief information about the store:

  • a retail store with a separate entrance and located in a residential building;
  • for the last year of operation, the store did not bring income to the company;
  • more than 15 years have passed since the opening of the store, during which no changes have been made in it;
  • all commercial equipment, lighting, floor tiles remained unchanged all these years;
  • outdoor advertising has also not changed.

In fact, the store was unprofitable, and a decision was required on whether to close it or try to make it profitable. The business owner is sure that the main problem of the lack of profit in the store is related to the global trend of outflow of customers to shopping centers. With this, he attributed the decline in traffic to the store in the last years of his work. He did not believe that in this particular place it would be possible to change the situation with sales for the better.

But still, the owner made the following decision:

  1. Make repairs (replace the floor tiles, double-glazed windows of the showcase and the front door, paint the walls and ceiling).
  2. Replace the advertising sign of the store, change the trade equipment.
  3. Change store name.
  4. Maximally fill the store with goods after repair with a new collection.

The store was closed for two weeks in February, after which they began to actively import a new collection of shoes and accessories in March of the same year.

As a result of the work done, over the next year, he beat all the company's records in terms of goods turnover growth compared to the same period last year. In some months, sales growth was 130-140%!

How and why did the store's turnover more than double in a year?

In one of my recent articles for Shoes Report magazine, we discussed the concept of the store life cycle. If a company sees a decline in sales over a long period of time, then the first thing to look at is the phase of the life cycle in which a particular store is located. It is possible that the phase of active growth has long passed, as well as the phase of stable income generation, and now the store is in a decline, which can only be overcome through the path of global changes.

Any commercial activity is subject to cyclicality. And we cannot expect stable and consistent sales results without systemic changes that need to be made at regular intervals. The whole problem of retail business leaders often lies in not realizing that sooner or later there will come a point when a particular store will need to make significant changes to the entire business process.

For a retail shoe store, it is critical to:

  • carry out cosmetic repairs once every 5-7 years;
  • make a partial replacement of commercial equipment;
  • make changes to the lighting scheme;
  • and in some cases a rebranding of the name is required.

Put yourself in the shoes of a regular customer who goes to the same store for several years in a row. He comes every time and sees that nothing has changed in the store. And sooner or later he decides to look for something new on the market.

The psychology of clients is such that they are divided into two main groups:

  • They strive for stability for 5-7 years and then begin to search for something new.
  • They strive for change and look for differences, therefore they are not constant in their choice.

Clients from the second group prefer not to buy shoes in only one or two stores. They like to enter new and unfamiliar stores, moreover, they can positively perceive the global rearrangement of goods in a store they already know. For this reason, if the store does not change within 5-7 years, the company may lose up to 80% of such customers.

Clients from the first group, despite the stability and loyalty in their choice, still begin to experience a feeling of satiety after 5-7 years. They also need an awareness of change. They begin to “look” towards other stores and a new assortment.

If a company does not change anything in a retail store for a long time, then it is quite natural that it finds itself in a phase of low sales and a decline in the life cycle.

Why else is it important to periodically redecorate a retail store?

An important point is the "firefly effect". As soon as a new store appears in the customer's field of vision (or noticeable changes in an existing one), he will definitely go into it. After all, it is interesting for everyone to see what is there “I can find something new and interesting for myself, especially if the name of the store has changed.”

And in this store, which we talked about above, the name has really changed. The company in question has more than 15 stores, most of which operate under a single brand. The manager decided to change the name of the store so that he could work under the same brand with other stores and be able to participate in promotions.

And the last important point, which also contributed to the growth in sales, is the filling of the store with shoes.

When the store showed unsatisfactory sales results, goods were periodically taken from it to other stores that were more successful. It is quite logical that you should not keep the goods where there is not enough traffic of buyers and low turnover. But at the same time, the store became a donor for other stores.

After all the changes, traffic in the store increased significantly. The demand for the maximum assortment on the trading floor has also grown. The store stopped being a donor for other stores and began to work much more efficiently.

What conclusions can be drawn from this case:

  • An unprofitable store can be made profitable by using the novelty factor for the buyer.
  • Every 5-7 years, the company must definitely change something in the store, accepting the inevitability of changing the phases of its life cycle.
  • In addition to internal changes, external changes must also occur (this is a showcase and an advertising sign).
  • The store should not be a donor for other stores. You can not count on profit by limiting the product content and choice for customers.
Last year, we published several materials by our regular author and speaker of the business program of the EURO SHOES exhibition, Evgeny Danchev, in which the expert analyzed cases from his…
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