Against the backdrop of store closures during the pandemic and even greater growth in online sales channels, the question of the efficiency of retail space can no longer be ignored. Moreover, no one - not small businesses, not industry giants. SR expert and our regular contributor Elena Vinogradova provides her own checklist for analyzing store performance, which will help you make the right decision: to close a store or restructure it by reducing the area or changing the location.
After the news about the closure of 1 stores by the Indite group around the world and similar actions of other companies, a number of media outlets started talking about the decline of offline trading, the global crisis and the fall of everything and everyone. Let's see what's really going on:
Therefore, the reaction of development-oriented companies is natural: to analyze the effectiveness of offline and online even more carefully, be flexible, redistribute efforts between different channels, evaluate changes in the consumption scenarios of the target audience.
The same Inditex group made a decision not just to close it, but to restructure it. Instead of 1 stores, which even before the pandemic showed insufficient efficiency, 200 retail outlets will be opened in a new format. Plus, by 450, it is planned to increase the share of online sales to 2022% (in 25 this figure was 2019%), having allocated 14 billion euros for this. These intentions existed before, but now the situation is stimulating to act faster.
Therefore, cost optimization, including retail space, and business restructuring are a normal reaction of a normal company to the economic situation.
Let's take a look at what to do and what factors to consider when deciding to close a store. We start with financial statements. We need to consider objects that are unprofitable and potentially unprofitable based on the results of the allocation of indirect costs. And then we consider different factors of activity, for which you can use the checklist.
Checklist for analyzing store performance, general approaches:
As you can see, many different factors affect the efficiency of a store, influencing which, you can improve the results of work, without resorting to immediately resorting to at least closing.
In fact, if there is complete order with operating activities, then the main factors influencing the decision-making boil down to two - rent and traffic (quantity and quality). Their change does not depend only on the owner.
Based on the analysis of each item on the checklist, we identify problem areas of the shopping facility. If there are several stores, we consider each separately. Next, we draw up an individual plan of measures to increase profitability (if a network - we make a plan for each such store), set tasks to eliminate the identified causes of loss.
Closing a non-profit store isn't the only response scenario. Traditionally, during a crisis, the market changes, new opportunities appear, including new locations. And if the predicted performance in the new location brings the store to the desired level of profitability (here we evaluate the strategic factor - traffic, first of all), then you need to use this chance to increase your market share.
Moreover, moving does not always mean maintaining or increasing the area. First of all, we are interested in improving the efficiency of a retail facility. Restarting a business is also possible on a smaller area. Recently, on my blog on Instagram @ fashion.business.blog, I published an interesting case on this topic from VM expert Irina Zabirko (in the portfolio - Gap, Familia, Podium): moving to the Mega shopping center to a smaller area (2/3 from the previous size) gave a 40% increase in sales. Of course, this was facilitated not only by traffic, but also by a set of measures for organizing the move: planning and analyzing the assortment, preparing the team, working with the client base.
Summary: the decision to close a store or change location should be as balanced as possible, based on an analysis of specific performance indicators. I wish you a correct assessment of the situation and competent decisions!
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