Managing Retail Space
As a retailer one of your greatest assets is ‘space’. However in many situations the amount of space you have is a finite resource so the asset has to be sweated – in other words made to work harder for you! It needs to be well managed.
What should be your space management objectives?
It goes without saying that space needs to be used effectively. This means providing a logical, sensible, convenient and inspirational customer offering and making sure that the right products are available at the right time.
A management process
‘Space management’ needs to be viewed as a management activity in its own right with rules of good practice and correct processes to follow. It should not be a random ‘ad hoc’ activity! First you need to measure the total amount of space available and divide this available space into selling areas, and non-selling areas (paths, till points, storage etc). Once you have obtained a figure for the total amount of selling space available, you then need to allocate space to each product category. The amount of space devoted to each product category will be determined generally by historical data or forecasted data.
Having allocated space to each product category the next stage is to determine the location of the product categories within the space available and to decide on product adjacencies – what will go next to a particular product category. Some products of course require a disproportionate amount of space (such as garden furniture), others such as seeds can withstand a disproportionately smaller area. At this stage it is also important to consider the life cycle of the product category – if the products are on the wane do you want to give them so much space? Could the space be replaced with a product that still has growth potential? Finally space needs to be allocated to each product line within a category. That, in very simple terms is how you determine how to use your space. Of course in reality it is much more complicated than I have suggested here but the principle remains the same. Space allocation must be considered thoroughly – and if it can be done in conjunction with historical sales data then all the better.
How to view products
A good way of viewing products and determining their space allocation is to consider them under 4 broad categories. They are:
These are product categories with high profit margins but low sales. The space needs to be adjusted so that you focus on quality space rather than quantity space – so putting these products in a secondary hot spot might just pay of.
These are product categories where sales and profit margins exceed targets. You therefore need to give them a large amount of good quality space – primary hot spots. You should consider increasing the number of products within these categories.
We all have these I’m sure! They will generally be product categories that have low sales and low profit margins! Do you need them? If you think you do then they should not be displayed in primary and secondary locations. Consider putting them at the top or bottom of shelves, but make sure that they are well signposted.
These are product categories that have good level of sales but profit margins are small. These products need to be displayed close to impulse lines but also work on improving their margins – maybe negotiating better deals or charging a higher price.
Why is all this important?
Very simply because as a retailer you need to ensure that sales volume and gross profitability is measured in relation to the amount of space used to generate those sales. The following measures of productivity should be regularly recorded: -
- Sales per square metre
- Profit (gross and net) per square metre
In measuring the profitability you can then make judgements as to how better to use the space.
Manage your space well and you will optimise your asset – making it work harder for you.