Retail Space Management

SPACE
MANAGEMENT
what does this “experience” really
mean?
■ Experience is defined as the “knowledge or skill from doing, seeing or feeling things”
(Cambridge).
■ It is the “direct observation of, or participation in events as a basis of knowledge”
(Merriam-Webster).
■ This hands-on, interactive learning—this affordance between customer, product and
service—is exactly the touchpoint that today’s retailers are most keen on creating
throughout the store environment.
Solution Selling
■ The formula is pretty simple: The salesperson diagnoses her prospect’s needs, then
recommends the right products and/or services to fill those needs.
■ The prospect might not know he has a problem or opportunity, let alone what it looks
like, how urgent or important it is, and how he should address it. That makes the
salesperson an important resource; not only can she help her prospect understand
his situation, she can also help him react to it.
■ Use this three-step plan to begin solution selling:
■ 1) Identify Common Pain Points
■ 2) Develop Your Questions
■ 3) Practice Selling Value
Retail Space Management
■ It is the process of managing the floor space adequately to facilitate the customers
and to increase the sale. Since store space is a limited resource, it needs to be used
wisely.
■ Space management is very crucial in retail as the sales volume and gross
profitability depends on the amount of space used to generate those sales.
Inventory Management
■ Typically, inventory makes up about 70 percent to 80 percent of a retail operation's

financial assets, meaning that it can be the largest drain on your cash. So, it makes
sense that the health of your business is directly linked to how well you
manage your inventory.
■ Turnover is another way to view inventory. In this calculation, you can determine the
number of months it takes to sell your inventory when viewed over a calendar year.
Therefore, if you have 12 of one stock-keeping unit (SKU) in stock and sell them in 12
months, you "turned" your inventory 1 time over the year (related as 1.0). If you sell all 12
SKUs in 6 months, your turnover is 2.0.
■ Calculating Turnover
■ The formula for calculating inventory turnover is:
Sales /Average Inventory Value
GMROI
■ Gross margin return on inventory investment (GMROI) is a tool used to analyze

business profitability. In recent years, this method has become increasingly popular
as a way to measure a retail business's profitability. It's easy to get into a rhythm of
looking at the top line sales number when you are a retailer. People oftentimes
measure the value of their business based on year-over-year (YOY) sales gains,
which is an unrealistic assessment of the health of your business.
■ In this calculation, you are taking your gross margin and dividing it by your inventory
value. What you are trying to assess is how much money (cash) your inventory
generated. This number must be greater than 1.0 or your costs are exceeding sales.
The formula for calculating GMROI is:
■ Gross Margin (dollars)/Average Inventory Value
Optimum Space Use
■ While allocating the space to various products, the managers need to consider the following points
−
■ Product Category −
– Profit builders − High profit margins-low sales products. Allocate quality space rather than
quantity.
– Star performers − Products exceeding sales and profit margins. Allocate large amount of
quality space.
– Space wasters − Low sales-low profit margins products. Put them at the top or bottom of
shelves.
– Traffic builders − High sales-low profit margins products. These products need to be displayed
close to impulse products.
■ Size, shape, and weight of the product.
■ Product adjacencies − It means which products can coexist on display?
■ Product life on the shelf.
Planograms
■ Planograms are detailed drawings of your store layout with special attention on
product placement. Merriam-Webster defines it as such: “a schematic drawing or
plan for displaying merchandise in a store so as to maximize sales.”
■ In addition to being a visual representation of your store’s aisles, displays, and point-
of-sale, for example, a planogram will show you exactly where specific products are
placed. The information in a planogram is thorough; it’ll demonstrate the exact shelf
an item is kept.
■ They’re especially useful for big-box retailers or grocery stores that carry many
products (and product categories) from a multitude of suppliers and have a lot of
space to fill.
The Benefits of Planograms
■ Maximize Sales
■ Over time, you’ll learn how product placement impacts purchase behavior and can thus
deduce strategies to capitalize on sales opportunities. Look at historical sales data and
compare that to your planogram to see which products sold most and where they were
located, and do the same for slow-moving merchandise. Place those items together to
increase sales of stock that’s getting old or stale.
■ Maximize Space
■ Retail space is expensive. And while the exact costs vary depending on a variety of
factors (location, size, lease term, etc.), property management company Hartman says
your gross-to-rent percentage could be anywhere between 1% and 13%.
■ Regardless of your rental expenses, maximizing the use of that space can help you run a
lean, cost-effective business. Planograms help you stay organized and allocate a
purpose to every area in your store.
Visual Merchandising
■ Visual merchandising refers to anything that can be seen by the customer inside and
outside a store, including displays, decorations, signs and layout of space. The
overall purpose of visual merchandising is to get customers to come into the store
and spend money. Visual merchandising includes how merchandise is presented as
well as the store's total atmosphere.
■ The process starts on the outside of the store with attractive window displays. This is
used as a technique to entice customers into the store and, in turn, increase
business. However, visual merchandising not limited to mannequins or window
displays. A retail store can also use wall décor or interactive displays to induce
customers’ interest.
Essentials of visual merchandising
■ So what refers to visual merchandising? Here’s a list that will tell you all:
■ Window displays: Ever heard of the term window shopping? Well, it originated from the
idea of window displays. Themes are created for window displays to lure customers into
the store. You can use window displays to make a lasting statement about your
merchandise.
■ Shelf displays: Shelf displays come into focus after customers enter a store. You must
strategise about what you want to show on the shelf display and how much shelf space a
particular merchandise should get.
■ Stock displays: Stock displays are a great marketing spot for your featured and profitable
products. Generally, the end of aisles, also called “premium spaces” are used for stock
displays to maximise the sale of profitable products and merchandise.
■ Visual merchandiser: This interesting profession helps to deliver visual concepts to
promote retails brands. Professional visual merchandisers also can help create effective
designs for stores. Moreover, they know exactly what theme is perfect for your visual
merchandising endeavour.
Purpose of visual merchandising
■ The purposes of visual merchandising are quite straightforward and aimed at

bringing in profits for the retail store. Other purposes include:
■ To increase sales by showing and promoting your merchandise;
■ Make the display visually appealing to encourage customers to enter the store;
■ Get the customer to pause and “shop” the selling floor;
■ Use merchandising to enhance, establish and promote the store’s visual image;
■ Improve customers’ shopping experience and entertain them;
■ Educate customers about the use or accessorising of a merchandise.
Top tips for becoming a successful visual
merchandiser
■ The customer is your audience and also your critic. You need to empower your
customers. Make sure that the visual content is engaging for the customers and
encourages shoppers to step into the store.
■ Visual merchandising is all about product styling and placement. This is where you can
put your creativity into use and make the shopping experience exciting for your
customers.
■ Encourage impulse purchases. According to sciencedirect.com, spontaneous selection of
merchandise accounts for 80% of all purchases made. Employ strategies that encourage
shoppers to buy based on these spontaneous impulses.
■ Converting window shoppers to leads. Present your window displays in a way that urges
window shoppers to enter the store and buy something. This will add value to your retail
merchandising strategies.
■ Put fresh and popular merchandise on display. Old can be boring and this applies to
merchandise too. Make sure that while you’re designing visual merchandise, you cater to
the mindset of new customers and also the existing ones.
Managing Retail Employees
■ A March 2015 survey by LoyaltyOne shows that approximately half of consumers

reported experiencing a problem on their last shopping trip.
■ Of those customers, 81% decided not to contact the retailer about the issue. Among
these silent shoppers, 32% said they were unlikely to recommend the retailer to
friends and family.
■ So very little is understood about what it takes to manage a retail employee…well
any employee. The real crisis is that poor management of associates has left them
as unengaged on the salesfloor as they are in many aspects of their lives.
secrets to managing employees:
■ Respect they have a brain.

■ Compliment in public.
■ Train in private.
■ Pay above minimum wage.
■ Hold accountable.
■ Ask their opinion.
■ Thoughtfully reward them.

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What are some important aspects of retail space management?

What are some important metrics for inventory management in retail?

SPACE

■ Typically, inventory makes up about 70 percent to 80 percent of a retail operation's

■ Gross margin return on inventory investment (GMROI) is a tool used to analyze

■ The purposes of visual merchandising are quite straightforward and aimed at

■ A March 2015 survey by LoyaltyOne shows that approximately half of consumers

■ Respect they have a brain.

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