The interior design of the retail store determines the way the merchandise is stored and offered for sale. The interior design should allow easy access to merchandise for customer. There are several layout patterns that enhance the customer’s access to goods. The interior also projects an image to the shopper that should be consistent with that conveyed by the store’s promotion, price, and merchandise and with the exterior design. The store interior must make the customer comfortable and encourage shopping.
The objective of layout management is to obtain the maximum benefits from the space available. There are issues that retail managers should consider when they make layout decision:
1. Value of Space
The value of space, depending on the location within the store, is expressed in sales per square foot of floor space, and sales per cubic foot of cubic space. Sales per square foot is the typical measure for a store, department, or freestanding display. A display, for example, may generate sales of $1,500 per square foot, where as a retailer like Sam’s will generate sales of $500 across entire store. Sales per liner foot is the common measure of shelf space for items like groceries, pet foods, and health and beauty aids. An emerging method of calculating space value on the shelf is sales per square foot of exposure space. This is calculated by a length times height measure of vertical space. Space has height value in addition to liner value. Sales per cubic foot is a relevant measure for freezer and refrigerator cases.
The first and perhaps the most significant element in planning a store layout is the fact that store space varies in value. Some parts of the store are visited by more people than other parts. There fore, it is easier to make sales along the routes traveled by customers. This means that the value of the space is higher along the more highly traveled routes. Not surprisingly, the area closest to the entrance of the store is the most valuable. The space nearest the front ranks second value, and so on to the back of the store. By the same line of reasoning, store space is less valuable in parts of the store that are difficult to reach. One would also expect variations in sales profits on different floors of the same store. As height from the ground floor increases, the difficulty of attracting customers becomes greater. Consequently, space on the upper floors or in the basement has less value than space on the main floor.
2. Space Utilization and Allocation
The available space in the store is divided into selling and non-selling areas. The non-selling space includes administrative offices, storage, and customer amenities, such as rest rooms. These are all critical requirements for a store. The desire to minimize non-selling space has led to several innovative operating procedures. Among them is the restocking of inventory. Many retailers have begun using quick response (QR) inventory system, where inventory arrives from vendors or a distribution center as it needed on the selling floor. Many retailers lack the partnering relationships with vendors required for QR.
There are several different methods of determining the amount of space a department or product class should receive. Among the most popular is space allocation by historical sales, gross margin contribution, industry averages, or strategic objectives. Some departments command a higher gross margin and higher sales volume per square foot than others. Because departments such as jewellery, candy, and toys can play their way in the high-value locations of the store, they can be placed in the more valuable areas. Some merchandise has better display potential than others and is capable of generating higher sales per square foot. A leather goods department, for example, lends itself to an interesting and dramatic display. Therefore, departments with such capabilities should receive choice locations.
- Allocation by historical sales. The amount space that a department or product is allocated is sometimes based on the proportional sales of the product. For example, if apparel traditionally accounts for half of the store sales, it would receive half of the space. A minor problem with this method is that it can lead to under or over allocation of space over time. For example, if space is allocated each year and a department has decreasing sales, the space of that department is decreased. This could lead to a greater decrease in sales, which in turn will lead to a continuing decrease in space. Another potential problem is the over allocation of space on high-priced items. A jewellery department may have very high sales compared to shoes; however, jewellery requires less space because of its physical size. Competition may mean that some volume selling seasonal goods have much lower margins. This can lead to a great deal of space given too less profitable item.
- Allocation by gross margin. One way around the problem of allocating space by sales is to allocate it by gross margin. You remember that gross margin is sales less cost of goods sold. The same method as sales is used except that space allocation is based on the proportion of margin. For example, assume an electronics department has 10 percent of the sales but contributes only 8 percent of the total gross margin for the store. The department would receive only 8 percent of the space. On the basis of financial criteria, these programs recommend how much space each category of products should have and a specific product mix that will enable the retailer to maximize profits.
- Allocation by industry averages. Stores sometimes allocate space based on competitive pressures. They allocate the same proportion of space to a particular item as the competition or a similar store. Trade associations provide these kinds of data. This allows the retailer not to appear weak in a particular department. However, it also creates a “me too” atmosphere that may not differentiate the store from competitors.
- Allocation by strategic objective. Often a store will wish to build up sales in a particular product line. The manager will allocate the product more space that is justified by its previous sales. For instance, if shoes are not selling well but they are important to the image of the retailer, a manager may give more space to the shoe department so that more varieties in types and styles and a greater assortment of colors and sizes are available for sale. Store managers may also use this method for short term promotion to build up sales of new product line. Thus, this is some times referred to as the ‘build up” method.
3. Storage of Stock
There are three accepted ways to handle storage in designing a retail store. The first way is to use direct selling storage – either exposed in show cases, counters, and drawers, or concealed behind cabinet doors. The second way to provide for storage is through stockrooms directly behind the selling area and in the perimeters. The third way is through a central storage location. In general, central storage is best located next to receiving and marking areas and as close as possible to selling areas. The trend is to reduce inventory levels by more frequent delivery and better forecasting of sales. It has become easier to display a greater percentage of the store’s stock, leaving as little in concealed areas as possible. Some store formats, like Service Merchandise, do not sell the stock on display. The goods are stored on floors above the selling area and then sent to a receiving area for customer pickup. Furniture, carpet, and appliance stores of ten stock merchandise off-premises in less expensive warehouse space because delivery to the home is required. There is no reason for valuable selling space to be devoted to duplicate items on the selling floor.
Exposed merchandise has great appeal. Recently, there has been a movement toward open storage, displaying all the inventory on hand and eliminating dead space. The trend toward self-service selection has made it practical to display most of the stock. Furthermore, stocking and stock maintenance time is reduced. So storage area is becoming more and more important in the recent days.
4. Customer Traffic Flow
Merchants use three basic types of layout patterns to control traffic flow in a store. The first type is known as the grid pattern. This arrangement has main, secondary, and tertiary aisles. The layout often maximizes the amount of selling space. It has an advantage in lower costs because of the possibility of standardizing construction and fixture requirements. The second major type of layout design is the free flow pattern. The free flow arrangement provides for flexibility in a layout. It reduces to a minimum the structural elements that from the fixed shell of building, such as columns and fixed partitions. Counters are arranged to give maximum visual interest and customer attention to each merchandise department. Counters can be positioned so that their angles will literally capture customer in a department. The third type, the “shop” concept or boutique pattern, is a natural extension of the free flow layout arrangements. Shops must be presented to the public so that they stand out from other departments and become small, intimate specialty stores within themselves. The free flow layout patterns make this easy to do.
Stores should be laid out so that customers can get to various parts conveniently and with little effort. Some aisles are made larger and are designed to accommodate a higher traffic count than others. In general, aisles should be wide if the merchandise adjoining the aisle is the type that customers like to look at for a long time before purchasing; if there tends to be a large concentration of customers, such as at entrances and escalators and before promotional merchandise displays; or if the retailer is attempting to control traffic to maximize customer exposure to various merchandise departments.
5. Types of Goods
Merchandise can be broken up into four major categories : impulse goods, convenience goods, shopping goods, and speciality goods.
- Impulse goods are goods customers buy as unplanned purchases. An example might be candy sold at the checkout counter, corkscrew in the wine section or videotape in the electronic section.
- Convenience goods are those that consumer put a minimum amount of thought into, usually purchasing a known brand or whatever is available. Examples are newspapers and batteries.
- Shopping goods are those for which a customer is willing to search and compare. There may or may not be a brand preference. If a customer is willing to search and compare. There may or may not be a brand preference. If customer is looking for a specific brand, such as a Sony Trinitron TV, the shopping may be for the best price or service. A customer will likely make a trip to different stores seeking just the right goods.
- Speciality goods are those for which customers have a preconceived need and for which they make a specific effort to come to the store to purchase. Consumers usually will not accept a substitute for a speciality good and will sometimes go to extraordinary, effort to purchase such an item.
Impulse and convenience goods benefit by being located in high traffic areas where customers ,as they pass by the displays, are likely to pick up an item for purchase. In many stores the checkout counter will be crowded with impulse goods such as candies, batteries, and miscellaneous odds and ends. Shopping goods on the other hand, because of the preconceived need, may be situated in more remote areas of the store. In most of the grocery stores, the meat is located at the back. This encourages the customers to pass through other aisles and increases the possibility of a higher number of purchases. Speciality goods are unique in that they can create customer traffic. Often a store selling speciality goods can locate in a less expensive site.
The type of the merchandise is the important consideration in a store layout. Think about how all four types of goods might influence a lay out in a discount drug store. For a particular customer a prescription could be a speciality good, and the customer would travel through a maze to get to the pharmacy. While going to the pharmacy a lot of convenience goods such as health and beauty aids may be picked for purchase. While in the store the customer could seek out the area where a shopping good like a home vaporizer was located and do some brand and price comparisons for the future purchase. In the check out area an un-planned purchase of film could be made. The key to using the type of good concept for layout is to understand how the store’s target market shops for the goods that are going to be offered.
- Complementary merchandise placement. The layout must also take into consideration the nature of complementary merchandise that is interrelated: A sale of an item prompts the sale of another item. For example, the sale of a shirt could logically lead to the sale of a ties, which in turn could lead to the sale of a tiepin. Because of these additional sales possibilities, it is appropriate to plan the interior design so that related merchandise is in close proximity.
- Seasonal departments. Some departments need considerable space during particular times of the year. Seasonal departments such as toys, lawn and garden, and greeting cards are examples. Because these departments must expand and contract during certain times of the year, provision must be made to accommodate these seasonal changes. To accomplish this, departments with offsetting seasonal peaks in sales should be placed next to one another or in place of one another.
Credit: Retail Management-AU