Naomi Davis
Posted: Tuesday, March 9, 2010 3:13 pm

Should department stores consider changing how they allocate floor space?

2010 is well underway and thankfully the economy is officially out of the recession. However it is widely known that every industry must work hard to work towards economic stability. For retail this means encouraging consumer confidence and thus spending. In this new decade and new economic period should department stores consider evolving how they allocate departments and floor space? If so what changes should be made?

Dr Tim Denison
BSC, MSC, PHD, MCIM.
Tim is Director of Synovate, the UK’s market leader in performance improvement systems for retailers. Trained formally as a social scientist and a marketer, Tim has worked for Synovate for 11 years. Previously he managed the Centre for Advanced Research in Marketing at Cranfield School of Management.

Department stores, except perhaps in predominantly touristy areas, cater to an enviably loyal and sophisticated audience. One of the things their customers especially appreciate is that they’ll know where everything they need to browse on any given day will be located. Consequently regular shoppers may be distinctly not amused if ladies wear was to somehow mysteriously migrate from the first floor to the basement. Therefore I would always advise caution before making any substantive changes to floor layouts.

However, this being acknowledged, customer inertia should not be a reason to never move anything. It’s simply a warning that any changes made must serve a business purpose, whether it is to improve sales, reduce costs or improve margin, because there will inevitably be a downside to any major change. Improved sales, reduced costs or higher margins can be readily justified, and as long as change isn’t for change’s sake, then why not? After all, if it had not been for Mr Selfridge’s deep understanding of a changing customer market together with his famed business acumen, we would not have glamorous beauty halls and cosmetic departments welcoming us into many department stores.

In the current recession department stores have well understood what makes them different and have used that difference to protect margins and sales while sailing tranquilly on. This is all very laudable, but every square foot in every store must repay its cost or it is a burden on every other. Layouts can always be improved, and the best way to do this is from a position of knowledge and the more of that you can gather, the better.

In the days of Mr Selfridge, this relied on exceptional people with unusual insight. In today’s world, thankfully, technology has made life easier in this respect. There now exist sophisticated and discreet electronic systems (including from my company) which allow retailers to fully understand how shoppers actually shop their store; where they go, what they engage with and which areas are ‘hot’ and which ‘cool’. Armed with this knowledge retailers can now build ‘win-win’ solutions: layouts that improve the customer’s in-store experience and improve the performance of the store.

Improvements might stem from building a more intuitive layout, such as clustering together those departments that shoppers are known to shop together, or making the experience more exciting by building a trail of ‘cookies’ (e.g. new designer brands) in strategic areas, perhaps within sight of or leading from an existing ‘hot area, gradually drawing customers into a formerly ‘cool’ one. This serves to improve the return from those friendless and unprofitable square feet, thus answering the needs of cost savings if nothing else. It is remarkable how, using such technologies, arid shopper deserts can become lush oases of buyer patronage, and all because you have taken the time to learn what is really going on.

Thanks in part to the recession the pace of change in shopping attitudes and behaviour patterns is accelerating. In this regard, it has never been more important to ensure that shop floors reflect the needs and aspirations of customers. I’m sure that Mr Selfridge would agree. Whatever you do this year, with dark clouds of potential tax increases, rising unemployment and general uncertainty, department stores must remain that safe, calm and reassuring bastion of familiarity on the high street; even if under the surface new technologies designed to raise the game are paddling away frantically!

Becki Rowe
Retail Marketing Maxim.           
Becki has worked in retail sales and marketing for 12 years with companies that include Estee Lauder, Bravissimo and Hotel Chocolat. In the last five years alone she has opened 29 stores, launched a new route to market, rebranded a retail channel plus built sales and marketing teams from scratch.

The short answer of course is yes. We all know that the best and most responsive retailers are those that constantly seek to evolve, tweak, adapt and otherwise improve every minute aspect of what they do. At the same time these retailers - I call them challenger brands - also hold both their USP and brand identity very close to their heart as an integral part of everything they do. It is no different when you are considering how to allocate department and floor space. Ask yourself, am I really making the most of our USP? Am I simply doing it this way because that is how it has always been done or can I turn this on its head and come up with something really unique? Does this plan result in a layout/environment that is on brand?

I suppose the essence of my advice is to keep the main thing the main thing; think really hard about exactly what the main thing is! And keep looking for just one more improvement. With the economic downturn set to loiter for a while longer, 2010 will be highly competitive and see even more ingenuity in retail. Businesses that cannot keep up a programme of constant improvement risk a fate much worse than just lagging behind.

Let's also look very briefly at the specific circumstances of the current year and how this may affect department and floor space allocation. It's been a hot topic for some time now so I won't witter on about it but it is worth thinking about some of the main trends as part of your everyday decision-making - not just when you are planning budgets. Some of the key trends for 2010 include continued uncertainty in consumer confidence, a change in buying trends and the decision making process along with a continued weakness of the pound and the reversal of quantitative easing measures. So how might these affect department and floor allocation?

The uncertainty in consumer confidence along with the reversal of quantitative easing measures has already resulted in a change in buying trends and the decision making process. There have been observed increases in products falling into categories such as 'mini luxuries', ‘stay-in/staycation’ and nostalgia (angel delight anyone?) to name just a few. These are set to linger as longer-term trends. Have you made adjustments as a result of this?

The higher number of overseas visitors driven by the weak pound presents opportunities that department stores are well placed to take advantage of. It won't be right for everyone but perhaps whether you make changes should be considered. Does your allocation of departments and floor space take into account the higher demand for certain products popular with tourists?

Now, indulge me for just a moment by allowing me a short spell on my soapbox. I beg you to look long and hard at your in-store navigation and signage. There is no point putting a lot of time and effort into adjusting the way you allocate space without considering the total customer journey. Maximize your chance of success by working in a genuinely collaborative way with all the other functions. Keep signage clean, simple and effective. For the avoidance of any doubt I absolutely mean quality over quantity! "Reduce the signage clutter" should be your new mantra! Another point within signage is to consider is the aforementioned higher proportion of overseas customers that are set to continue through 2010. Reviewing what you currently have, could any improvements be made to the signage for these shoppers?

Sophisticated space allocation in conjunction with truly great signage will help you to make the most of the opportunities presented. It helps to effectively navigate visitors to different departments and communicates essential information once they get there. And with that, my soapbox moment is over.

Mike Pretious
Lecturer in marketing and retailing at Queen Margaret University, Edinburgh.
Mike Pretious lectures in marketing, consumer and retail management at Queen Margaret University, Edinburgh. Prior to becoming an academic, Mike worked primarily in the retail clothing sector and held buying roles for a number of major companies including Selfridges, Mothercare and the Burton Group (now Arcadia).

Department stores, in common with other large retailers, have a history of realigning their merchandise categories depending on customer demand. Until the 1980s, for example, Selfridges still sold gardening and DIY products, which have long since been replaced by departments better suited to city-centre shoppers. At a more general level, there has been a strategic shift over the last two decades amongst department stores in all market segments to focus on clothing, with many becoming ‘houses of brands’ where discerning consumers can select from a far greater range than would be available in a typical high street outlet. In this way department stores differentiate themselves, becoming must-visit ‘destinations’, especially when exclusive designer lines are featured.

From an operational perspective, if a buyer correctly identifies the established and new brands that appeal to the store’s target audience, fashion clothing has the potential to generate greater sales and profit per square foot than most other categories – though the downside is considerable in terms of markdown costs if the buyer gets it wrong! Interestingly, the notable exception to the increasing prevalence of clothing in the department store merchandise mix has been the John Lewis Partnership, which still has a more obviously ‘home based’ offer, yet is one of the most successful store groups. This can be attributed in part to JLP’s reputation for good service and value, but by bucking the trend and continuing to offering an extensive range of, for example, carpets, lighting and haberdashery, it has become by default a reference point for potential purchasers in these categories.

Notwithstanding the evolution in product ranges outlined above, department stores can be slow to alter their overall allocation of floor space. Whilst there are occasional ‘ad hoc’ changes, such as ‘pop-up’ departments for Christmas or Valentine’s Day, the level of detail in planning and presenting ranges is not typically as sophisticated as in some retail sectors. This is partly due to the nature of the buying process and the stock-turn regime – given that many department store merchandise categories are seasonal, slow-selling lines will be eliminated by markdowns and the traditional end-of-season sales. As a result of this, there are constantly ‘new’ ranges on offer, which makes it difficult to forecast the best and worst sellers with enough confidence to judge the amount of floor space they should occupy.

In addition, the layout of many retailers, particularly grocery stores, is dominated by aisles of shelves, which are ideal for the use of planograms which give instruction as to how many of each individual product line to present per facing, developed on the basis of rate of sale and profitability at individual item level. Fixturing in department stores is far more varied and less flexible, and the cost of investment in the image of a particular department militates against tactical experimentation. This, whilst in principle a ‘scientific’ category management approach to buying and stock presentation, can be used for department store merchandise but is much less prevalent or applicable than it is in other retail contexts.