Space Case: Make It Count

Look down -- you may be standing on a gold mine. Then again, your facility may be just a black hole you throw money down once a month.

Efficient and effective use of space is one of the most under-appreciated aspects of store management. Certainly sales per square foot is one ratio that most of us should and do look at on a regular basis. But that figure alone can hide a lot of variation and inefficiency. In the grocery business, real estate is expensive and margins are small. We owe it to our members to get the most out of our rent dollars by careful attention to what we do with each square foot we pay for. Some lessons to keep in mind:

Bigger isn't always better...
    It may sound tempting to sign on for that bigger space or buy that extra-large cooler. But stop and think before you do. Consider all the costs, both direct and indirect. Retail space needs to be filled with something, and if it is useful, that something costs money, both in cash tied up in inventory and labor costs to stock and maintain the space appropriately. Not only does empty space not generate any revenue, it makes the shelving next to it look bad. Other than vermin and dirt, nothing is more unattractive in a retail setting than neglected and empty space. If you don't have the money to do it right, paying for more space may not be the right thing to do at the moment.

Free isn't always...
    Just because someone gives you something doesn't mean you have to use it. Many donated and homemade items are simply inappropriate for any retail grocery. If that cute, decorative display unit shaped like a windmill holds only 8 SKUs of product (one on each sail) instead of the 16 to 20 on conventional shelving in the same amount of floor space, then the windmill is costing you real dollars in lost sales. The same goes for the donated freezer bigger than Rhode Island and the cute tea table built by the husband of the board president. Either a fixture earns its keep in sales per square foot or it should become a door prize.

The more things change, the more they're different...
    Anyone who says the natural foods market isn't changing must have been in the business only a few minutes. Products and packaging change constantly, and that means the best use of space will change as well. Over the course of the year, aim to retouch every section of your store, taking everything off the shelves and thinking hard about what gets shelf space and how it is displayed. Your end-caps should be centers of creativity, spilling over with attractive product and changing at least with the moon. Vigilance in this area keeps your look fresh and your customers interested. It makes the same old floor space new again.

What business are you in?...
    This question is not one your customers should have to ask. To the member who wants to sell clothing on consignment in that "extra" space by the bulk bins, tell her "sorry." To the vendor who wants to plunk his strawberry softserve machine next to the checkout counter at "no cost" to you, tell him "no, thank you." With the exception of a small amount of general merchandise that can be effectively cross merchandised with other products, the basic thing we sell is natural food products, and to stray too far from that invites customer confusion.     On the other hand, some extras are worth having. Many stores, for example, designate a safe play area for children, because they value these small customers. Such space does not generate direct revenue, but it does generate good will. Weighing this versus other potential uses is a fair question and should be examined.

Analyze this...
    The best way to determine use of space is to track your sales, then think about what you learned. Don't just track sales per square foot for the store, try tracking it by department, tracking it by linear foot, tracking it before and after a major overhaul. Examine both direct effects (does it sell?) and indirect effect (does it bring in customers?). Look at every part of your store as a potential profit center, then try to make it one.

It's not too expensive to...
    Many managers complain about the cost of a reset. There's downtime, inconvenience, extra labor costs, and perhaps the cost of new equipment as well. All in all, it's lot easier not to do it. The trouble is, it's a rare store than can afford this luxury. A major reset every few years should lead to sales increases of as high as 10-25%. With that kind of growth, it's not hard to recover your costs in a reasonable amount of time. A reset, like saving for retirement, may not be the most fun thing to do, but making the right decisions now can reap you large financial rewards in the future.

See other articles from this issue: #082 May - June - 1999