Friday, July 08, 2011

Stores Shrinking To Seek More Profitability

I have been working in the retail industry for about 3 years now, and I have learned a lot about it. It seems pretty simple, as execution is a key factor of success, in a world where every details have its importance.

One of the main lesson I learned while I was a manager at Auchan, was that one store sizes was a way to shrink distribution cost, by driving higher purchase amounts and hence. Nevertheless, this concept, the "hypermarket concept" I would say, is struggling right now, as main actors in French market are seeing its sales flattening those past couple of years.

I read this very interesting article in French "Marketing Magazine". The author, Nicolas Chomette (Interbrand), is discussing about the numerous flagship stores brand are setting up, in order to get brand awareness, and displaying the company's vision of its position in the market and innovation.

Nevertheless, the author believe that large flagship stores are not following the main trend. First of all, downtown commercial real estate prices are skyrocketing, and the larger the space, the harder it becomes to generate square meter profitability. Secondly, flagships haven't been thought as actual stores, but showrooms, and therefore, most of them are not that convenient to drive sales, which what should remain the ultimate goal of one company, even though its trying to get brand awareness thanks to glamorous store addresses and top of the line display/innovation.

Instead of appearing as arrogant with large choices, innovation, small stores appear to be closer to customers expectation, creating some more intimate space to get in contact with the brands.

As a final conclusion, I like the idea of the author: "the future retail business may look like the old fashion one, with the exception of looking closely to salespeople expertise and ability to respond to customer needs". I like this idea, as I believe that within the next few years, after having looked for all the ways to cut wedges by implementing automation of CRM tasks, the employees will have a stronger role in the overall customer relationship strategy.

What do you think about it?