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How Can You Over-trade Your Space?

Over-trading from space is a term you used to only hear from the old guard of retailers but it has become more common in recent times.

The theory is that from say an eighty square metre store there is a ratio of sales to space that can be achieved and that anything above that actually means that you are setting yourself up for a decreasing customer experience that will eventually lead to a dramatic run-off of customers at some point down the track. “The sweetest avocado on the tree is often the last” is the expression I’ve heard used to describe this theory.

While on the rare occasion this theory has been proven, more often than not it fails the field test reality.

After all – as you’ve heard me say on more than one occasion – retail is a continual search for productivity gain. Increasing costs without a proven return on investment is not a recipe for productivity. Taking on increased space – equating to increased occupancy costs – to sustain the same store takings is not a productivity gain.

It should be the objective of every retailer to gain as much in sales from every store as possible. Every store will have some aspect that makes it different and – while ratios can be useful to establish guidelines – applying the same set of measures to every store leads to sloppy practice. In retail your gains come store by store. Every store needs to be worked individually to earn every dollar of profit out of the network.

And every store should be continually looked at to find new ways to make more profit with the same cost base and the same fixed inputs. Space being one of them. The theory of over-trading limits thinking and trial. There is in truth no such thing as over-trading. Just yield optimisation. Getting as much profit as you can – on a continually escalating yield curve – from every square metre.

There are after all seven levers of productivity that can be used to stimulate productivity gain. The points of the C.O.M.P.A.S.$.® – cutural behaviours; organisational model; merchandise; promotion; access; store environment; and $dollars and pricing architecture.

Every one of these seven areas of retail endeavour can be the catalyst of new initiatives that achieves better yields from space. Rather than applying the self-limiting belief of worrying about over-trading, retailers should be employing limited risk trials to push the boundaries of yield from space on a regular basis.

The theory of gravity applies to retail as well. If it’s not going up, it’s only a matter of time before it comes down.

Think up, not down. What you think is what you’ll do.