Chapter - 2

Store planning

Retail Store Layout

A retail store layout (whether physical or digital) is the strategic use of space to influence the
customer experience. How customers interact with your merchandise affects their purchase
behavior. This retail principle is one of the many from Paco Underhill, author of Why We Buy:
The Science of Shopping, keynote speaker, and founder of Envirosell.

The interior retail store layout has two important components:

Store Design: The use of strategic floor plans and space management, including furniture,
displays, fixtures, lighting, and signage. Website designers and user experience (UX)
researchers use space management techniques and web design principles to optimize
e-commerce websites. We’ll further discuss a variety of popular retail floor plans later in this
article.
Customer Flow: This is the pattern of behavior and way that a customer navigates through a
store. Understanding customer flow and the common patterns that emerge when customers
interact with merchandise based on the store layout is critical to retail management strategy.
Physical retailers are able to track this using analytics software and data from in-store video and
the wifi signal from smartphones. For example, solution providers like RetailNext provide
shopper analytics software for retailers to understand flow and optimize the customer
experience based on in-store video recordings. The technology also exists to track the digital
customer flow and online shopping behavior. Using “cookies” and other software, online retailers
can track customer behavior, including how customers interact with their website.
While the exterior retail store layout includes exterior store design and customer flow, it also
includes the following factors:
● Geographic location of the retail store (real estate)
● Size of the building and length of the walkways accessible from the entrance and exit
● Use of furniture and exterior space for people to gather and interact
● Style of architecture of the retail building
● Color of paint and choice of exterior building materials
● Design of the physical entrance and exterior window displays
The objective of retail store design is to positively impact customer experience and create value,
which is the primary goal of retailers in the supply chain. For more information on retail strategy
and management read the article “How to Survive and Thrive in Retail Management.”
Different Layout design for Retail space management

The different layout design is used for different types of stores. Let us learn about them one by
one.

#1 Free Layout
As the name suggests, the free layout does not follow a proper design or fashion and is usually
used when there is a large space and fewer products to display.
For example, the free layout is a suitable design for luxury stores and fashion stores. Using this
layout, you are not guiding your customers to follow a particular fashion.
Instead, you are giving them liberty to wander in your store. You don’t impose any rules on
them. The free layout is the best way to showcase your creativity. However, don’t forget to add
proper signs and window displays wherever required so that your customers don’t feel lost.
The free layout encourages interaction between salespersons and customers. Salespersons
help customers to make a shopping decision and also offer them other products available in the
store to make more sale.

#2 Grid Layout
Grid layout is the most common type of layout used by retail stores. in a grid layout, products
are displayed in a very predictable manner. So that customers don’t have to make much efforts
to look for products. You will see this type of layout in stores such as pharmacy stores,
convenience stores, grocery stores, etc.

The main reason behind using grid layout is to display maximum product categories without
leaving any empty space in the store.
In grid stores, items which are bought by customers impulsively are placed near the cash
counter, and staple products such as milk and bread are placed at the end of the store to
encourage more sales.
This type of layout is suitable for stores which sell more than 30 categories of products.

#3 Loop Layout
Loop layout is a closed layout where the customer starts at one end of the store and can exit the
store after going through all the merchandise available in the store. This type of loop is suitable
for stores which sell a few categories of products. For example, a loop layout is good for a wine
store.
So that customers can have a look at all the wines available in the store before making a final
purchasing decision, loop layout helps you understand the pattern of traffic in-store, and there
are fewer chances that customers can bump into each other.
This type of layout can also prove to be risky as customers who don’t have much time would not
prefer to shop from such stores and might mind avoiding coming to the store in the future.
#4 Herringbone Layout
Herringbone layout is a substitute for Grid layout for the store has long and narrow retail space.
This type of layout is used most by small hardware stores, libraries, tuck shops, etc. the one
major drawback for using herringbone layout is the risk of theft.
As space is congested and provides chances for picking and hiding things. But this can be
avoided by installing Cameras.

Location Planning

Location planning is the process to help evaluate the impact of location on the consumer buying
process. No single location is the same as another. It's obvious but it's surprising how often
brands and retailers don't account for this fact.

Importance of location planning

Location planning decisions are very important for all types of business units. This is because it
affects the cost, selling price, and demand of the product. It is a non-recurring heavy
expenditure. Large companies take the he⁰lp of different professionals like lawyers,
accountants, environmentalists, etc. for selecting the proper location of a plant.

Following image lists 8 points that bring out the importance of location planning.

● .Expansion : If the company wants to expand and diversify its activities, it will have to
search for a new-location for setting up its new business unit. In this case, it will need
location planning.
● Cost advantages : If an existing plant is not near a market place, it will increase the
transport cost. This will also increase the cost of the product. So, to avoid this, the
company will search for a new plant location which is near the market. Such location of
plant must be convenient to the employees and must have a regular supply of water and
electricity. Overall, this will result in reduction of the cost of production.
● Discovery of raw-material : Generally, a plant must be located at a place where
raw-material is available. For example, if oil and gas are found at some place, then a
new petrochemical plant has to be set up there for processing purposes.
● Additional facilities : Plant location-related decisions will have to be taken if the
organization wants additional facilities. New facilities may be necessary to improve the
quality of work, to meet rising demands, etc.
● Mergers : Mergers, joint-ventures, and Amalgamations may lead to starting a new unit at
a new-location. It may even require closure of an existing plant unit. In mergers,
production is mostly started at a new place as per the new-agreement.
● Political and social changes : Each political party has its own philosophy. Political
changes can lead to changes in economic policies of the government. This may make
the existing location unattractive for doing business. Social changes may require
production of eco-friendly goods. This may require a change in location.
 ● Increasing product demand : Demand for the company's product may increase at
other places, especially in countries abroad. So, the company will have to start a branch
in another state or in foreign countries. This would lead to a search for a new location of
the plant.
● Avail tax benefits : Government may announce some tax benefits for starting a
business in rural areas. This may motivate entrepreneurs to start their business units in
remote areas.

Retailing image mix

Retail Image refers to how a retailer is perceived by customers and others.To succeed, a retailer
must communicate a distinctive, clear, and consistent image.
A retail mix, defined, is the marketing plan put in place to address key factors such as location,
price, personnel, services, and goods. The retail mix is also referred to as the “6 Ps.”
customers to locate the required product easily.

The benefits of establishing a clear brand image are well-established. Doing so can help you
appeal to more customers, earn their loyalty and stand out among a sea of similar options.
These benefits are especially important in highly competitive spaces like retail.

Discussing and evaluating your retail mix in the organization offers a number of benefits. First,
you are addressing the needs of your target market. In essence it forces the retailer to make
the customer top of mind and foremost in all strategy decisions. It also allows for a business
planning strategy within the retailer. By approaching all six components the retailer is ensuring
they are able to meet the needs of the customer using all these components. Lastly, it allows
the retailer to respond to competition. For example, a key competitor for JCPenney is Kohl’s. If
Kohl’s drops prices on a national brand such as Levi’s, JCPenney might follow suit.

Let’s now take a look at the components of the retail mix that are ultimately the pieces of the
retailer’s strategy.

1. Price
What is my pricing strategy? What is my markup strategy and how does that affect my overall
retail price? You must make sure you calculate your retail price based on the markup you
receive and not the costs involved. You also want to think about profitability and relate this back
to the goals of your area as well as your organization.

2. Promotion
What promotional tools will you use to influence the consumer’s purchase decision and, overall,
their intention to purchase? This is where you also want to make sure you include a budget that
shows where resources are allocated as well as a time table for the promotional activities.
Remember to include specific examples of your proposed promotional activities. Some
examples include online promotions, print advertising, and any television advertising.

3. Place
What are the hours of operation for your store? How many employees do you need and when
do you need them? This is where you can also include a general description of the
responsibilities of each associate along with some type of detailed info on the organization’s
structure. This could also be dependent upon the area in which you are located as well as the
needs of the customer.

4. Product
What type of product do you intend to carry? What is the depth (how much you will carry of an
item) as well as the breadth (number of SKUs) you will carry in your assortment? What is your
anticipated turn as well as inventory levels? Later we will discuss in more detail the importance
of inventory turnover and how it contributes to profitability. This is where you want to make sure
you have adequate inventory levels to meet customer demand. Too much product could lead to
excessive markdowns which deteriorates profitability while too little desired merchandise might
lead to missed sales opportunities. Does your product meet your customer’s needs?

5. Presentation
Will you have a free-standing location? Will you be located in the mall? How is the location you
have chosen a good fit for your target market? It is during this time you will also want to provide
a thorough trade analysis that shows the population in the area and how they are a good fit for
your business.

6. Personnel
How are you selling to your customers? What kind of internal marketing supports your sales
team? What are the graphics that set your store apart? What does the signage look like inside
and outside of your store? These are all key elements you want to consider.

For the final segment of this section let’s take a look at how the retailer can take the one
element of the mix (product) and transform it into a customer experience as well as why this is
important.

Effective Retail space Management

Retail space management is a process of using the space available in the store effectively. The
management of space is important as a retailer is required to display a large number of products
in limited space available in store. Space management is not a difficult process to understand.

In simple words, you can say that space management is a process of utilizing store space to
attract more and more customers and providing them a pleasing shopping experience because
you cannot deny that only a happy customer can bring more sales.
You would not want to waste a single square meter of your store when you know that you have
rented that place. You would want to use every available space in the store to get the maximum
return on investment.
Effective retail space management requires you to ask the following questions to yourself before
you start allocating space to products of different categories. How much space should be
allotted to each brand on shelves?
Where to place products in the store? And what two categories should be placed adjacent to
each other? Etc. Answers to these questions will help you to utilize shelf space in the store
effectively.

#1 Retail space management is important to increase sales

Planning available space in the store helps you to increase sales. Having an understanding of
the space available in the store helps you to decide the layout of your store and location of
different categories of products.
It is essential for a retailer to divide the right amount of space available on shelves to the
different categories of products.
If you don’t plan your storage space and place products without thinking, it will leave you in
trouble later. You will always find yourself struggling with a shortage of space for important
products. Let us understand this with the help of a retail store example which has about 30
categories of products.

#2 Customers can easily find the products they need

shopping experience in your store Nowadays, customers don’t only come to your store to buy
things they need, but they also come to destress themselves. Just think how they will feel if they
can’t find things they want to buy easily.
There are chances that they would prefer to visit a nearby store with a better organization, or
they would order the things that they want to buy online.
Let us understand this with the help of an example. Imagine your customer enter your store with
a list of ingredients to make a cheesecake.
He would expect to locate all the products easily and in less time. By organization, your store
properly and by allotting proper space to each product and placing them at the right place on the
shelf will help your customer to find them easily and without getting frustrated.
Poor retail space management will give you more and more unsatisfied customers with
constantly dropping sales. However, proper logical categorization of products will help your
customer to locate the things they want to purchase easily without wasting any time.

#3 It is helpful in controlling the rush in the peak hours

Choosing an effective layout for your store is important as it will not only help you keep your
store well organized but will also keep the rush moving during peak hours of a day.
You can take professional help in choosing the right layout for your store, or you can copy the
layout plan of a store which has similar dimensions to your store.
Just imagine how difficult it would be for you to handle your store if it is always overcrowded.
Proper space management will let you choose the most sold categories of products and
distribute them around the store so that you can avoid cluttering in one corner of the store.
What to consider while managing space available in-store and allocating it to various products?
Retail stores come of different sizes. It would be unwise to copy the layout design of one store
that has maximum sales in your town without considering space available in your store and the
categories of products you want to sell in your store.

Types of Merchandise Which Occupies Retail Space

To be able to decide where and how to place the merchandise you want to sell depends on the
type of merchandise.

1) Demand Products
Demand products are those products which are regularly bought by your customers or the
products which are consumed regularly. For example, bread, eggs, milk, etc. are the kind of
products that are bought and consumed regularly by customers and they can’t live without them.
Such products are part of the daily life of customers. Demand products should be placed at the
last of your store so that when customers try to reach them, they have to cross the whole store
while searching for them.
By making your customers walk through the store can tempt them to buy one or two additional
products from the store.

2) Impulse Products
The products of this category are not bought with planning. People buy these products just
because they look good or have tempting price tags or attractive offers on them. You must have
seen fragrant candles near the cash counter.
These candles are the perfect example of impulse products. Stores usually place products like
candies, chewing gums, chocolates, etc. near the cash counter. People buy these products
impulsively while checking out their goods.
These things are not on the shopping list of buyers, but they buy these products because they
are placed there. Impulse products should be placed near the cash counter or near the products
(like demand products) which are bought frequently.

3) Category Products
Retail space management
People make a lot of brand comparisons for the products under the category products. For
example, when people buy a laptop or mobile phone, they usually do a lot of research before
making a purchase decision. People make a buying decision based on how that brand makes
them feel.
Take the example of the Apple company. When people buy “iPhone,” it makes them feel that
they are richer and have status in society. To make the maximum sales of this category of
products store should place a few brands that your customers would want to buy.
For example, Costco stores only offer one or maximum two brand choices. People prefer to buy
products from Costco stores because they believe that this store only sells the best quality
products.
You can also choose this strategy for your store and choose to sell a few quality brands. In this
way, you can build the trust of your customers in your store.
4) Specialty Products
Now, this category of products is your store’s specialty. People come to your store to buy these
products, especially.
The good thing about these products is that there are no brand comparison alternatives for
customers to choose from. People will find you out on their own if your product is a specialty
product.
You don’t have to make extra efforts to be able to get located in the market. Specialty products
should be placed in a prominent area of the store.

Effective management of retail space requires you to consider the following points

#1 life of products on the shelf

The space on shelves should be allocated to products based on their shelf lives. For example, a
product with a short product life should not be placed on the top of a shelf.

#2 Categories of products:
This is the most important factor for deciding the space allocation. Products can be of different
categories such as profit builders, traffic builders, star performers, and space wasters.
You would certainly not want to waste much space on space waster products, and maximum
and premium space should be allotted to profit builders and star performer products and traffic
builder products should be distributed evenly in the store to avoid congestion.

#3 Adjacent Products:
The next important decision a retail manager is required to take is “which products should be
placed adjacent to one another so that sales can be increased.

#4 size, shape, and weight of products:

These are important factors that a manager needs to consider while placing products on the
shelf. For example, it would be poor space management if you place heavy products such as a
bottle of cooking oil on the topmost shelf.
However, products such as kids’ diapers, soft toys can be placed on the top shelf because of
their heavy size.

#5 Frequency of purchase:
There is a certain category of products which are frequently bought by customers, and
customers usually come in a hurry to buy such products. The example of such products will be
toilet paper. Toilet papers should be placed at the bottom of the entry shelf. So that people can
easily find them without making many efforts

Floor space Management

Operative floor space management includes services such as determination and documentation
of space, assignment of attributes and their space costs as well as the preparation of land
utilization and land occupancy plans.
Space is finite – and space is a cost factor. Floor space management serves the purpose of a
sustainable and efficient use of property, real estate, residential or commercial space. Strategies
for optimized real estate management ensure that existing space, for example office space or
sales areas can be better used and thus be used more economically. Efficient floor space
management is the prerequisite for increasing space efficiency, which of course has direct
impact on the relative utilities or rent. Active floor space management thus directly serves value
optimization and performance optimization of real estate and land of all types. However,
employees can also benefit from the ergonomic advantages of good floor space management
through increased job quality.
It is the process of managing the floor space adequately to facilitate the customers and to
increase the sale. Since store space is a limited resource, it needs to be used wisely.
Floor Space ManagementSpace for a retail store is money and the success of the retail store
depends on effective retail floor space management.
Parameters to Judge Space Performance:
1. Sales per Square Foot
2. Gross Margin Return on Footage (GMROF):Gross Margin/Total sqft for particular store or
section
3. Gross Margin Returns on Inventory:Gross Margin/total inventory for particular store or section