We’ve recently examined the importance of, not only upgrading a retail outlet, but also determining the return on investment (ROI) of this redesign.
Shop! – a non-profit, retail trade association – recently developed a white paper focused on determining industry standards for store redesign ROI.
Interestingly, though perhaps unsurprising, this study found that – as important as determining ROI is – not many stores actually calculate it. The metrics used to determine ROI also varied greatly, from payback on capital investments, to energy savings and customer feedback.
Of the outlets that do determine the ROI of a store redesign, retailers were the most robust with 60 percent responding positively. This is compared to only 27 percent of designer respondents and 19 percent of manufacturer respondents (who calculated ROI on products sold for store design). Of these positive responses, two things were the same: they measured ROI consistently and quickly (within more than one year, but less than three years).
The reasons for these low numbers were not studied, but it is safe to assume that difficulty determining which metrics to evaluate plays a part. Determining the metrics you are going to evaluate is essential before beginning a store redesign. Metrics to evaluate include tangible and intangible.
- Impact to profits
- Foot traffic
- Sales per square foot
- Sales per category
- Intangible metrics
- Brand perceptions
- Customer loyalty
- Shopper engagement
- Customer experience
The study did find that the most successful redesigns were those that took a holistic approach to the remodel, meaning the impact to staff, customers, sales, as well as project costs were all considered. In fact, a great deal of attention was given to a store’s staff, which is often overlooked when it comes to a redesign.
Any challenges faced by store staff can ripple to the customer experience. Service interactions are a critical part of the store experience that must also be “designed.” Thus, staff should understand the impact to their operations with the new concept early on, be provided training and support to manage through any changes, and given the other tools to help them deliver the full sensory experience for shoppers.
This makes sense, since the vast majority of retailers agreed that the in-store customer experience is “very or extremely important” to them. Retailers also believe in the importance of brick-and-mortar locations. So, most of these redesigns centered around one or more of the following themes: experience, convenience, and personalization.
Ultimately, the study determined that industry standards for redesign ROI remain elusive. However, retailers, designers, and manufacturers must determine the metrics they are going to use to evaluate the store redesign and stick with them. ROI evaluation is a continuous process. Organizations need to remain focused to ensure they achieve their redesign goals.
Customers want to be engaged when they shop. A space that creates memorable in-store experiences should be the goal of every retailer – and careful measuring of that goal is essential to success.
For bright ideas and support during your redesign – and for assistance measuring your ROI after it’s completed, give The Trade Group a call at 800-343-2005. Our staff can help to create a store that will keep customers returning for more.