ow long has it been since you looked at the productivity of your store. In this case, I'm actually referring to the balance of the productivity from department to department. The reason it is critically important to go through this process occasionally is that you are constantly incurring oppurtunity costs if your store is not balanced. Simply put, opportunity costs are missed opportunties.
For example, let's say that you have a soda vending machine. In the soda vending machine you have one row of Coke and one row of several other flavors. The problem is that each week you sell out of Coke. Now let's say that you have a row of Orange soda that you only sell 5 cans of per week. It would be an easy decision, then to remove the Orange and replace it with another row of Coke. The opportunity cost of maintaining the row of Orange is the potential sales of The additional Coke that you could sell. It's right in front of you in nice neat rows and so it's kind of a "no-brainer" to make the switch.
But now consider your store. For example, if yours is a hardware store and you have an area that is 20x24 devoted to electrical items. Do you know that the space that the department occupies is justified by its contribution to sales? And what about that tool department that is producing at a much higher rate per square foot that any other department...would it do even better with more space?
Watch this video for a simple and profitable way to balance your store's space and inventory!
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Remember back to when you first assorted your store or when you inherited it from the previous owner/manager. Was there any basis for alloting the space that the department now occupies? Truthfully! Probably not. In fact, what we find on our consulting visits is that most departments end up taking up the space because that's the space that's always been allotted. Over time market buys and assortments you thought would sell great but haven't occupied the space.
OK, it's time you do some analysis. Never fear, it's not going to be that painful! The first thing you must have is a 2D Birdseye view drawing of your store. Show the perimeter walls, and then draw each display within those walls.The next thing that you will need to do is outline the perimeter of each department. Make sure that you go half-way into the aisles that border the departments because the department requires that space to function. The next thing you will need to do is dimension those areas and compute the square footage taken by each.
Once you have those measurements analyze the space taken in relationship to the departments contribution to sales. For example does one department take up 20% of the floor space but only contribute 12% to sales? Opportunity! Does another contribute 20% to sales but does so with only 8% of the space? Opportunity.
The most difficult part of the process is in realizing that each equation is "rubber-banded" together. If you decrease the size of a department you must put it back somewhere. If you take space, you must give space. The calculations are very slippery because they are all interconnected.
