3 retail network planning strategies to successfully grow a business
Written by Rafa Pulido ·
Retail is an ever-changing industry. With the perpetual emergence of new channels and technologies responsible for impacting shopper behaviour, developing robust retail network planning strategies has become challenging. The relationship between different stores is not as clear-cut as it was once believed—what maximises profit margins for one location does not always do the same for another. How then can retailers devise long-term and adaptable plans to boost the performance of the different stores across their entire retail network?
The answer lies in the retailers’ ability to deep dive into the specific market dynamics surrounding their store locations. To plan successfully, retailers must first pinpoint the market conditions that contribute to the performance of individual stores. Then, they must understand how those stores affect the entire network and deploy relevant solutions for each. We are going to explore three retail network planning approaches in this article that have proven to contribute to the overall growth of a business. And—who knows—maybe your perception of how to “grow” your retail network will have changed by the time you reach the end.
Business expansion is considered a fundamental pillar for growing a network. While this may be true, there are both strategic and trivial ways to expand a business. Sustainable expansion strategies consist of balancing the demand for a store and its products with the overall cost—opening, maintenance to keep it running, etc. What many retailers overlook is how this relationship between cost and demand changes for every location. For example, it may cost more to open a store in Chelsea than to open one in Camden town. However, if there are high concentrations of a retailer’s target market in Chelsea, the total sales could potentially outweigh the elevated costs. Moreover, the demand to open another supermarket in the City of London may be greater than in Leeds. Nevertheless, the potential Leeds location could be equally as profitable as the City of London as it may utilise fewer resources (personnel, operating hours, stock, etc.) to maintain it. These subtle but significant variations in market conditions that are location-specific can throw off the balance between cost and demand. This makes them essential factors to consider when planning to expand a retail network to promote both the individual and collective success of a brand.
Comparison of catchment areas with a walking radius of 10 minutes on foot
Another retail network planning tactic that has been tried and tested involves benchmarking. When retailers examine the unique market dynamics behind their best-performing stores, they know the drivers that contribute to their success and can draw conclusions about other stores in their network. Traditionally, retailers have relied on consultancy firms to help them identify which location components make some of their stores more profitable than others. But what if it were possible for the retailer to have the necessary tools and reliable data to benchmark the performance of their network on their own? This would not only make retail network planning a more autonomous and “in-house” process but it would also reduce overall costs.
The final component when it comes to developing an adaptable retail network plan involves responding to rises in demand. Retailers should pay close attention to market trends as a means to allocate their resources and manage their sales forces efficiently. Remember in the previous example when we compared the cost of opening a supermarket in the City of London to Leeds? This use case can be extrapolated even further. Imagine the data for the Leeds location shows high sales of laundry detergent in the area. If the retailer decides to open a supermarket in that particular location, they can also be sure to have this product well-stocked and develop a solid pricing strategy. This would mean that the customers who would frequent the Leeds supermarket location would never stumble across an empty shelf—and the retailer can benefit from higher margins by accurately pricing the item in-line with its perceived value. Following consumer trends and anticipating their needs for each unique store location will not only boost turnover but also generate customer loyalty.
Retail network planning with Location Intelligence
Each of the tactics covered in this article is usually developed and implemented as a standalone strategy. Nevertheless, as a retail network grows, a one-size-fits-all approach loses its strength. Retail network planning is no longer static and growth can be achieved in many different ways—optimisation and anticipation are equally as effective as expansion. Retailers need to be able to rank their stores’ performance and improve them individually by employing contextual solutions. This means that a certain level of dynamism and variation in tactics are crucial to generating positive results. But can retailers devise a combination of all three? With the right technology, we think so.
Reducing costs and capitalising on demand whilst also carrying out powerful expansion plans is possible with Location Intelligence. This technology provides the necessary data to obtain a 360º vision on the unique market factors that influence different stores’ performances which can, in turn, be used to streamline operations or replicate success in a new location. Transforming the big picture into actionable, bite-sized pieces is the key to selecting the relevant levers to grow store networks in concrete ways. With Location Intelligence, retailers can finally develop multifaceted and adaptable strategies that boost both the bottom line and sales on a store-by-store basis.