In the rapidly shifting landscape of retail, the foundations of success have never been more critical. As the retail market adapts, the importance of strategic decision-making concerning location, forecasting, and staffing comes to the forefront. A recent partnership between Brookfield Properties and The Business of Fashion highlights best practices for retailers aiming to thrive in 2024 and beyond.
Understanding Market Dynamics
US retail is on the rise, with planned openings of over 4,200 stores for 2024, marking a 20% increase over closures. This development is underscored by a decreasing vacancy rate in US shopping centers, which fell to a record low of 5.3%, according to Cushman and Wakefield. These statistics suggest a reinvigoration of brick-and-mortar stores driven by consumer preferences for in-store experiences. Physical retail outlets provide sensory experiences that e-commerce cannot replicate, with 79% of consumers stating that the experience a company offers is equally important as its products.
1. Choose the Right Location
Selecting the right location is arguably the most crucial decision retailers will make. Unlike online businesses, physical stores cannot change their location easily. Therefore, data-driven decision-making becomes vital. As observed by Elyse Walker, a luxury boutique chain, evaluating “key adjacencies” is essential. Areas close to popular restaurants can encourage patrons to explore shops nearby before or after their meals.
Research from Coresight shows malls typically outperform open-air shopping centers, capturing higher sales productivity. For explanatory purposes, Suitsupply operates primarily outside of high streets, catering to a specific market of men needing formal attire. Their strategy includes extensive market research, using e-commerce data to analyze potential customer bases.
Long-term leasing, defined as five years or more, is preferred to mitigate the risks associated with short leases where frequent negotiations could hinder relationship-building within the community. Lush Cosmetics’ Cheryl Rose emphasizes the need for stability when forming connections with customers, indicating that store construction costs necessitate time to recover investments.
2. Pop-Up, Test the Market
Testing the waters before making long-term commitments can yield critical insights. Elyse Walker frequently hosts pop-up events to gauge customer preferences in new markets. This method acts as a “temperature check,” allowing the brand to modify its offerings accordingly. Birkenstock exemplified this approach by engaging the Miami art community, fostering brand awareness while delivering unique experiences.
Pop-up shops help brands evaluate market potential without the commitment of a permanent store. For example, luxury brands like Jacquemus have employed temporary stores in renowned department stores such as Galeries Lafayette in Paris, focusing not only on sales but also on elevated brand experiences.
3. Forecasting Sales
Accurate sales forecasting is essential before committing to a lease. Landlords typically provide demographic data, aiding retailers in understanding their target market. Companies with established online presences can use e-commerce sales as a benchmark for physical store forecasts. Feedback from local stores can further aid in fine-tuning these estimates.
Joseph Miller, a co-founder of Runyon Group, advises stakeholders to network extensively, seeking insights from experienced store managers and local developers. Retailers such as La Ligne opened their first store on Madison Avenue after setting up meetings with nearby store managers to glean operational know-how. Understanding that rent should ideally not exceed 15% of annual sales provides a financial safety net for new businesses.
4. People Power
Effective staffing is crucial. Retail operators typically aim for staffing costs to remain around 25% of sales. A significant lapse often occurs when stores are understaffed, leading to compromised customer service. Retailers focused on employee retention create a more consistent and knowledgeable sales force.
Having experienced employees not only fosters customer relationships but also ensures higher sales and profitability. For instance, Suitsupply boasts an annual turnover of just 15% for their sales associates, significantly lower than the industry average of 60%, highlighting the importance of employee retention strategies. This commitment extends to promoting from within, as seen in Aritzia, where 84% of vacancies in retail management were filled internally.
5. Flexibility in Store Management
As multi-location retailing becomes more common, empowering individual store managers to make decisions tailored to their local markets is crucial. Uniqlo exemplifies this by allowing its 2,434 global outlets the autonomy to create their own inventory and merchandising strategies. This flexibility helps stores adapt to the specific preferences of their customer base, enhancing the overall shopping experience.
Moreover, visual merchandising adapted to local tastes can significantly affect each store’s appeal. Elyse Walker emphasizes their approach tailored to individual markets, showing that effective merchandising demands constant attention to community preferences.
Key Takeaways
– Conduct extensive market research before signing any lease agreements to ensure calculated investment risks.
– Assess the market through pop-up events before committing to long-term locations.
– Utilize reliable forecasting methods incorporating demographic insights from key stakeholders to gauge potential performance.
– Invest in your staff’s development and provide career advancement opportunities to enhance customer service and retention.
– Foster an environment of autonomy across store networks, allowing for localized management strategies.
In conclusion, understanding the interplay of these foundational elements will decide a retailer’s success in today’s competitive landscape. As brands navigate new challenges, their adaptability will be fundamental in meeting evolving consumer demands.
