Andy Campbell suggests how to optimise your retail space for maximum profit

“If you can see any backboard, the implication is that space is not being utilised as efficiently as possible”

In garden centre retailing today, we already accept the disciplines of buying management, supply chain management, waste management and cost management – we don’t need anymore, surely? Well, I would like to make a case for just one more; that is – space management.

Your retail space is one of the most valuable resources a retail business has, along with your brand, your customers, your suppliers and of course your team. If you are seeking to maximise your profit, you have to optimise the use of your space. In virtually all garden centres, space is a finite and limited resource, especially the more expensive internal covered area. More expensive, for several reasons including initial capital investment, rates payable, heating and lighting as well as the ongoing costs of maintenance. So how do you go about optimising the use of the available space?

The starting point has to be to question whether you have the right balance of internal to external space currently for the offer you wish to put together for your customer base. The decision to build additional internal selling space is an important one. Still, the existing space is invariably the limiting factor to the overall level of turnover that can be achieved. But before you go to the expense of increasing internal space you have to be sure you are making the best use of the existing space.

The next issue to be considered is whether the balance of accessible selling space to storage or service space is correct. While I accept the latter is a requirement bearing in mind the seasonality and weather dependency of many ranges and bulk purchasing in advance of the season; I am mindful that if customers can’t access it they can’t buy it. I am, therefore a strong advocate of minimal storage areas and maximum selling space.

Once these balances have been addressed, the critical issue becomes ensuring that you have the right product, in the right quantities, in the right place, taking up the right amount of space, at the right time.

RIGHT PRODUCT

This is about having the breadth and depth of range most suitable for the consumers within your catchment area. Not only your existing customers but also those who don’t currently shop with you, but potentially would if they felt the offer was pitched in such a way as to include their requirements as well. It also involves careful construction of ranges to encourage customers to trade up, increasing the individual sales value and the cash profit on the transaction, thereby maximising the return from the space.

Perhaps most importantly though the critical issue when it comes to product selection is identifying the absolute best sellers that are going to sell in volume and turnover quickly, and to concentrate on these. The challenge is to identify these and determine just how many of the tail of slower selling lines you need for range authority.

RIGHT QUANTITY

From a theoretical perspective, you only really need sufficient stock to meet anticipated sales for the period between deliveries within the replenishment cycle. This might be cutting things a little too fine though and does not allow for dramatic fluctuations in demand due to unexpected good weather. It also does not take into account the minimum quantity required to make a respectable, high impact display. Therefore, there is an optimum stock level to aim for, that changes throughout the season, for each product.

This principle does fly in the face of excessive pre-season stocking, mainly where space is minimal, and does require a fast and effective response from the supply base to meet your “little and often, just in time” delivery requirement.

RIGHT PLACE

This not only covers the horizontal dimension, which involves the location on the footprint of the garden centre at a macro-level, but also the vertical dimension of product placement on the display equipment at a micro-level. This introduces the concept of locating those ranges and products that are heavily impulse-driven in hotspots with maximum passing footfall. While merchandising the more considered purchase elements of the offer where the customer is more likely to search them out with good sectional signage to help them find what they are looking for. It also demands careful planning of customer flow to maximise exposure to the offer. Ideally, you want 100% of customers passing 100% of your offer.

When thinking ‘up and down’ rather than ‘left to right’, ensure you make the best use of the height. This may involve higher display equipment against walls around the perimeter, keeping the middle area lower to avoid obstructing sightlines. It also involves ensuring there is no wasted space on the fixtures due to differing height products on the same shelf or lots of fresh air around peg-hook lines. If you can see any backboard, the implication is that space is not being utilised as efficiently as possible.

RIGHT SPACE

The first consideration is whether the ratio of display space to aisles is correct – the product-to-path ratio. Planning the layout from a bird’s eye view will help you to understand whether you can capture more display space without reducing the amount of customer access space to the detriment of sales. As a general rule, those ranges that are more browsing oriented – such as seeds – require more space for the customer. Conversely, those that are more considered, like compost, need less.

The next issue is to allocate the appropriate amount of space according to the expected return. A good understanding of the net profitability from all ranges is required to enable informed decisions on how much space to allocate, particularly when there are competing demands on the space.

RIGHT TIME

Very simply put – not too early and not too late. There is an opportunity cost attached all the time that excess stock is sitting on display over and above what is required to meet anticipated demand. It is taking up space that could be used for a faster selling range. This requires stocking up in preparation for the rapid uplift in sales but not months beforehand. It also necessitates strict range control. Stock levels are proactively managed down as the season end approaches to minimise the amount of excess stock remaining while controlling the costs of achieving this.

Proactive space management is both a science and an art. The science is in having the data available to make good quality decisions. The art is interpreting this data where it exists and using good commercial judgment in its absence – ideally, you would have both. ✽

Andy Campbell is an independent business development consultant specialising in the garden centre industry with over 35 years of experience. He can be contacted by phone: 0044 (0)7788 567011; email: andy@andycampbellconsulting.co.uk. Alternatively, visit: www.andycampbellconsulting.co.uk