Ken Nisch, JGA

In mea­sur­ing ROI, sep­a­rate the fac­tors within the en­vi­ron­ment that serve as neg­a­tive and pos­i­tive in­flu­ences

VM&RD - - CONTENTS - By Ken Nisch

How does re­tail de­sign con­trib­ute to max­i­miz­ing sales for a store? Con­sider that re­turn on in­vest­ment (ROI) is mea­sured in mul­ti­ple ways. We can look it as a pure mon­e­tary ROI, mea­sured by cash-to-cash vol­ume re­lated to sales vol­ume and mar­gin re­turn (in terms of sales mix). Other met­rics, such as, items per trans­ac­tion and the av­er­age dol­lars per unit should also be con­sid­ered when look­ing at ROI. The other as­pect of ROI is the long-term im­pact, which in­volves con­sumer at­ti­tudes be­ing changed or shifted through an ef­fec­tive re­tail ex­pe­ri­ence, not nec­es­sar­ily im­pact­ing the bot­tom line of the company im­me­di­ately, but rather as a pre­dic­tive mea­sure­ment for fu­ture ROI through chang­ing con­sumer at­ti­tudes to­ward the brand. The brand value in a sense of con­ver­sion vs. aware­ness (a key to look at from in­vest­ment and tra­di­tional needs re­lated to ad­ver­tis­ing vs. point of sale and store ex­pe­ri­ence), and how the con­sumer can be a key source of “un­paid me­dia” through am­bas­sador­ship, al­lows the cus­tomer to be­come an ad­vo­cate of the brand through ex­cite­ment and sat­is­fac­tion gen­er­ated by a new con­sumer ex­pe­ri­ence. In short, mea­sur­ing the near term through one set of fac­tors, and the long-term im­pacted by another set, are both im­por­tant mea­sure­ments.

Magic Bas­ket of Fac­tors

The more prag­matic mea­sure­ment in terms of real time sales is mov­ing the trans­ac­tion to higher mar­gin goods, al­low­ing the sales as­so­ciates not to fo­cus on one par­tic­u­lar at­tribute which can in­crease units per trans­ac­tion, in turn cre­at­ing what is termed as a “magic bas­ket” of fac­tors. For both types of ROI, a clear un­der­stand­ing of what the sit­u­a­tion is to­day is im­per­a­tive. Look­ing at his­toric mea­sure­ments around mar­gin, units per trans­ac­tion, etc, but even more im­por­tantly the at­ti­tu­di­nal per­cep­tion of the brand is some­thing that only can be ef­fec­tively an­a­lysed be­fore changes are made. And this needs to be done so in a con­text that is sim­i­lar and com­pa­ra­ble to what the new re­tail con­cept ex­ists within. It is chal­leng­ing to test the ROI on a lo­ca­tion that hasn’t ex­isted be­fore with a cus­tomer who hasn’t shopped, and with a sales and man­age­ment team re­lated to the store who hasn’t worked to­gether. Of­ten a mea­sure­ment of ROI is best tested in the case of a ren­o­va­tion rather than a new store or re­lo­ca­tion, where there may be a num­ber of el­e­ments that cloud the mea­sure­ments. With th­ese num­bers baked into the anal­y­sis, the other as­pect when look­ing at ROI is what might the core store cost to main­tain? How does it im­pact the staff? Is the life cy­cle of the de­sign such that it might min­imise the need for ren­o­va­tion, while max­imis­ing the op­por­tu­ni­ties for refreshment and cost­ef­fec­tive re­newal?

Mea­sur­ing Suc­cess

Another point in look­ing at ROI is sales pro­duc­tiv­ity and in­ten­sity. Again, a rent per square foot will fac­tor into the bot­tom line, but other in­di­rect costs such as en­ergy us­age, num­ber of per­son­nel re­quired and inventory are also el­e­ments to be con­sid­ered. As well, inventory turn can highly af­fect the bot­tom line, with even the in­crease of a quar­ter or half turn mak­ing a huge dif­fer­ence lit­er­ally all the way through the sup­ply chain (in­ter­est costs for hold­ing inventory, ware­hous­ing cost, dis­tri­bu­tion, etc.). Th­ese are of­ten not seen as di­rect store cost, but rather as op­er­at­ing cost. Hence, the full ROI “ecosys­tem” -- look­ing at prod­uct lit­er­ally from de­sign to sale through cus­tomer sat­is­fac­tion -- must be taken into con­sid­er­a­tion.

Her­shey’s: A store can be your most ef­fec­tive show­room, pro­vid­ing a full prod­uct ex­pe­ri­ence. At Her­shey’s Choco­late World – Las Ve­gas, the en­tire global line of Her­shey’s Kisses flavours be­comes a fo­cal fea­ture.

Ken Nisch, Chair­man


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