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