If you're looking for ways to improve your store's efficiency, consider shopping frequently at your competitors' locations. It's a tactic Walmart founder Sam Walton used—imitating what worked for other stores and learning from aspects that didn't work as well. He once stated he was the biggest customer his chief competitor, Kmart, ever had.
One of Walton’s biggest decisions was whether to use departmental checkout or centralized registers. It was his observations of successful business practices in other retailers that led him to the centralized checkout model—a model that even high-dollar departments stores are moving toward. What Walton knew was that your store’s physical environment affects the ways in which shoppers interact with your merchandise, and it ultimately affects how much money customers spend.
By looking to the competition, can help you build a better store that accounts both for the needs of your shoppers and that boosts your bottom line. What do other stores do that’s most effective? Let’s take a look.
Tricks of the Trade
First and foremost, there’s a natural inclination in terms of the order in which most consumers choose to physically shop at a store. They tend to move counterclockwise through the physical space, which means that any display just to the right of the door is premium real estate. Shoppers will pay attention to displays in this location, and the displays should be stocked with high-profit goods.
A quick note about shopping carts or baskets: provide them, and make them big! Size matters when it comes to shopping carts. When they’re full, the customer feels compelled to check out. If there’s still space, customers are more likely to continue to shop. Use the largest basket or cart that makes sense in terms of your store’s space and the products you sell.
Back to your physical space … a critical choice is where to put your staples. For grocery stores, that means the bread, milk and eggs. For liquor stores, that means the beer. For office supply stores, that’s printer paper and ink cartridges. As it turns out, there is one right answer to where you should place your essentials: as far from the door as possible. Your goal is to increase the time your customers spend in your store, and to push them to cover as much ground as you can. The more ground they cover and the more time they spend, the more money they spend.
The physical arrangement of your store needs to account for consumer psychology, and one of my favorite tactics is to appeal not just to the purchaser, but also to the influencer. In the grocery store, it’s frequently young children who work as influencers, so high-profit items with kid appeal need to go at eye level—not the parent’s eye level, but the kid’s eye level. Sometimes you face limitations on your eye-level space, and one of the best workarounds I’ve ever seen was a store that used dinosaur footprint decals to lead children through the store and arrive at a dino-themed display. Even though the products were displayed higher than most kids would notice, using the footprints created excitement and led to a profitable display.
Once you have set the layout of the store, you’re ready to set your shelves. Don’t underestimate the power of eye-level shelving. That’s where your high profit items belong. Folks will bend or reach for cheap goods, but you want to make it easier for them to purchase the products that boost your profitability.
Atmosphere is an aspect of the physical environment that some stores overlook, but it’s more important than we realize. You think bad lighting, exposed beams, and a warehouse-y feel sound unappealing? Not if you want customers to feel like they’re getting a deal. Stripped down facilities contribute to the atmosphere of large discount retailers. High-end stores have to cultivate a different climate. Creating an atmosphere that mirrors your image is key. Think about it: A bargain bin with closeout deals doesn’t connote high-end shopping and wouldn’t be suitable for, say, an exclusive jewelry store.
Two particularly powerful aspects of atmosphere are the customer’s olfactory and auditory experiences. Bakeries know the power of heavenly aromas wafting through a store, and car dealerships understand the persuasive pull of that new car smell. Scent generators are useful in creating a pleasant shopping experience. Music matters, too. Classical music typically results in higher spends, and slower tempo music slows shoppers down and actually increases the amount of time they spend in a store.
Finding a way for shoppers to sample your products can be one of the single most effective ways of converting them to purchase. When we hold or interact with an item, we feel ownership of it, and part of us wants to complete the process required for us to own it. We try, we like, and we buy. Sampling can also create a cluster of customers and generates excitement.
Retail square footage is costly, and I’ve seen many an entrepreneur fret over how little space a new business can afford. Nothing draws a crowd like a crowd. Sometimes a smaller facility is preferable in that it gives a warmer, more successful feel than does a cavernous space in which shoppers feel uncomfortably alone.
Building a loyalty program into your store can also have huge effects, and interestingly, assigning huge point values relative to dollar value may result in customers who are far more motivated to participate. Gamification is also effective, whether it’s a collectible token or a scratch off ticket that reveals prizes. Anything that compels a shopper to spend more time in your store and return for multiple visits is a good thing.
And here’s a bonus tip about the physical aspect of your store: Use the power of the mirror. We behave better when we can see ourselves, and mirrors have proven to be a remarkably effective theft deterrent.
Picture yourself as a smaller scale Sam Walton. Visit your competition. Observe the ways in which customers shop your store and other stores. Test yourself constantly by trying new ideas small scale and moving the best ideas to a larger, storewide test. The worst thing you can do with your physical space as a retailer is to be complacent. Keep making small changes to prevent your shoppers from settling in and making the same purchases day in and day out. Be creative and forward-thinking.
Mike Michalowicz is the author of Profit First, The Pumpkin Plan and The Toilet Paper Entrepreneur and is a nationally recognized speaker on entrepreneurial topics. He is founder of Profit First Professionals. His popular small business blog shares strategies and techniques for entrepreneurs.
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A version of this article was originally published on February 3, 2015.
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