Maximizing SpaceUtilizing Every Square Foot
Maximizing a store’s efficiency is crucial for the success of any business. Liquor retailers are no exception. After payroll, real estate is your number one expense, and utilizing every square foot is key to a healthy bottom line. And not just because of rent; business insurance, maintenance and janitorial costs go up as square footage increases. Security and loss prevention also become issues in larger spaces. It’s a good retail strategy to reduce costs by displaying as much product as possible in your available space.
Here are the five steps to get the most out of your space:
1. Measure your efficiency.
2. Set a goal.
3. Analyze your layout.
4. Maximize your shelves and use your walls.
5. Place your products.
Measure Your Efficiency and Set a Goal
The first step to improving your efficiency is to measure your sales per square foot. Do this by dividing your annual sales by the total square feet of retail space. You can drill down further by dividing your sales into categories, like wine, beer, liquor, refreshment beverages, etc. Getting even more granular, you can calculate a SKU’s Space Productivity Index (SPI). SPI is the sales a product generates compared to the percentage of total floor space it occupies.
Even tracking efficiency in the simplest form is a powerful business tool. Data is available to compare your store to similar operations. According to Colliers, Canadian retail stores generate an average of $580 per sqf, but this covers many different businesses.
A good comparison for liquor stores is the government-run stores in BC and Ontario (because Alberta’s stores are fully privatized the AGLC does not track this). According to the BC Liquor Distribution Board’s (BCLDB) 2013-14 annual report, sales per square foot in government liquor stores was $1,222. The Liquor Control Board of Ontario’s (LCBO) figures for 2015 were $1,745.
Once you’ve calculated your sales per square foot, you’ll need to decide on a goal and a timeline for achieving it. If you’ve never done this exercise it might feel like a shot in the dark. However, having a defined goal will help keep you on track. One caution: if your current sales are closer to the Canadian average than the BCLDB or LCBO figures don’t try to make it all up in one day. Adding 5-10% to your sales per sqf is an excellent start, plus you can tweak your plan as you go.
There is no single correct floor plan for a liquor store. Every store has to adapt to their space and customer needs. High-end stores for clothing, accessories, or jewellery will often have layouts that force customers to navigate past displays. This angles them deeper into the store and past tempting merchandise. This works well for retailers with fewer SKUs and higher priced items, as it increases consumer time in the store. It won’t have the same impact in a store with many SKUs and lower prices.
Almost all the packaging in a liquor store is of a standard size (the 750ml bottle) so it makes sense to have a uniform layout. A grid pattern, with straight shelves aligned with the walls, and displays and fixtures set at right angles works best. While it’s not as trendy as other layouts, customers are familiar with it and it gives excellent visibility. It allows you to fit the most aisles and shelves in a standard rectangular layout, and accommodates all display options and shelf types.
Liquor stores can take a page from big-box retailers, who all follow the same layout plan. First, they have an attractive display visible as soon as customers enter the store, giving a good first impression.
Second, they allow for a ‘decompression zone’ at the entryway. This gives the customer space to make the transition into the business without being overwhelming. Confronting them immediately with merchandise, signage and offers makes customers feel pressured and uncomfortable. A welcoming, open space brings down their guard.
Third, big-box retailers lead shoppers to the right. Most of the population is right handed, and turn in that direction immediately on entering a store. This means that the wall to the immediate right of your entryway is your power wall. Place high value items here, both to encourage impulse buying and to create a positive impression of your product mix.
Fourth, they place the most popular items farthest from the entrance. If you have a cooler, it should be on the back wall, and any in-store specials need to be as far back as possible. This will lead your customers past other merchandise and can tempt even goal-oriented buyers.
Finally, they place impulse items near the checkout. Grocery stores are champions at this. They know consumers reward themselves with small purchases, and when the checkout line is long, the impulse to buy increases. Even inexpensive add-ons can add up to an increase in sales. Consider placing a grab-and-go fridge with single cans by the checkout.
Your Shelves and Walls
An old adage for retail is ‘what shows, sells’. Well stocked shelves with plenty of inventory have an inherent pull for consumers. During the last recession some retailers reduced inventory to lower costs. They opted for uncluttered shelves with fewer displayed products.
The New York Times reported positive consumer sentiment towards shorter shelves and uncrowded aisles, but they also noted steady sales decreases. Consumers enjoyed the uncluttered experience, but spent less money. Envirosell, a leading retail consulting firm noted, “Historically, the more a store is packed, the more people think of it as value—just as when you walk into a store and there are fewer things on the floor, you tend to think they’re expensive.”
There are two take-aways from this: first, make sure your store isn’t wasting any display space on wide aisles or airy layouts. The narrowest aisle you can use is 42 inches, the minimum to accommodate disabled or mobility challenged shoppers. Keeping aisles as narrow as possible allows you to put in more shelves, thus more selling space.
Second, taller shelves allow you to put more stock in front of your customers. When US discount store, Dollar General raised their shelves from 62 inches to 78 inches, they saw a jump in revenue from $165 per sqf to $201—with no increase in floor space.
Walls are another area to consider. A bare wall wastes floor space that is better dedicated to shelving. Shelves running along walls are usually half-width, as they are only accessed through one side. That’s enough extra sales space to drive your per sqf revenues. It will be easier to work with a planogram (scale floor plan, see below) and a ruler to figure out the greatest shelf space with the least amount of aisle.
A truism for shelf merchandising is ‘eye level is buy level’. Research shows consumers are more likely to buy products that appear at eye level on shelves.
Divide your shelf heights into four zones:
- Highest shelves: boutique, rare or desirable brands;
- Eye level: the sweet spot for high margin products you want to move;
- Lower level: standard products; and
- Bottom shelf: high volume or bargain products that consumers are willing to search for.
To keep your merchandising organised, it’s very helpful to make a planogram. A planogram is a diagram that shows the placement of products in your store and on your shelves. It’s a high-detail map of your sales space, and it’s a simple, powerful tool, allowing you to optimize shelf layout and make plans on paper, before you’re committed to them.
Planogramming software is available, but it’s not necessary. You can generate planograms with a pencil and graph paper. A photograph of the shelves and sections can help keep things as accurate as possible when you’re sketching.
Keep in mind, a planogram doesn’t get used once and then filed. It can be a guide for new employees, letting them face shelves and replenish product easily. The best way to clean and dust a shelf is to strip it bare first—with a planogram in hand it can go back up as fast as it came down, faced correctly and looking great.
An Ongoing Process
Once you have calculated your sales per sqft, set a sales target, analysed your layout, maximized your shelves and walls, and improved your product placement, the next step is to go through a selling period and calculate your results. Did you meet your goals? Which products have the highest Space Productivity Index? Which have the lowest? How will you improve that?
Even if your numbers show improvement, you can go right back to the beginning and look at your store with a fresh eye. There will always be another step you can take to maximize your profits from every sq ft.