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Remodeling – a Path to Stronger Sales?

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In leaner times, stores may not have had the capital to invest in major renovations, but supermarket consultant David J. Livingston of DJL Consultants, says, “A remodel usually brings in a 5 percent to 10 percent increase in sales.”

Remodeling takes on many different forms and expense. In the last couple of years, Publix has renovated 124 of its stores and they’re in the process of overhauling many more. But not all improvements are big ones, nor do they have to make an impact.

Maria Brous, Director of Media and Community Relations for Publix Supermarkets, thinks that small improvements go a long way. She says, “For example, [customers] appreciate the LED lighting in coolers that turns on only when customers enter the aisle. That’s a sustainable [element], and customers are starting to pick up on those things.”

Some stores go big in an effort to keep up with, or surpass the competition. When a competitor creates a new buzz with a new store feature like an expanded deli or enters a market for the first time, stores in the area usually follow suit with some sort of renovation as a competitive necessity. If the existing store is aging, the retailer’s desire to renovate in the face of new competition is even stronger.

Duane Reade, a pharmacy chain based in New York, also carries groceries and has been remodeling all of its stores as part of a company-wide rebranding effort.

Remodeling usually costs less than reconstructing from the ground up. But if a store is more than maximizing its sales per square foot and encountering bottleneck crowds in front, odds are a larger location is needed.

So, how do you know when to remodel? Anthony Bruce of Applied Predictive Technologies, a firm that helps measure the impact of businesses making capital investments, like store remodels, thinks that an accurate return on investment boils down to comparing a remodeled store’s performance to that of similar “control” stores that have not been remodeled. In this case, remodeling can mean repainting, expanding or adding more checkout aisles.

Whether it’s a new floor plan, new fixtures, new and upgraded lighting—a freshly renovated store encourages staff and new merchandising. Store renovations demonstrate management’s confidence in the future; a facelift can boost employee morale and pride in the store; customers can see that the store means business and intends to grow. This awareness and positive perception usually goes along with increased sales.

Recently, in the May issue of the American Marketing Association’s Journal of Marketing, a study done on store remodeling showed the need and benefits of store remodeling projects. Sales growth increased substantially among new customers compared with existing customers. Where small independent retailers were concerned, a year after remodeling, new customer sales accounted for 43% and 7% for existing customers. For the large chain stores, the results were similar (44% for new and 10% for existing customers). Moreover, between 30% and 80% of the growth in sales revenue after remodeling can be directly tied to new customers.

New customer visits to the remodeled store were 16% higher after the initial purchase. Existing customer visits increase by only 2%. But both types of retailers recouped their remodeling costs within two to three years. This is considerably less than the average time between remodels of seven to 10 years.

A store that hasn’t been renovated in seven years also falls into stale patterns. Store staff is likely to repeat old merchandising habits. A fresh floor plan and new fixtures encourages creativity and excitement among sales staff, which in turn, spreads to the customer. When things remain the same for long periods of time, it suggests complacency and boredom. If you need to start small, make your point with well-planned updated fixtures and lighting—the new energy created will be contagious.

TAGS: retail, retail trends, retailers,
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