The 3 most important things in retail

Of course this is not true but is merely used as a figure of speech to emphasise the importance of position.

What is a good position for some retailers can be a terrible location for others and vice versa.

Tied into this is the question of traffic. The more the better? Wrong. Too much traffic can be a bad thing. Years ago I commented on an accessory store at a busy railway station. The retailer thought the traffic would result in fabulous sales, but this did not materialise. Lots of people in lots of hurry.

This week I came across some interesting figures sent to us by a client.

They have two stores in quite different locations. One is in a busy major shopping centre where they are naturally paying rent accordingly. The other is in a quiet neighbourhood shopping centre facing onto the street.

Sales forecasts are about 25 per cent higher for the shopping centre location, although the other shop is catching up fast and will finish January 35 per cent higher than its sister store.

But the interesting statistics are those concerning transactions and units.

Over the past six months, the shopping centre shop achieved sales 17 per cent higher than the street shop, however, there were 88 per cent more transactions and 50 per cent more units sold. Other factors aside (such as rent), the street shop is clearly far more efficient. Not only are there selling staff savings, but also significant savings in handling goods in and out of the store.

While the shopping centre shop is still more profitable, the gap is narrowing and if sales continue the way they are at present for the street shop, the tables will turn. Salaries as a percentage of sales are consistently higher in the shopping centre shop.

What this example suggests is that one must be careful when the landlord offers a shop in a ‘better’ position with more traffic. It may happen that a ‘worse’ store with less foot traffic but easy access to the car park, may be a better bet.

Or that being in a shopping centre is not the best alternative at all.

Position, position, position is important but it doesn’t mean that the best position is the best position.

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted atstuart@impactretailing.com.au or 0414 631 702.