Retail performance is an area with many facets: from pricing to merchandising, from facility cleanliness to customer service. Added to the complexity is the fact that each site’s trading area is unique, with its own demographic profile, traffic count, competitor mix and competitor attributes. In today’s busy retail environment, how can you find the time and focus to commit to the right aspects of retail performance — the ones that will maximize your site and network profits?
Through our modeling of retail fuel and convenience sites in more than 70 countries, we have found that the many factors impacting retail performance can be captured in 7 Elements that are the key areas of focus for ensuring maximum profits. These 7 Elements are measurable using quality-driven data and sophisticated analytics. The 7 Elements that every retailer needs to understand, as they relate to their individual sites and retail network as a whole, are: market, location, facility, brand, operations, merchandising and price.
Focusing on the 7 Elements is a strategic response to fast-paced retail conditions. Today’s consumers are in a hurry. They want to get in, find what they’re looking for and check out. And they want to do it all quickly. This phenomenon has led to the rapid growth of online retailers and the erosion of traditional retail. Attention to the 7 Elements will help you keep convenience at the forefront of your retail operations.
Let's take a closer look at the 7 Elements and their role in helping maximize retail performance.
Understanding market conditions is important to ensuring a competitive edge. As a retailer, you need to know who your immediate key competitors are and how your site compares. Benchmarking your site against key competitors can reveal improvement opportunities that you can then act on to ensure your site is as successful as possible in your market.
Location is something you can't change; therefore, you should employ a systematic approach for choosing the best locations. Having a better location than your competitors is the first step to ensuring your retail site has the abilities to withstand competitive threats and help consumers realize their need for convenience.
Your site's facility is more than its physical attributes. It is important to provide consumers with a pleasant and efficient shopping experience. A facility must fulfill the needs and demands of consumers — for instance, it should include an adequate number of fueling positions and parking spaces, and the setup should make it easy for consumers to find products in the store. Consistency of facilities across your retail network provides consumers with familiarity of layout and comfort in knowing they can quickly find the products they need.
That same consistency also reflects well on your brand and its overall reputation and quality as perceived by consumers. Keep in mind that each market has its own unique critical mass and saturation points. Until a brand reaches critical mass, it’s vulnerable to competitive threats. When nearing saturation, retailers need to carefully evaluate adding sites to their network due to the fact that cannibalization is more prevalent at that position. The sweet spot between critical mass and saturation lies where volume share increases outpace outlet share increases as new sites are added to the network.
Operations are the personal and often intangible aspects of management and customer service at a specific site. Customers demand fast service, courteous employees, well-stocked shelves, equipment that works, cleanliness and fresh food. Well-trained, quality employees will contribute positively to the bottom line.
Merchandising success relies on the correct product mix, adequate inventory, fresh food and a clean and neat appearance. Driving synergies between the fuel forecourt and store can improve overall profits. Leveraging the products that consumers value most can drive additional demand.
Price is a unique case for the 7 Elements. The 6 elements that we just described act as volume magnets to bring customers to your site. Success in those 6 elements earns you the right to price more competitively. It can be difficult to measure, especially on the forecourt, where in many countries it changes multiple times each day. It's important to have a constant and solid grasp, not only on your own price, but also on the prices of your key competitors — those most impacted by your price moves.
Clearly, there are many aspects of day-to-day and strategic operations that lead to successful retail performance. And because most retailers operate more than one site within a city, wading through the mountains of information associated with each of those sites can be a daunting task. Successful retailers rely on systematic processes and tools to help them understand site strengths, weaknesses and improvement opportunities. These tools, when filtered by the 7 Elements, help ensure that the best, most profitable decisions are being made, while minimizing cannibalization in the overall retail network.