Retailing is just a tough business. Seeming little changes in the store can either delight or disappoint customers. It is really hard to get everything right. We have two recent stories that look at changes retailers are making to goose up sales. The first is from the Wall Street Journal and looks at retail dressing rooms (Why Are Fitting Rooms So Awful?, Apr 6). In this video one of the authors discusses her findings.
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Here is the money quote:
Customers who try on clothes in fitting rooms have a conversion rate—meaning they ultimately buy something they tried on—of 67%, according to retail consultant Envision Retail Ltd., of Surrey, England, based on observations of more than 8,000 shoppers. Customers who don’t use the fitting rooms have only a 10% conversion rate. Shoppers who use the fitting rooms spend a third of their in-store time there.
The second article is from the New York Times and reports on a trend to add more and more stuff to stores (Stuff Piled in the Aisle? It’s There to Get You to Spend More, Apr 7).
After the recessionary years of shedding inventory and clearing store lanes for a cleaner, appealing look, retailers are reversing course and redesigning their spaces to add clutter.
Dollar General is raising the height of its standard shelves to more than six feet; J. C. Penney is turning its empty walls into jewelry and accessory displays; Old Navy is adding lanes lined with items like water bottles, candy and lunchboxes; and Best Buy is testing wheeling in bigger items, like Segways and bicycles, to suck up the space created by thinner TVs and smaller speakers. …
“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,” said Paco Underhill, founder and chief executive of Envirosell, who studies shopper behavior.
This is an interesting pair of articles. Each is aimed a different (although very standard) measure of retail performance. Fitting rooms are about conversion — that is, what fraction of customers coming into the store actually buy something. If you can get people (OK, women) to try things on, they are more likely to buy. If anything, it is a little surprising that it has taken this long to figure this out. That said, the article points out, fitting rooms are one of the most heavily used parts of the store, making it a challenge to have it keep looking nice. It is also not just about the space it is about service, having staff to go fetch a different size or restocking unsold items. To some extent, this really plays up the advantage of physical stores over on-line shopping. The advantage of going to the mall over going on the web is that you can see the items in person and try them on. Making it easier and more enticing to go into the fitting room helps seal the deal.
The Times article is really about trying to maximize sales per square foot. A Dollar General spokesperson is pretty clear on that point.
At Dollar General, the tops of the shelves have been raised to a standard 78 inches. Some were as short as 62 inches. “Think of the shelf heights as air rights, if you will — it’s easier to raise the shelf height than expand the footprint” of the store, said a spokeswoman, Mary Winn Gordon. Raising the shelf height, she said, raised sales per square foot to about $201 in 2010 from $165 in 2007.
What’s unclear to me is whether clutter boosts sales or just more assortment in greater depth boosts sales. Some of the examples they give suggest that people just react to a pallet full of stuff by assuming that it is manna from heaven. That doesn’t seem to fit Dollar General expanding its shelf space or Best Buy putting electric where there once were CDs. Both of those example seem much more about offering a wider assortment. For Dollar General, it is cheaper to go up than move to a larger location. For Best Buy, it is too hard to go the other way and slim down to smaller stores.
What both of these stories have in common is that American retailing is pretty much saturated. There is no way for a large retailer to grow just by adding stores. Growth is going to have to come from getting more out of what you’ve got.