In the first interview in our Retail Expert Interview Series, Bluestock Advisors retail consultant Reet Singh took the opportunity to dig into Flora Delaney's strategic space planning expertise. Flora is President and founder of Delaney Consulting, which helps large retailers' store environment teams to automate, optimize and scale for future growth. With her deep insights into consumer space planning, Flora has drawn valuable conclusions as to how technology and data can improve the bottom line and provide a better customer experience.
Q: Flora, with your expertise in retail systems and automation, can you explain to us 'Space Planning'?
A: When it comes to physical retail spaces, space planning focuses on the arrangement and organization of stores. It's important to differentiate between space planning and visual merchandising. Visual merchandising deals with elements like aesthetics, color schemes, textures, and finishes that contribute to the store's ambiance. On the other hand, space planning involves strategically placing different sections within the store to optimize the shopping experience. That is everything from allocating space for specific categories such as footwear and home décor to ensuring that shoppers can easily locate the items they want. It also helps shoppers discover complementary products without regretting missed opportunities after leaving the store.
Q: At Bluestock Advisors, we often have clients who need to understand how macro and micro space planning co-exist. Can you help us understand?
1) Macro Space Planning for Holistic Shopping Solutions
Macro space planning is the overarching layout of the store. It's about strategically allocating space to various section. Then creating logical adjacencies ensuring that customers can explore and find complete solutions. The goal is to help shoppers identify not just individual items, but an entire solution that fits their needs. This macro approach orchestrates the store's layout to create an intuitive shopping environment.
2) Micro Space Planning for In-Section Decision Making
Moving from the macro to the micro, we encounter “planograms.” Planograms serve as the merchandising guide as a customer stands in front of a particular section, like household cleaning. The objective is to guide customers through decision-making within that specific section. Clarity is key, as customers need to differentiate between products like all-purpose cleaners, dish detergents, and toilet cleaning supplies. Once they've narrowed down their selection, micro space planning helps them make informed choices. This might involve arranging products in a good-better-best hierarchy, ensuring prominent display of preferred brands, highlighting sales and value deals, or simply making it easy to discover a specific product for precise needs—such as a stove top cleaner.
Q: In your experience, how does space planning and planogramming help the retailer direct the consumer's shopping experience and increase their sales?
A: Space planning, when executed effectively alongside planogramming, offers shoppers invaluable assistance throughout their shopping journey. Think of a perfectly crafted planogram as a silent sales associate, ready to support customers without them needing to ask for help. When properly implemented, stellar planogramming empowers shoppers with a logical presentation so that they can make the right selection that fits their needs and budget.
Q: What are your top tips for retailers who want to strategically incorporate space planning into their business?
Beyond Tactical Implementation: Unleashing the Strategic Power of Space Planning While retailers often associate space planning with directions for store organization, its potential surpasses mere tactical rearrangements. A tactical approach involves positioning new items, adjusting facings, and relocating merchandise—a necessary aspect of running a store. However, the true potency of space planning emerges when it transforms into a strategic tool.
A Strategic Vision: Amplifying Sales per Square Foot
One strategic avenue lies in evaluating sales per square foot, then delving into outliers—whether those are categories or specific stores. A data-driven approach allows retailers to identify areas ripe for improvement and growth. Given that most transactions still happen in physical stores, their proper layout and stocking are pivotal. Furthermore, with the rise of services like Instacart, which fulfill online orders from in-store inventories, an optimized store environment is critical for meeting emerging customer demand.
3. Integrated Planning: Bridging Space Planning and Annual Strategy
At a strategic level, retailers should seamlessly integrate space planning into their annual planning. As they allocate category budgets and devise target stock price strategies, they should contemplate which categories will drive the majority of growth. The question becomes: How will the store environment be adjusted to drive sales growth? Aligning space planning and broader business goals ensures that each area of the store is primed to maximize customer engagement and sales potential.
Q: What are your recommendations for retailers and businesses who want to leverage some of the new digital technologies?
Embracing Digital Transformation for Informed Space Planning
To unlock the full potential of space planning, retailers must embark on a journey of digital transformation. The foundation lies in digitizing stores—an endeavor that entails designing ideal store layouts as well as accurately reflecting the current realities in every single store. Bridging the gap between aspiration and actuality becomes the guidepost for store transformations.
2. Unveiling Crucial Key Performance Indicators (KPIs)
Once digitized, retailers can derive essential KPIs to inform their strategic decisions. The well-known metric of sales per square foot comes into play, offering insights into store- and department-level opportunities to generate additional revenue. Additionally, gross margin returns on space (GMROS)—a strategic indicator akin to GMROI – can identify profit pools throughout the store footprint. There are many more space metrics which provide a panoramic view of how effectively space planning is contributing to revenue generation and resource optimization.
3. Simplicity Meets Insight: Heat Maps and Fair Share Analyses
At its core, technology-driven space planning uses accessible tools like heat maps and fair share analyses. While simple, these measurements can offer profound insights. Heat maps visualize customer traffic and engagement patterns, enabling a better understanding of high-traffic and underutilized areas. Fair share analyses provide a comparative perspective, evaluating each category's or department’s performance against its potential, ensuring equitable allocation of space.
4. Holistic Integration: A Fusion of Technology and Retail Strategy
To get it right, retailers need to seamlessly integrate technology and data with retail strategy. When they understand store layouts, grasp in-store realities, and employ advanced analytics, retailers can foster a dynamic environment where each shelf, nook, and aisle is aligned with both customer needs and business objectives.
Q: At Bluestock, one of our defining traits is our data driven forecasting and strategic planning. What are some future space planning trends that you predict for 2024 and beyond?
Dynamic Evolution: Reshaping Space Planning Landscape
Looking ahead, the trajectory of space planning appears poised for transformation. The days of manual processes seem numbered. In the past, data generation was followed by analysis and recommendations for space adjustments. However, the future holds a shift toward increased automation driven by rules, guidelines, and requests so that adjustments can be made on -demand.
2. Automation: Micro Space and Inventory Integration
This evolution is expected to bring automation to the forefront, particularly at the micro level. While automated changes might not extend to store layouts, they will certainly impact planograms, facings, shelf stock, and shelf availability. This automation will integrate with ad support inventory replenishment, offering enhanced visibility into store-level customer demand.
Q: At Bluestock Advisors, we have seen a shift in the use of artificial intelligence in all sectors we advise in. How do you see AI integrating with space planning at retail?
A: Artificial Intelligence will play a pivotal role in this transformation. AI can take forecasts down to the store/SKU level and make automated adjustments on space plans. Then deliver those to store associates much faster than we ever could with human beings doing that work. It will take a lot of the monotony out of planogram updates. I like to think that when we allow machines to do what they do best, we can allow humans to do what we do best: make creative decisions.
Q: Why is space planning an integral part of any retail strategy?
A: Retail space planning underscores the pivot from tactical execution to strategic elevation. The conventional understanding of space planning as just executing store layouts and inventory allocation is limited. I believe in redefining space planning as a strategic advantage—one that aligns with the rigor applied to managing inventory, payroll, and other critical retail assets.
Retail space is a finite and precious resource, one that demands strategic management. Rather than viewing it as a means to execute tactical tasks, I advocate for recognizing store space as an invaluable asset that deserves meticulous attention. This means looking ahead and anticipating the dynamics that will shape stores in the coming months and preparing them to effectively respond.
We hope that you enjoyed this post in our expert interview series, you can get more information about Flora’s work at https://floradelaney.com/.