Impact of Store Size Reduction on Overall Store Performance – Insights from an Experiment

Abstract

Majority of brick-and-mortar retailers in India assume that (a) existing store size is ideal totheir retailing format, (b) inventory display density per square foot is optimal, (c) larger thestore size higher the consumer walk-ins, (d) more premium the store location more premiumthe perceived retail store brand positioning in consumers mind, (e) larger the store size higherthe store revenue and most importantly, (f) store revenue reduces in proportion to reduction instore size. Such assumptions and widely followed practice have resulted in increasing pressureon store operating costs for many years. Brick-and-mortar retailers need to understand theimportance of store rent and its implications on the overall store profitability to achieve asustainable store level profit and to achieve this they need to rationalize stores size onconsistent basis. In this research, we have analysed the existing store size across locations ofa select retailer in relation to overall store profitability, selected few loss making stores;especially the ones which are delivering losses owing to higher rent and larger store size,reduced these stores size without compromising the consumer experience aspect, evaluatedthe overall store performance over a period of eleven months to understand the changes in (a)consumer walk-ins, (b) store revenue, and (c) overall store profitability.