Open a new store or renovate an existing space?

How To Get Started: Open a new store or renovate an existing space? Each has its opportunities.

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If you’re ready to grow your retail business, you may ask if it’s more advantageous to stay put or to change locations.


As part of our How To Get Started series, we look at the burning topics that affect all retailers who are looking to grow their retail footprint. Our previous post in this series looked at how retail fixtures can help improve your customers’ experience.


From ordering inventory to researching market trends to merchandising displays to training staff and planning in-store events to scheduling online marketing and more, running a retail business means constantly having a thousand details top-of-mind You’re focusing, balancing, juggling finances – frankly, it’s all consuming!

So, moving from a location for any number of reasons: whether it’s because you’ve outgrown a space in size and layout; or because of population shifts or consumer catchment area growth; or even downsizing into a shared space with a complementary business, or perhaps following consumer trends. From time to time events are out of your retail-hands such as when a building is sold.

Moving makes sense, right? But not always.

You have to decide for yourself if renovating an existing space – maybe taking on neighbouring square footage if necessary, is the smarter move.

The decision to stay put or change/add locations is such a personal one in your retail-journey; dependent on timing; intertwined with your own unique set of circumstances; tied to your location(s) and the size of your retail portfolio (whether it’s 3 stores or 49; or somewhere in between). Covering all possible options is near-impossible here, nevertheless, it’s helpful to explore some diverging paths for such a complex decision-making journey by examining some possibilities.

Perhaps some of these roads-less-travelled will be just up your alley.




ONE – REALIZE

Firstly, you may already have a sneaking suspicion that your current location won’t get you to the next level of growth as things stand. So, what are some signs that something needs to change?

  • Your core customer demographic might be changing. Or your core may no longer be close to your targets.
  • Perhaps an influx of ethnic customers (if you’re not part of that ethnic group) has made it more difficult to conduct business and be profitable. Or at the very least, riskier.
  • Customer traffic might be decreasing. Average basket or purchase/receipt of sale may be declining; inventory may not be moving as quickly (or even worse, lots of merchandise could be left after the season is done). [NOTE: This might also be an indicator of incorrect ordering practices]
  • Competition may be driving you out. Or if your strategy was to co-locate with competition to feed your sales traffic, their customer base may have shifted in some way.




TWO – EVALUATE

Whether staying or moving, analysis of sales potential and market capture is vital.

What are solid reasons for each option?

Only by examining all the data can you decide which choice is right for any given moment. And as with every business move, it generally comes down to a cost/benefit.

The cost of making a move vs. upgrading where you are currently. Costing must include the expense of renovating/expanding compared with those of moving (and potentially facing construction in a new space). Consider ROI – what your expected increase in sales could be and how long you’d be willing to pay off the investment made.

Calculate your ROI whether renovating or moving.




THREE – CONSIDER

Ask yourself what you’d need to consider if you’re open to both options (staying or moving to a new location, or possibly both right – after all, you could be expanding).

  • Take inventory of what is working in the current location and consider if that can be replicated.
  • Take stock of your layout/setup/merchandise, etc. and plan for any changes or updates you might wish to make to the customer experience in any new locations. REMEMBER: You’ll want to budget for an update to the current location, so your brand presents a consistent impression.
  • You’ll need to plan on using staff from the existing location to train new staff.
  • Ask yourself if you’ll need to consider a store concept now? Think, a standard layout that you can replicate in a new location and roll out in more locations to come. Or perhaps your offering is unique to each community. Maybe you’ll be using the space/location to dictate what that look should be.
  • And then schedule, schedule, schedule. Consider what the right time might be to open new your business. Allow for 16-20 weeks for fixtures and installation. Another 4-5 weeks if you need a design/floorplan and more time depending on the amount of construction work needed on the space. Time always matters.




READY, SET, GO…


Let’s take a look at some of the considerations that could (and should) factor into your decision to move (or add) locations, bearing in mind that very personal and unique circumstances will influence any decision made.



POSITIVES TO A NEW LOCATION:

  • You’ll have the opportunity to start with clean slate. An empty box. And you’ll be able to make it to suit your own vision.
  • You’ll have control over location quality when selecting your site. A prime location, ideal footprint and layout, high visibility, great accessibility, a ready-made customer base or population trends or customers that would follow you make GOING an easy decision. Perhaps you’ve found a site that’s already outfitted for your business (ie – restaurant).
  • If moving costs out at the more affordable/budget-friendly option, then moving it is.



THINGS TO BE AWARE OF WITH A NEW LOCATION:

  • There may be unknown factors involved with moving. Remember, there’s always an element of risking some misstep.
  • Filling that bare-bones box is going to be an expense that has to be accounted for. A net-new location requires more work in permitting, plans, construction and inspections than a reno (assuming that reno isn’t just shuffling fixtures around).
  • Timing/potential downtime at any location is critical to assess. You may need to factor in staying open at one location (perhaps serving customers in a reduced retail space while work proceeds in phases). Try to time rental for shortest time before opening for business (typically 2-3 weeks) so that you could earn sales revenue within your first month. TRY: Negotiating with the landlord for an amount of rent-free or reduced rent to cushion that prep-time.
  • TIP: Many retailers fail to consider the lead-time prior to opening, so ask for a closing date no earlier than 20 weeks (that’s 5 months!) minimum from signing the lease agreement. This time will be necessary for concept design, manufacture/sourcing, install and merchandising.
  • Then, see Colliers International’s moving checklist with over 60 items to be aware of.




READY, SET, STAY…



When weighing the other side of the equation, your own personal and unique situation will come to bear on any final decision you should and could make to fulfill your retailer’s vision.



POSITIVES TO STAYING IN YOUR CURRENT LOCATION:

  • There’s something to be said for dealing with a known quantity, be that competitors or compatible neighbours, where there are common strengths and needs.
  • An existing customer base is invaluable.
  • With the right partner you can keep your store open during the day while having renvoations take place during off-hours – so your revenues are not impacted.
  • Perhaps it’s cost-effective to refresh vs. absorbing the expenses of moving in both time and money.
  • You can count on your existing logistics like parking and visibility/accessibility.



SOME DRAWBACKS TO STAYING AT YOUR CURRENT LOCATION:

  • Perhaps staying put hems your business in (sizewise) by not allowing for growth/expansion? The desire to reconfiguration an existing space might also not be well supported at your site making staying a harder option. And the need for expanded services might warrant moving rather than staying.
  • You’ve heard that expression of putting lipstick on a pig? It may not be cost-effective to rejig an existing space when moving is an option. Your decision, once all factors are weighed.




SHOULD I STAY OR SHOULD I GO?

So, what if you’re keeping one or more retail locations open while starting at a new location? Consider that renovating or relocating are less costly than adding locations…but once other options (such as diversifying your offerings, expanding to online or adding pop-ups) are exhausted, multiple locations may be your best solution.

Adding locations has definite perks by expanding your customer base, building brand awareness over a larger area, allowing you to provide better customer service (again over an increased service area), increasing your ordering power, lowering operational costs, bettering profit margins and displaying valuable social currency by showing off a thriving business.

Location, location! Ask yourself, are you / should you be adding different kinds of units to the mix of your retail portfolio? Should you be located in a strip mall? Perhaps a stand-alone store or a more commercial location will augment your customer base. You might also consider whether to allow each retail location to be injected with a local flavour distinct to each community.

Then it’s vital to focus on remaining consistent in your branding. Sure, standardizing all processes, logistics, technology will help, but multiple locations can muddy your image if not carefully managed.

TIP: Keep an eye on the market shift as discount retailers collectively add hundreds of stores during 2018 while mall-based stores shutter stores in record numbers. This speaks to the power of cheap and high-end succeeding while mid-tier specialty stores close). Trends and market movements are important indicators that bear watching.





SO WHERE DO WE LAND? KEY TAKEAWAYS

  • With a clear eyes crunch the data for all scenarios.
  • Look in. You know your business best; what are your traffic and sales are telling you?
  • Look out. Are there new emerging markets where your product or offering would be a great addition? Or are more of the same type of clients you currently have or want in a new location?
  • REPEAT: Give yourself at least 5 months breathing room before the opening. This will allow you to get in and set up with minimal rent payment before you start making sales. And don’t be afraid to negotiate early entry rent free or reduced rate. Perhaps ask the landlord to pay for any renovations that will remain to benefit the next tenant (such as lights and flooring).
  • Know where you want to spend and where you want to splurge. Life is full of compromises and when you have to make tough decisions, it typically makes the choices more valuable.




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