Store Scores: No Longer a Numbers Game

Posted by Carol Spieckerman on April 06, 2011

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“How many stores did we get?”

That’s a question I got used to asking back in my supplier days; the answers were often thrilling because store counts escalated into the thousands for the first time in history while, at the same time, all-store buys remained the industry standard. At one point, I was managing key accounts for over 35 separate licenses, all of which were actively distributed across various high-volume accounts. The store count for each property was the key performance indicator and reflected how viable the property was to the overall brand portfolio.

Fast-forward a decade, or so, and, in many cases, not much has changed on the supplier side. Generalized store counts are still a key metric, even as retailers’ store formats become more specialized than ever before and each format achieves a different goal for the retailer.

Although “small” and “urban” are the terms that are most often used to describe these emerging formats, they fail to fully explain the diversity that is taking shape and why it exists. This became particularly apparent to me during last week’s GlobalShop conference, when retailers such as Starbucks and Whole Foods shared their perspectives on the role that physical stores play in their brand game plans.

It’s time for licensors and licensees to incorporate proactive format planning into their branding strategy. In this era of format frenzy, the answer to “How many stores did we get?” can’t be the only way to keep score.

Instead, focus on the “why” (why retailers are creating these concepts) rather than just the “where” (where your products and brands end up).

Moving forward, the retailers’ new playing fields can be categorized into three motivation-based strategies to help position your brands and products for the impending format opportunity:

1. Proliferation
Motivation: To penetrate new markets with smaller footprint stores

Smaller footprint stores are where you can get your small, urban, and (let’s stop leaving this out) rural fix. Walmart’s Express and Target’s City Target concepts fall into this category.

Game changer: Drug retailers, dollar stores, and hard discounters, such as Aldi, will feel the heat, greater store density will intensify price transparency, and consumables will take center stage. These stores should not be assumed to be “mini” versions of the mother ship. In fact, it remains to be seen which categories, brands, and even packaging sizes will gain ongoing placement. As these concepts get fine-tuned, they’ll continue to evolve and change.

2. Specialization
Motivation: To capture new niches and saturate key categories

Separately-branded specialty concepts, created by formerly generalized retailers like Macy’s, Loblaw, and Penney’s, were the focus of my last blog article for LIMA.

Game changer: Spin-off specialty stores will change the existing specialty store landscape and potentially siphon sales away from competitors that are more generalized. Most specialty stores will initially focus on the retailers’ owned brands; however, just as J. Crew, Gap, and other private-brand-based specialty chains have begun to augment their assortments with selective national and licensed brands, the same is expected to hold true here as well.

3. Localization
Motivation: To drive loyalty by closely connecting stores with their communities

These concepts may be highly customized, as with Whole Foods’ all-out hyper-local approach — where each store has a local “forager” who pushes for local products and a community advocate whose role is to immerse the store in all types of neighborhood activities, both prior to openings and beyond — or formatted, as with Starbucks’ three newly-refined Heritage, Artisan, and Regional Modern “palettes.”

Game changer: Even though much has already been stated about big box retailers putting “mom-and-pop” stores out of business, a rush of highly-efficient, hyper-localized concepts could pose an even greater threat to business as usual and woo a new generation of shoppers. I recently wrote about the reality of retailers being brands. In the near future, individual stores will become their own brands, with the concept of “retailer-as-brand” evolving into “store-as-brand.” Brands that engage in their own version of “community service”, by integrating localized insights into a community-specific context, will be highly favored, and everything from event marketing to POP displays should be planned with each retailer’s localization and community engagement perspective in mind.

Bottom line:

  • Format planning should be part of your strategic planning.
  • New formats achieve different goals for each retailer and those goals should inform your brand positioning strategies.
  • Not that long ago, localization meant tweaking assortments and changing as little as necessary to achieve the desired effect. Now, localization is a full-spectrum proposition that involves community engagement, store design, brand selection, and product assortment. Today, localization is also becoming the rule, rather than the exception.
  • All-store buys aren’t a given; neither are existing brand and product assortments.
  • When Walmart began to hint at creating smaller format stores, many assumed that meant a rollout of their existing Neighborhood Market format – welcome Walmart Express! Not many would have assumed that Loblaw, known primarily as a Canadian grocery retailer, would open Joe Fresh apparel specialty stores in the U.S. Toss out all your old assumptions. Format planning is the newest arrow in your quiver.