I’ve written before about product diversity, which is the process of finding new applications for an existing product and therefore opening up new markets. If you missed this blog, go here.
However, how about premises diversification? This really applies to retail businesses where, typically, the cost of your store is the biggest overhead you have.
We all know that retailers have been struggling ever since the launch of internet shopping. Just look at the high street! And now with the effects of COVID 19, the situation is even more critical. But that’s not to say you are all just a bunch of dinosaurs, waiting for the comet. No. When COVID 19 is finally defeated, which we are on track to do, you guys could very well have the upper hand over the internet. How? Client Interaction. You see, billions of human beings have been locked down for months, and we are desperate for some human contact. Not ‘bot contact’.
So, with that in mind, let’s move on now to premises diversification or, as I like to call it, the ‘dating game’. The first step is to look at your annual turnover and divide it by your square footage. Let’s say it equals £400 per sq foot. From here you can start to set a target, perhaps to raise this to £600? By the way, if any of you are wondering what ‘good’ looks like in this game, one of the higher numbers comes out of Apple, at £3,250 per sq foot back in 2018.
However, this is all subject to what you sell and at what cost. Furthermore, I’m not covering profit margins which is even more important. No. This blog is purely to get you thinking about how to eek more turnover out of your premises.
Okay. So you have your sales per sq foot and a new target. Next step is to consider how much of your floor space can be liberated without impacting current turnover. This is where we make space for the dating game.
And now, your new partner. Who complements your current clientele? This is where you really need to know the demographics of your customers: age, income bracket, professional or retired, etc. Armed with these answers, space and clientele profile, you can go ‘dating’.
Who's your perfect sales partner?
Perfect examples of this exercise are Waterstones who introduced the Costa Coffee franchises into their stores (now Café W), or WH Smith who have introduced Post Office counters. These are dates made in heaven. Perfect profiles for the existing footfall and I assure you that you too have a date waiting somewhere.
Now, let’s review some ideas for the smaller retailers who not only make up the bulk of the high street population, but also need the most support right now. I’m not suggesting that you go out and look at a costly franchise introduction. You probably don’t have the space, let alone cash to spare. You might only be clearing 400 sq foot, but this could very well be all the space that a start-up business requires to sub-let from you. With a little more space, perhaps you can build a mini market of 4-6 micro stalls for retailers to rent?
If you decide to introduce a new, second business yourself, make sure it is clearly defined and separated. A new feature for existing customers to explore. Give it a clear brand and advertise this in your window as ‘now onsite’. No matter how small – big it up.
If you are uncertain of what or who to introduce, ask your customers. What else would you like to see here, and where are you going next? If it is for a coffee, well…?
Another way to tackle the opportunity is to jot down all the applications of what you sell and then consider the ‘before’ and ‘after’ markets. Think of it as a client journey. What were they doing before they used your product and where did they go to next? I’ll give you an example. In clothing they were perhaps looking at old clothes no longer used, bought a new dress from you, and then went to the dry cleaners. This journey highlights three businesses: second-hand clothing, new fashion, and dry cleaning. Got it?
And finally, don’t forget adding a service, perhaps a classroom? If you sell cookware, you can rent space for cookery lessons. If you sell hardware, perhaps offer DIY lessons. A florist, flower arranging lessons – and so on. What you will find is that if these classes are successful, you will have the opportunity to extend your product range to cater for the keen amateur, and not just supply the finished article.
Remember, your goal is to increase sales per sq foot with increased, complementary footfall. And further more, remember that your opportunity is coming – your customers need contact again!