Starting situation – too many branch outlets were non-starters because of a lack of systematic selection
On the one hand, our client, one of the biggest retailers in Germany, attached high priority to growth. On the other, its selection of locations for its expansion plan was driven by opportunistic motives. This growth process resulted in a high number of stores with below-average profitability based on floor area. As a result, 30 percent of the stores were closed within three years of opening. As well, the cadence (power or cycle time) for the expansion was too slow. Sustained improvements needed to be made to both the quantity and, more importantly, the quality of products.
Project approach – identification of the white spots and implementation of a new expansion course
An expansion tool was developed in order to place growth planning on a systematic footing. The aim was to evaluate all locations in terms of their profitability. A detailed analysis was performed to determine which location factors (such as competition, purchasing power and centrality) influence profitability and viability. An individual customer scoring model was developed from this in continuous coordination with the heads of the expansion project. This became the core element of a process combining the sometimes conflicting interests of expansion and sales. As well, a cadence offensive was launched to obtain top offers from both brokers and property developers.
Finding – better to have one store less than one bad store too many
Profitable expansion is a process that needs to be learned. Unsystematic growth leads to the opening of unprofitable locations, which then have to be closed again in a cost- and resource-intensive process.
The alternative is to have a systematic, data-based process that allows focus regions to be systematically processed. However, what is crucial is the cadence – a profitable opening is not possible without high-quality property offers. And the bottom line is crucial – in the quest for profitability, viability should never be forgotten.
- Development of a geodata-based expansion tool and anchoring in a systematic expansion process
- Identification of focus regions as a basis for realigning the expansion process