KnowThis Blog Postings
- Published on April 19, 2011
- Posted by Paul Christ
Stuff Piled in the Aisle? It’s There to Get You to Spend More (New York Times)
When walking into retail stores consumers rarely give much thought to understanding just how much a retailer invests in a physical store. For many retailers, the investment is substantial. It includes the costs associated with the building, the store fixtures and the employees.
However, the largest expenditure facing retailers is the inventory of products sitting in the store. For example, the value of inventory in large grocery stores or department stores can easily be worth millions of dollars for EACH outlet.
With such a large investment, it is easy to understand why retailers see this as one of the first areas to cut during rough times. That is exactly what happened during the recent economic slowdown when retailers reduced the amount of product they sold in their stores. This was accomplished in two ways. First, retailers reduced the number of products they carried by eliminating slow-moving products. Second, they reduced how much extra stock was carried of products they kept in the store. For instance, when restocking shelves a store would order 10 cases instead of 20 cases. While this means they must resupply their stores more frequently and it also increases the chance of products being out of stock, the retailer gains financial benefits by having fewer funds tied up in inventory.
With most retailers seeing better days ahead, they now face a difficult choice when it comes to store inventory. As discussed in this story, research shows customers like the less congested appearance of stores where fewer products are displayed. Yet, research also shows customers psychologically believe a store is offering more bargains when it is packed with merchandise.
Additionally, retailers feel they need to stock their outlets with more product because they project fewer new store openings. They believe they can serve customers in large numbers in their existing outlets by adding more products to the display area. For some this means turning back-store storage space into selling space. For others it means adding more products by increasing the height of store shelves.
With retailers seeing customer spending increase, shoppers can likely expect retailers to continue this trend with stores becoming even more congested.
“Messiness, or pallets in the middle of an aisle, are also a cue for value,” said Ben DiSanti, senior vice president of planning and perspectives for TPN, a retail marketing consultant. “There are a lot of cues that the shopper picks up on in stores.” A streamlined, simplified store, he added, “begins to alter that shopper’s perception of, ‘Does Wal-Mart have the best prices?’ ”
Which retailers are the most difficult to navigate because of the abundance of product on their selling floor?
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