How do you define store development?
Store development is a retailing function that stretches from finalising the retailer’s store network plan across potential markets to the store sizing, store design, layout , optimal merchandise assortment fill, visual merchandising and the construction of the store. Its mission is to ensure the physicals attributes of a store can deliver the business intent right from site selection to store opening. Store development is not a service provided to the business of retailing but a part of the business itself as its output has a large impact on the P&L of the store.
How exactly is an efficient store development process structured?
My understanding from meeting store development professionals from international chains is that fundamentally there are two functions in store development. The first is the property acquisition that comprises space network scouting, space acquisition, leasing legalities and commercial finalisation. The second, which is the development of the physical store, comprises store planning, store design, visual merchandising, construction and handover of a ready-to-operate store.
There are two possible models and in the first, which is popular for small to medium-sized specialty stores, one single department is accountable for both the functions integrated together. The second model, used mostly by big box formats, has both the functions operating as two separate departments that co-ordinate together.
Currently in India is a prevalent third model which further segments this into a Business Development department handling space acquisition, a Store Design/Planning department handling store design, a Projects department for managing construction and a Visual Merchandising department handling the store presentation. All of them report into different departments and this presents a huge and complex challenge to integrate on the drawing board and the construction site.
What are some of the disadvantages of the store development model prevalent in India and what is the approach at Mahindra Retail?
The concept of store development is still not common and accepted in India. There are store development teams operating with a very few established retailers but even they are not structured and empowered for accountability from site selection to store opening.
We don’t have any retailer in India operating by the first or second model despite these having been proven to deliver better control and accountability. For some reason, it is common to have many unrelated teams running around handling their silos of accountabilities with no one actually being accountable in totality. In fact, there are organisations that actually operate in a way where no one can be held accountable for a store opening delay !!
At Mahindra Retail, we effectively follow the second model where the store development department evaluates and qualifies sites short-listed by a cross functional team of the stake holders. Once a site is evaluated, qualified and selected, the store development department is responsible for taking it forward from there right up to delivering a ready-to-operate store.
What could be the reasons for Indian industry to not recognise the value in a more holistic approach to store development?
I suspect it's because store development is still not considered a profession; it's considered as a cluster of professionals gathered together, usually with different agendas, to deliver stores.
For instance, the main agenda for an architect would be to make the store look structurally nice while the store planner would want to maximize the store capacity, the visual merchandiser would focus on graphics and display and the project manager on constructing the store at the lowest cost possible. The result of all these seemingly disconnected agendas could be an over designed, over-crowded, visually busy and cheap store that falls apart in a few months!
The larger reason is probably the lack of talent with the band width to take on this integrated function that demands commercial, business, merchandising, design and engineering skills rolled into one. It could also be an organisation's perception of risk in placing so many critical functions 'in one basket' that is preventing the move, which again means that it becomes a bigger challenge for potential talent to emerge, learn, operate and multiply.
What benefits have your seen in operating as a store development team compared to a more siloed approach?
The store development approach is completely about team work, multi-tasking and involves a lot of intra-team empathy. The architect, while designing the interior space, is also sensitive to the merchandise presentation efficiency to be achieved and visualising the visual merchandising requirements for the environment. When planning services for the store, like electrical and air-conditioning, it is also simultaneously about ensuring optimal energy consumption and ease of operation. The store construction is planned to ensure completion within the rent-free period, with fixtures, visual merchandising, planograms and sinograms planned to ensure store fill and setup in the shortest possible time. The entire process is even integrated with the supply chain by merchandise carrying cartons being coded fixture wise and cross referred in planograms to facilitate ease of store setup and training of operations in that process. The benefits are enormous, in terms of efficient and optimal usage of store build capital cost, time required to open a store and, the most important of all, getting it right the first time.
What have been some of the positive fallouts of adopting this integrated approach to store development?
This approach has helped initiate many ‘projects’ that have yielded commercial and operational benefits.
An exercise of re-engineering the lighting of our store, with the lighting consultants, brought down the capital cost by 20 percent, energy cost by 15 percent and helped us achieve more efficient lux levels across the store. Re-planning energy circuits at the time of construction helped control peak and non-peak hours energy consumption in the store, resulting in an overall saving of about 15 percent energy per store without any expensive energy management equipment. Resizing fixtures by about 50-75mm helped reduce cost by about 30 percent.
By using a process we call 'tracing', where all frills in terms of space for back-of-house and non-merchandising areas are trimmed, the trading area efficiency was improved by about 10 percent and hence improving space efficient in the same proportion.
Breaking down and re-scheduling the project process from the drawing board to the site helped trim a significant time of about 20 days in construction time.
Better management of merchandise densities in tandem with assortment plans, planograming and fixture design tweaking helped increase densities by about 20 percent.
With all these measurable parameters that have a direct impact on business this function would obviously earn the status of being critical component of the business.
Do you think there is a correlation between the lack of an integrated approach and the tendency to re-do stores because the ‘concept is not working’?
This issue of redoing stores is actually quite common in our market and I have seen many retailers having to do it, if not the whole store at least some of the departments. If it is because of business requirements arising from customer need or feedback then its understandably a worthwhile effort. But if this is because of, as in most cases, sheer oversight and shallow detailing then its a serious issue.
Considering the time, effort and expenditure incurred on re-doing, owing to oversight or not thinking through requirements, it's a criminal waste of money. With the integrated store development approach, you have better looking, better working, better merchandised stores with lower running costs and, I am sure this will translate to happier customers.
So in a nut shell it won’t be an exaggeration to say that an integrated store development approach could make a difference to the business of retailing.
Definitely and as a beneficiary of this approach I strongly recommend that we look at designing and setting up stores from a holistic business approach that gets the maximum out of the precious resources employed |
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