Retail Marketing and Branding: A Definitive Guide to Maximizing ROI, 2nd Edition

CHAPTER 4

DEVELOPING AND REFINING RETAIL FORMATS

Peter Breuer, Thierry Elmalem, Stefanie Möller, Tobias Wachinger

The right format is the foundation of a retailer's success. It is, after all, the real-life representation of a retailer's value proposition, comprising location, assortment, price, in-store experience, and service – as introduced in the retail pentagon in Chapter 3 (Exhibit 3.8). Any decisions that affect the choice or evolution of formats are, therefore, among the most important decisions a retailer will ever make.

Store formats used to be static over long periods of time. In the 1970s, successful formats showed steady growth for more than a decade without any real modification. Today, however, a new concept has often run its course after just a few years (Exhibit 4.1). The pace of change in consumer needs is quickening, and digital distribution channels are eating into the share of traditional retail. Especially in saturated markets, simple sales space expansion does not generate profitable growth anymore.

In fact, increasing sales space per inhabitant generally leads to a decrease in overall area productivity, with the exception of players that have a superior format. The expansion of such successful formats, then, leads to a further increase in sales area density, resulting in even lower sales area productivity in the overall market. As a result, retailers are under pressure to refine their formats continuously, or reinvent them completely, before others seize ...