Size DOES Matter: The Pop-up PrincipleJanuary 31, 2011
Everybody did it: Borders, Burlington Coat Factory, Dick’s Sporting Goods, Toys “R” Us and others all opened “pop-up” stores for the holidays. This year, Toys “R” Us alone opened 600 pop-ups instead of the 90 they had last year.
What many retailers seem to be missing, however, is that, with the exception of the short-term leases, the underlying principles that make this boost-holiday-profits strategy successful also provide the underlying principles for improving the bottom line year-round.
Here’s why: In an ideal retail world, retailers would stock only products with the highest margins, the least waste, and the lowest product-related, facility and personnel costs.
Pop-ups, therefore, are close to the ideal retail because only the most popular, highest margin items are on the shelves. As a result, fewer square feet are required. There are fewer sku’s to stock and track, and, at season’s end, there are fewer items remaining. Those that do remain are the fastest moving and most desirable. In addition, it’s easier for customers to find things, so personnel can spend less time helping customers find things and more time ringing up sales at the cash registers. This means shorter customer waits in the checkout lines and/or fewer personnel. Last, but not least: there is no long-term lease expense to drag down the bottom line during the slow seasons.
Except for the short-term, season-only leases, why don’t more retailers apply these same “pop-up” principles to their year-round strategies? Evidently, somewhere along the way to too many marketing plans, too many people bought into The More Choices Fallacy; i.e., retailers need to carry every product under the sun in order to entice customers into their stores. The results for too many retailers? Shrinking margins and turned-off customers.
It’s time to rethink this More Choices strategy because offering fewer choices might well lead to both increased revenues and improved profitability. Stocking fewer sku’s might increase revenues by making it easier, quicker and more pleasant to shop, and stocking fewer sku’s can reduce expenses across the board.
Barry Schwartz, in The Paradox of Choice: Why More Is Less, makes the case that being faced with an overabundance of choices can be both overwhelming and stressful. In fact, he cites evidence that customers are actually less likely to buy when faced with too many choices. If retailers started measuring sales lost due to customer frustration, the results would likely be staggering, and today, every sale counts.
- Having too many choices complicates decision making and, therefore, makes shopping take more time. For many prospective customers, time is a precious commodity.
- When there are too many products, customers are often frustrated because salespeople either can’t locate the merchandise or can’t answer questions about it. There are simply too many items for sales staff to master.
- On top of that, as every shopper knows, many products’ additional bells and whistles don’t work as well as their simpler, less snazzy predecessors—people lose faith in those brands.
Stocking fewer sku’s can also improve the bottom line by reducing costs. After all, the more distinct products a store offers, the more people, space, etc. will be needed to support those products. When retailers offer a smaller, carefully chosen number of selections, they have
- Fewer sku’s to order, transport, stock and track
- Fewer products personnel need to master
- Lower facility costs because less space is required
- Less undesirable, unsalable merchandise left over
In my neck of the woods, Portland, Oregon, Babies “R” Us and Uptown Hardware in the Pearl District provide a study in contrasts.
Babies “R” Us, with its vast array of goods, almost certainly faces a huge percentage of lost sales. Almost no one I know will shop there. It’s too hard to find things; clerks aren’t knowledgeable or available; the lines are too long; the baby registry is broken, etc.
On the other hand, Pearl Hardware, a small store located in a gentrified area with many high rises, is like a beacon in a storm to every shopper I know, male and female; young and old. Why? Whatever we need for our households (other than large appliances and furniture), Pearl Hardware has it. Need stainless steel cleaner? Paint and painting supplies? A serving dish for that dinner party tonight? Screws, tools, garden and cooking implements? Pearl Hardware has them all. Although the store offers only a narrow assortment of each type of item, every item the store does carry, without exception, is of good quality. If we need something for our homes, Pearl Hardware has it, so that’s where my friends, neighbors, and I go. In the meantime, some other retailer is losing those sales because that retailer simply stocks too much stuff that’s too hard to find.