| In classic "Mission Impossible" style, I
was asked to research and write a report on how renovations impact
retail businesses. Every person I called responded in the same
manner. First they laughed, then said "good luck, no one gives
out that information" and then several people actually were kind
enough to share their company's statistics.
After researching this topic I have chosen to divide the subject
into three sections: Emotional/Psychological Impact of Renovations,
Fixtures Old and New, and Renovation Facts and Figures.
The Emotional and Psychological Impact of Renovations
Why choose to renovate?
The negatives are: renovations are expensive, time consuming
and there's no guarantee that they will improve business.
The pluses are powerful.
Renovations talk to your customers and to your staff. When
management chooses to renovate a store it is showing its faith
in the future of the store. Both customers and staff are aware
that renovations are rarely made to stores about to be closed.
This certainty creates good faith and a sense of continuity
and trust. In today's fragile business climate, developing trust
and a sense of security are primary goals for all retailers.
When a retailer renovates a store he is telling the competition:
" I'm here to stay"
" I'm a player"
" I'm offering my customers more than my competition"
" Match me!"
"I'm here to stay" falls into the reliability/stability category.
People want to know that they are buying from someone who will
stand behind their merchandise. Although the "Going Out of Business"
signs in the windows of several electronics/gift stores on Fifth
Avenue in New York City generate sales, confidence in the products
is limited. Generally only tourists think they might get a "deal"
on Fifth Avenue.
Renovations = longevity in the mind of the consumer.
Renovations = longevity in the minds of the employees. They
will treat their customers better with lower job anxiety levels.
Better service = better sales.
Renovations = better sales.
"I'm a player" is an annoying expression but it sums up the
feelings of both the manager and the staff of a renovated store.
When a store is renovated it says to the competition - "I'm
in business, I'm counting on growth and I'm going after you!"
The perceived quality of a purchase is in direct proportion
to the look of a store. People buy down in prices when a stores'
energy and appearance is faded, tired and old. Even when maintenance
standards are high, people can sense dead energy.
A store that feels old and faded gives customers the feeling
that the merchandise assortment is made up of "losers" and is
unwanted. Only clearance goods will move well in that kind of
Renovations = management's confidence in the future of the
Renovations = employees pride in the look of the store
Renovations = customers awareness that the store is in business
to stay and is growing.
Awareness of growth and appreciation of new look = improved
"I'm offering my customers more than my competition" is another
way of saying, "my merchandise mix and my employees are terrific
- and I have the power to make it even better."
Making it even better is the key.
Customers are a captive audience in many of Aramark's locations.
Where else are they going to go for souvenirs or gift items
at Muir Woods or Ellis Island? But, even with a captive audience,
they will buy less if the energy in the store is old. While
cleaning and moving merchandise will improve energy flow, renovations
alone create a dramatic increase in the perceived value of the
merchandise. If the merchandise is perceived to be more valuable,
customers will feel better about themselves when they buy.
People like to be associated with winners.
When a store positions itself as a "winner", it's telling
the customers that they too are winners for buying at this store.
This may sound simplistic or childish - but it's true.
Imagine that you bought two t-shirts. One was purchased at
a basic discount store for $12.99 while the other was bought
at an attractive gift store for $15.99. Which T-shirt will have
more emotional value?
Which shirt allows you to feel like a "winner?"
The experience at the attractive gift store would be more
memorable because it was appealing. The discount T-shirt would
be a practical purchase while the gift store shirt may be more
Now, add an overall positive experience to the attractive
gift shop - such as a walk in Muir Woods or experiencing the
win of your favorite team -and the T-shirt's emotional impact
doubles in value.
Renovating the store adds to the value of the merchandise
by helping the customers and the employees feel like they are
worth the effort. When people feel like they are worth such
an intensive effort - they feel like winners. Winners support
the store that makes them feel great.
Renovations = people feeling like winners
Winners = spending money to keep feeling that way
Renovations = more money spent in the store
"Match me!" This is not just a challenge to your competitors;
it's a challenge to your staff.
It's one thing to have a great location and just wait for
people to wander in - and another to galvanize them when they
come in to buy far more than they intended.
A store that hasn't been renovated in 7 years has fallen into
patterns and traps. The personnel, no matter how hard they try
to do something different, are going to repeat merchandising
habits over and over.
A newly renovated store offers a fresh floor plan, new fixtures,
different lighting and forces the staff to rethink the entire
merchandising for the store. Rethinking encourages creativity.
Creativity honors both the customer and the sales staff.
Renovations + Creativity = sales.
Renovations get energy moving in a store. Most merchants will
either admit - or brag that when they move something - it sells.
There are several reasons for movement creating sales.
- People tend to dust in new places. Dirt discourages sales.
Neat and clean stores increase the perceived value of the
- When you move something you create energy. Energy attracts
other energy. People like movement and are attracted to moved
- When something remains unmoved for long periods of time
it becomes "wallpaper" - attractive but unwanted and invisible.
Why not just move stuff around the store? Why go to all the
trouble and expense of renovation?
Customers know the difference. Fixtures, flooring, wall treatments
and lights all get old. They are very difficult to move. Even
fixtures on casters may move - but they never change - except
to get beat up and old looking. So, you can move product all
over the place and it's a short-term good investment in energy.
In the long term, only renovations will give the total store
the lift it needs to get people to buy more when they come in
Fixtures Old and New
After talking with numerous fixture manufacturers and store
designers one fact came up over and over. The only people who
buy stock fixturing are small Mom & Pop stores that think
they can't afford custom fixtures.
The big box retailers who have seas of chrome quads can afford
to have the quads manufactured to their exact specifications.
Even the most mundane, typical fixtures in a chain store have
probably been recreated and engineered to fit the store planner's
While there are many specialty fixtures on the market that
are standard - such as some quilt holders, poster swing frames,
etc., the bulk of fixtures are custom made.
Custom doesn't have to mean more expensive. A lot depends
on the surface materials and how complicated the fixture gets.
Interesting, expensive surfaces = interesting, expensive merchandise.
Interesting surfaces can make even the most mundane gifts
seem unique. When you are trying to develop a mood, feeling
or image for a store, standard non-custom fixtures will more
often than not destroy that mood by making the store similar
in feel to the local convenience store.
Custom fixtures have the most impact in the front of the store,
in focal areas and at the cash wrap. These are the areas that
will convey the entire theme of the store. If these areas are
standard issue - the store will have less impact than 7-11.
The logic behind this is easy - what we see influences what
we think. If we see bland off-white counters and chrome racks
with a vast assortment of gifts heaped on the shelves, we think
- "okay, let's grab something for the kid and get out of here
before the traffic gets bad."
If, however, the counters are wood mixed with copper and the
sides are birch and you see trees wherever you look adding a
soft feeling throughout the store - all of a sudden things start
looking more appealing. It's more interesting, fun and engaging.
The store has honored you, their customer, by making itself
more presentable and different from the competition. The merchandise
then looks more appealing and interesting which leads to increased
Renovation Facts and Figures
Very few people were willing to share their renovation facts
and figures. One major fact that became extremely obvious was
that if renovations didn't pay off, no company would be doing
Every company that renovates one or more stores figures on
a minimum increase of 10% of sales with an anticipated and/or
hoped for increase of 38% which seems to be the average increase
after significant renovations.
The method of analyzing the success of a renovation is unique
to each company.
There is virtually no way to compare sales and profits figures
or, "apples to apples" by company. Each figures their costs
differently. The only figures that matter are those within each
Some smaller companies saw immediate increases in sales and
didn't dwell on the actual renovation costs. For other companies,
the costs are factored in to determine the actual profit and
the percentage of profit increase over time after the initial
renovation costs are covered.
One of the premier upscale chain of stores in the United States
shared their process with me for this essay. They did not want
their name mentioned.
When they decide to renovate one of their stores they first
look at the real estate deal. The costs of the real estate determine
how much they need to make on the property after renovations.
They then create a target for this location. They look at
the history of the location, the national average of their stores
and their actual goal for the store.
They determine the sales per square foot by category in the
store, the average throughout the chain, their expectations
for each department and the gross margin by department.
This corporation expects -and generally gets 2.5 growth out
of each renovation - for example: 1 million spent on renovations
will generate 2.5 million in sales.
The one million will be amortized and capitalized over five
Their oldest stores are often located in their best market
areas. To remain competitive and to keep their best customers
from going into their worst stores, they often renovate highly
successful locations to keep them fresh and appealing. They
believe they must remain competitive in their own market.
Bobby Drouin, the director of Real Estate and Store Planning
for "Things Remembered" was very helpful with information regarding
their remodeling projects.
" Things Remembered" has two types of remodels/renovations:
The Skin Package
This is a clean-up/fix-up program that deals with the storefront,
carpet, wall paint and lights.
Full In-Place Remodel
Better malls = better growth
This includes new architecture, custom fixtures - which consist
of a standard fixture package that is custom for them.
They tend to have stronger percentages of growth after either
type of remodel in "A" centers.
They try to do their renovations when their lease terms expire.
In the better malls they have been averaging 22% increase in sales
after full remodels.
In their stores located in less successful malls, the increases
were based mainly on the Skin Package type remodel and generated
between 7 - 12% increases in sales.
When asked about their use of custom fixtures, Drouin mentioned
that non-custom fixtures often had variations of colors/shades
and standards. When combined in a store, non-custom fixtures looked
significantly less professional and attractive. The only "off
the shelf" fixtures they buy are specialty items such as bronze
throw holders and prop pieces.
Mike Grimes, the president of GH Home Furnishings in Charlestown,
MO finds that when he makes improvements to his store the confusion
and movement during construction excites customers and sales
increase. When he put a new façade on his building the
sales increased 28%.
When he did a remodel in the bedding area of his store (new
carpet, new walls, banners and fixed the 'dip' in the floor)
the sales in that area increased 45%.
"Spirit of the Red Horse" carries American Indian western-themed
gifts. Jim Stelton of CBR. Inc. carried out a renovation for
this interesting store that included:
- Replaced the ceiling coves to make the energy flow better
and create an airy feel.
- Changed the fixturing from solid to the floor to "leggy" so
the airflow and energy improved and the store feels lighter.
- Redid store front
- Created storage drawers by each bay with twin panels to reflect
the new traverse detail.
After renovations "Spirit of the Red Horse" improved their business
by 30% yearly with an average ticket price increase of 10%.
Devangshu Dutta, based in New Delhi, India has been researching
the impact of renovations on retail sales internationally.
What he discovered was the impact in the six months following
major refits and renovations ranged from 10 to 40% of a sales
increase with large discounters showing a lower impact than
smaller specialty stores. Gross margins also improved to the
extent of 10 to 12%. The sales upswings tapered off after the
initial months but sales levels per square foot remain higher
than comparable stores that remain unrenovated. They also remain
about 5-10% higher than previous levels for the same store.
The impact, Mr. Dutta states, comes from the renewed consumer
interest as well as better management of space and merchandise.
These figures are supported in the United States by every
person interviewed. All those who did not want their names or
companies mentioned in this report agreed that the percentage
increase in sales after a full renovation averages between 30
- 39%. "Skin" remodels averaged 12 - 20% sales increases.
A renovation tells the world that you are putting your money
where your mouth is - a cliché that makes financial sense.
When you renovate you are offering your customers more than
the competition. You are giving them an interesting, fresh,
creative and hopefully exciting shopping experience. When you
correctly factor-in location, renovation costs and new merchandise,
experience proves that your profits will increase significantly
By Linda Cahan
Linda has been in the retail design business since 1971.
As a Retail Visual Design consultant she has worked with American
Express, Singer, The Mills Group, Saks Fifth Avenue, Intel,
CompUSA, Steinbachs, and hundreds of medium to smaller sized
retailers with every type of merchandise.