Case Study: Retail Store Portfolio Strategy
How we helped a national retailer develop an actionable store portfolio strategy that optimized the existing fleet while positioning the client for significant growth in new locations.
Project Impact
Client Challenges
The client had recently gone through a large merger and faced several operational problems that needed addressing prior to aggressively continuing growth of the store fleet.
Shrinking 4-Wall EBITDA Margins
Management identified this as a general issue plaguing the fleet of stores but were unable to identify the specific stores causing the declining margins. The root cause of declining margins was another uncertainty.
Lacking Store Performance Insights
Insights and key performance indicators that identified customer tendencies, location specific factors, and the optimal spacing between locations had yet to be identified.
Disjointed Leadership Hierarchy
Several inefficiencies existed within the field leadership hierarchy due to the integration of the two store fleets that merged. This led to extra expenses, mismanaged geographies and deteriorating customer experience.
Store Portfolio Redundancy
Cannibalization and operational inefficiencies arising from clusters of tightly packed retail locations needed to be addressed. How to determine which stores to close was a challenge for management.
The Collaborative Solution
During an engagement lasting over a year, we worked with client leadership to develop a strategic transformation of the store fleet, delivering significant improvements in operational efficiency and sales performance while positioning the client for continued growth.
Identify Characteristics of High Quality Locations
We collaborated with the client to gather, clean, categorize, and analyze vast amounts of the client’s store data. Separately, we gathered external data about specific markets in over 600 different localities across the U.S. Utilizing these data sources we were able to identify the specific characteristics most significantly contributing to highly successful retail locations across hundreds of unique geographies throughout the country.
Develop a Real Estate Fleet Optimization Strategy
Once we understood the characteristics of a high quality location, we worked with the client to develop a strategy to eliminate location redundancy across the store fleet. By identifying store areas of influence we were able to highlight pockets of cannibalization and operational inefficiency. We also identified geographic areas with the most and least favorable economic characteristics. Using all this information, an aggressive optimization strategy was implemented.
Develop a Complementary Growth Strategy
We understood the client’s aggressive growth goals via organic and inorganic means. A separate competitor analysis was conducted and we highlighted several acquisition targets with complementary store footprints for the client. On top of that we identified hundreds of favorable markets that would fill gaps in the client’s current fleet of stores and stack ranked them to ensure markets with the highest chance of success were prioritized for capital investments.
