How can we deal with underperforming stores?

Managing store performance should not be a one-off exercise, but an area for continuous improvement. Sanjay Bailur, managing director at consultancy Alix Partners, says a simple dashboard with a clear set of key performance indicators is critical - both in terms of a store’s own like-for-like performance and also compared with a store cluster or the overall estate.

Once a store has been identified as consistently underperforming, the next question is to understand the reasons why. Bailur says: “These will vary in how easy it is to control them, and include everything from location, pitch, capex requirements and rental costs to things like workforce scheduling, in-store operations and local visual merchandising.”

He adds the dashboard should drive a detailed, holistic review of a store portfolio. “Retailers should be asking questions such as what format is performing best, and what are the other key factors such as geography, location and proximity to other brands,” he says.

Other factors to consider include the impact of online and where the store fits in the multichannel environment - whether it’s successful as a showroom, for instance.

Bailur says: “Once you have an understanding of how your overall store portfolio is performing and where the problems are, you can have more productive discussions with landlords.” There could be opportunities to reduce rents based on market conditions, for instance, although this will depend on the length of time left on the lease. There may also be the possibility of sub-letting the space or reducing it.

It’s important to approach underperforming stores with the right mindset. Bailur says: “Individual store performance needs to be managed carefully in conjunction with emerging channels and markets, rather than as a one-off cost-cutting exercise.”