Store Layout, Design, and Visual Merchandising By Sarah Bauman

What will be discussed… First discussion will be about store design objectives. Next, the elements of store design are discussed. Then the decisions about how much space to allocate to different merchandise categories and departments and where they should be located in the store. Concluding with how retailers use color, lighting, and music to enhance the customer’s shopping experience.

Store Design Objectives There are five store design objectives… Implement the retailer’s strategy Build loyalty by providing a rewarding shopping experience Increase sales on a visit Control costs Meet legal requirements

Implement Retail Strategy The primary store design objective is to implement the retailer’s strategy. The design must be consistent with and reinforce the retailer’s strategy by meeting the needs of the target market and building a sustainable competitive advantage. Example: McDonald’s

Build Loyalty When customers consistently have rewarding experiences when patronizing a retailer’s store and/or Web site, they are motivated to visit the store Web site repeatedly and develop loyalty toward the retailer. Store design plays an important role in making shopping experiences rewarding. Customers seek two types of benefits when shopping-utilitarian and hedonic benefits.

Utilitarian Benefits Store design provides utilitarian benefits when it enables customers to locate and purchase products in an efficient and timely manner with minimum hassle. Utilitarian benefits are becoming increasingly important with the rise in two-income and single head-of-household families. Due to the limited time these families have, they are spending less time shopping. Example: Whole Food stores

Hedonic Benefits Store design provides hedonic benefits by offering customers an entertaining and enjoyable shopping experience. This shopping experience encourages customers to spend more time in a store because the visit itself is rewarding. Example: Cabela’s

Increase Sales on a Visit A third design objective is to increase sales made to customers on a visit. Store design has a substantial effect on which products customers buy, how long they stay in the store, and how much they spend during a visit. Since so little time and thought is spent shopping and selecting items in supermarkets, the purchase decisions are greatly influenced by what products customers see during their visit.

Increase Sales on a Visit Cont… What they see is affected by the store layout and how the merchandise is presented. Thus retailers attempt to design their stores in a manner that motivates unplanned purchases.

Control Cost The fourth design objective is to control the cost of implementing the store design and maintaining the store’s appearance. The store design can also affect labor costs and inventory shrinkage. Some stores are organized into departments that are isolated from each other. This design provides an intimate and comfortable shopping experience that can result in more sales.

Control Cost Cont… However, the design prevents sales associates from observing and covering adjacent departments. Another design consideration related to controlling cost is flexibility. As the merchandise mix changes, so must the space and the layout of the store. Store designers attempt to design stores with maximum flexibility. Flexibility affects the ability to physically modify, move, and store components and the costs of doing so.

Legal Considerations Store design or redesign decisions must comply with the 1990 Americans with Disabilities Act (ADA). This law protects people with disabilities from discrimination in employment, transportation, public accommodations, telecommunications, and activities of state and local governments. It affects store design because the act calls for “reasonable access” to merchandise and services in retail stores built before 1993.

Legal Considerations Cont… Stores built after 1993 must be fully accessible. The act also states that retailers should not have to incure “undue burdens” to comply with ADA requirements. Although retailers are concerned about the needs of their disabled customers, they are also worried that making merchandise completely accessible to people in a wheelchair or a motorized cart will result in less space available to display merchandise and reduce sales.

Legal Considerations Cont… However, providing for wider aisles and more space around fixtures can result in a more pleasant shopping experience for able-bodied as well as disabled customers.

ADA Requirements Provide 32-inch-wide pathways in the main aisle, to bathrooms, dressing rooms, elevators and most fixtures Lower most cash wraps and fixtures so they can be reached by a person in a wheelchair Make bathrooms and dressing rooms fully accessible

Store Design Elements Three elements in the design of stores are… Layout Signage Feature areas

Layouts Retailers use three general types of store layout designs: Grid Racetrack Free form

Grid Layout The grid layout has parallel aisles with merchandise on shelves on both sides of the aisles. Cash registers are located at the entrances/exits of the stores. The grid layout is well suited for customers who are primarily interested in the utilitarian benefits offered by the store. They want to easily locate products they want to buy, and make their purchases as quickly as possible.

Grid Layout Cont… The grid layout is also cost efficient. There’s less wasted space because the aisles are all the same width. Finally, because the fixtures are generally standardized, the cost of fixtures is low. One limitation, from the retailer’s perspective, is the customers typically aren’t exposed to all the merchandise in the store due to the height of the shelves. Thus the layout does not encourage unplanned purchases.

Racetrack Layout The racetrack layout, also known as a loop, is a store layout that provides a major aisle that loops around the store to guide customer traffic around different departments within the store. Cash register stations are typically located in each department bordering the racetrack. The racetrack layout facilitates the goal of getting customers to see the merchandise available in multiple departments and thus encourages unplanned purchases.

Racetrack Layout Cont… Low fixtures are used so that customers can see merchandise beyond the products displayed on the racetrack. To lead customers, the racetrack is wider than other aisles and defined by a change in flooring surface or color. Since many department store customers seek hedonic benefits, they typically spend more time shopping at department stores, and the more time they spend, the more they buy.

Racetrack Layout

Free-Form Layout A free-form layout, also known as boutique layout, arranges fixtures and aisles in an asymmetric pattern. It provides an intimate, relaxing environment that facilitates shopping and browsing. However, creating this pleasing shopping environment is costly because there is no well-defined traffic pattern, as there is in the racetrack and grid layouts.

Free-Form Layout Cont… Customers aren’t naturally drawn around the store, and personal selling becomes more important to encourage customers to explore merchandise offered in the store. In addition, the layout reduces the amount of merchandise that can be displayed.

Free-Form Layout

Signage and Graphics Signage and graphics help customers locate specific products and departments, provide product information, and suggest items or special purchases. Graphics, such as photo panels, can reinforce a store’s image. Signage is used to identify the location of merchandise categories within a store and types of products offered in the category. Frequently, icons rather than words are used to facilitate communication with customers speaking different languages.

Signage and Graphics Cont… Smaller signs are used to identify sale items and provide more information about specific products. Finally, retailers may use images, such as pictures of people and places, to create moods that encourage customers to buy products.

Different Types of Signs… 1. Category Signage – used within a particular department or sector of the store, category signs are usually smaller than directional signs. Their purpose is to identify types of products offered; they are usually located near the goods to which they prefer.

Different Types of Signs… 2. Promotional Signage – This signage describes special offers and may be displayed in windows to entice the customer into the store. For example, value apparel stores for young women often display large posters in their windows of models wearing the items on special offer.

Different Types of Signs… 3. Point-of-sale Signage - are placed near the merchandise they refer to so that customers know its price and other detailed information. Some of tis information may already be on product labels or packaging. However, point- of-sale signage can quickly identify for the customer those aspects likely to be of greater interest, such as whether the product is on special offer.

Digital Signage Digital signage includes signs whose visual content is delivered digitally through a centrally managed and controlled network, distributed to servers in stores, and displayed on a flat-panel screen. Due to their dynamic nature, digital signs are more effective in attracting the attention of customers and helping them recall the messages displayed.

Digital Signage Cont… Digital signage also offers the opportunity to enhance a store’s environment by displaying complex graphics and videos to provide an atmosphere that customers find appealing. Because the content is delivered digitally, it can easily be tailored to a store’s market and changed during the week or even the hour. Finally, digital signage eliminates the costs associated with printing, distributing, and installing static signage.

Feature Areas In addition to using layout and signage, retailers can guide customers through stores and influence buying behavior through the placement of feature areas. Feature areas are areas within a store that are designed to get customers’ attention. They include window, entrances, freestanding displays, end caps, promotional aisles or areas, walls, dressing rooms, and cash wraps.

Windows – window displays draw customers into the store and provide a visual message about the type of merchandise offered in the store and type of image the store wants to portray. Entrances – the first impression caused by the entry area affects the customer’s image of the store. Department stores typically have the cosmetics and fragrance categories at the main entrance because they are visually appealing.

Freestanding displays – are fixtures or mannequins that are located on aisles and designed primarily to attract customers’ attention and bring them into a department in stores using a racetrack or free-form layout. End caps – are displays located at the end of an aisle in stores using a grid layout. Promotional aisle or area – is a space used to display merchandise that is being promoted. Walls – because retail floor space is often limited, retailers utilize wall space as much as possible.

Dressing rooms – are critical space in which customers decide whether or not to purchase an item. Large, clean, and comfortable dressing rooms put customers in the mood to buy merchandise. Cash wraps – also known as point-of- purchase (POP) counters or checkout areas, are places in the store where customers can purchase merchandise. Retailers often use these areas to display impulse items.

Space Allocated to Merchandise Categories Some factors that retailers consider when deciding how much floor or shelf space to allocate to merchandise categories and brands are 1) the productivity of the allocated space, 2) the merchandise’s inventory turnover, 3) the impact on overall store sales, and 4) the display needs for the merchandise.

Space Productivity A simple rule of thumb for allocating space is to allocate on the basis of the merchandise’s sales. Two commonly used measures of space productivity are sales per square foot and sales per linear foot. Apparel retailers that display on fixtures use sales per square foot and supermarkets that display on shelves use sales per linear foot.

Inventory Turnover Inventory turnover affects space allocations in two ways. First, both inventory turnover and gross margin contribute to GMROI – a measure of the retailer’s return on its merchandise inventory investment. Second, the merchandise displayed on the shelf is depleted quicker for faster selling items with high inventory turnover.

Display Considerations The physical limitations of the store and its fixtures affect space allocation. For example, the store planner needs to provide enough merchandise to fill an entire fixture dedicated to a particular item.

Location of Merchandise Categories and Design Elements As discussed previously, the store, layout, signage, and feature areas can guide customers through the store. The location of merchandise categories also play a role in how customers navigate through the store. By strategically placing impulse and demand/destination merchandise throughout the store, retailers increase the chances that customers will shop the entire store.

Impulse Merchandise Impulse merchandise or products are purchased without planning, such as fragrances and cosmetics in department stores and magazines in supermarkets, are almost always located near the front of the store, where they’re seen by everyone and may actually draw people into the store.

Demand Merchandise Demand merchandise and promotional merchandise are often placed in the back left- hand corner of the store. Placing high-demand merchandise in this location pulls customers through the store, increasing the visibility of other products along the way.

Special Merchandise Some merchandise categories involve a buying process that is best accomplished in a lightly trafficked area. Categories that require large amounts of floor space, like floor furniture, are often in less desirable locations. Some categories, like curtains, need significant wall space, whereas other, like shoes, require easily accessible storage rooms.

Category Adjacencies Retailers often put complementary categories next to each other to encourage unplanned purchases. For example, sporting goods retailers often locate exercise equipment next to sporting goods and apparel for children so that mothers can see children while they are shopping for treadmills.

Location of Merchandise within a Category Retailers use a variety of rules to locate specific SKU’s within a category. For instance, supermarkets and drug stores typically place private-label brands to the right of national brands. Because Western consumers read from left to right, they will see the higher-priced national brand first and then see and possibly purchase the lower-priced, higher-margin private-label item on the right that looks similar.

Planograms A planogram is a diagram that shows how and where specific SKU’s should be placed on retail shelves or displays to increase customer purchases. The locations can be illustrated using photographs, computer output, or artists’ renderings.

Virtual-Store Stimulation Virtual-store stimulations are another tool used to determine the effects of placing merchandise in different areas of a store and evaluating the profit potential for new items. In these simulations, customers stand in front of computer screens that depict a store aisle. Retina-tracking devices record the eye movements of the customers.

Videotaping Consumers Another research method used to assess customer reactions to planograms involves tracking customers in actual store environments. GPS tracking devices are placed in customer shopping carts and on shoppers to determine where customers and carts go in a store. Small video cameras are strapped on the shoppers’ foreheads to provide information on their eye movements.

Visual Merchandising Visual merchandising is the presentation of a store and its merchandise in ways that will attract the attention of potential customers.

Fixtures The primary purposes of fixtures are to efficiently hold and display merchandise. At the same time, they define areas of a store and direct traffic flow. Fixtures work in concert with other design elements, such as floor coverings and lighting, as well as the overall image of the store. Apparel retailers utilize the straight-rack, rounder, and four-way fixtures, while the principle fixture for most other retailers is the gondola.

Straight rack fixture – consists of a long pipe balanced between supports in the floor or attached to a wall. Rounder – also known as a bulk fixture or capacity fixture, is a round fixture that sits on a pedestal. Four-way fixture – also known as a feature fixture, has two crossbars that sit perpendicular on a pedestal. Gondolas – are extremely versatile. They’re used in grocery and discount stores.

Presentation Techniques Some presentation techniques are idea- oriented, item and size, color, price lining, vertical merchandising, tonnage merchandising, and frontage presentation.

Idea-oriented presentation – a method of presenting merchandise based on a specific idea or the image of the store. Item and size presentation – probably the most common technique of organizing stock is by style or item. Color presentation – a bold merchandising technique is organizing by color. Price lining – occurs when retailers offer a limited number of predetermined price points and/or price categories within another classification.

Vertical merchandising – merchandise is presented vertically using walls and high gondolas. Tonnage merchandising – is a display technique in which large quantities of merchandise are displayed together. Frontal presentation – a method of displaying merchandise in which the retailer exposes as much of the product as possible to catch the customer’s eye.

Creating an Appealing Store Atmosphere To provide a rewarding shopping experience, retailers go beyond presenting appealing merchandise. In addition, retailers use lighting, colors, music, and scent to stimulate customers’ perceptual and emotional responses and ultimately affect their purchase behavior. Research has shown that it is important for the atmospheric elements to work together – for example, the right music with the right scent.

Lighting Good lighting in a store involves more than simply illuminating space. Lighting can highlight merchandise, sculpt space, and capture a mood or feeling that enhances the store’s image.

Highlighting Merchandise A good lighting system helps create a sense of excitement in the store. Another key use of lighting is called popping the merchandise – focusing spotlights on special feature areas and items.

Mood Creation Traditionally, U.S. specialty and department stores have employed incandescent lighting sources to promote a warm and cozy ambience. Overall lighting sources were reduced, and accent lighting was pronounced to call attention to merchandise and displays. It was meant to feel like someone’s home.

Energy-Efficient Lighting As the price of energy soars and retailers and their customers become more energy- conscious, retailers are looking for ways to cut their energy costs and be more ecologically friendly. Stores are switching from incandescent lighting to more energy-efficient fluorescent lights.

Color The creative use of color can enhance a retailer’s image and help create a mood. Warm colors (red, gold, and yellow) produce emotional, vibrant, hot, and active responses, whereas cool colors (white, blue, and green) have a peaceful, gentle, calming effect.

Music Like color and lighting, music can either add to or detract from a retailer’s total atmospheric package. Music can control the pace of store traffic, create an image, and attract or direct consumers’ attention.

Scent Smell has a large impact on customer’s mood and emotions. Scent, in conjunction with music, has a positive impact on the customer’s level of excitement and satisfaction with the shopping experience. Scents that are neutral produce more positive feelings toward the store than no scent.

Conclusion A good store design allows shoppers to move freely, unencumbered by clutter. When a store is properly designed, customers should be able to find what they are looking for easily. Stores are designed so that customers can easily view the merchandise and read the signs.

Conclusion Cont… It is important to visually reassure customers that they’re going to have the same satisfactory experience on the Web site that they have in stores.

Assignment 1 As an architect for retail space, you are responsible for Americans with Disabilities Act compliance. How would you make sure that a store’s retail layout both meets accessibility requirements and enables the company to reach profitability objectives?

Assignment 2 Go to your favorite multichannel retailer’s Internet site. Evaluate its degree of simplicity, ease of navigation, readability, use of color, consistency with the brand image, and similarity of pricing and merchandise offered with those of its competitors.

Assignment 3 Go into the physical store location of a retailer of your choice, and evaluate the store layout, design, and visual merchandising techniques they use.

Assignment 4 How can signage and graphics help both customers and retailers? Consider the following types of retail formats that you likely have visited in the past: discount stores, department stores, card and gift stores. Describe which retail formats have implemented the best practices for coordinating signs and graphics with each store’s image and which formats should improve this aspect of their store layout, design and visual merchandising.

Assignment 5 What are they different types of design that can be used in a store layout? How does the layout impact the types of fixtures used to display merchandise? Describe why some stores are more suited for a particular type of layout than others.

Assignment 6 What are the pros and cons for both centralized cash wraps and departmental cash wraps for stores such as JCPenney and Kohl’s?