Herb Sorensen, Ph.D.

Study Sees Upside of Store-Within-The-Store Concepts

September 11, 2009

FROM RETAILWIRE:
A study from two marketing professors explores whether stores should just be leasing retail space to manufacturers. The stores-within-a-store model is used across the board in China and other Asian countries as well as Europe. What do you see as the pros and cons of retailers renting retail space to manufacturers versus the traditional re-sell arrangement?      [more...]

Thinking in terms of location [real estate in the store] not only requires a paradigm shift, but it opens the doors to new types of questions about merchandising. In fact, merchandising a single category or section can be thought of as the management of a "micro-store." For this purpose we can think of a single supermarket as being a microcosm that parallels a single shopping mall.

Just as a shopping mall has a few anchor stores, so the supermarket has a few "anchor departments." This includes items that are thought to be powerful enough forces to attract shoppers to their locations, things such as produce, meat, dairy, and bakery. Anchor stores in the mall and "anchor departments" in the supermarket are thought to be traffic builders and thus are dispersed around the property for the convenience of the owners and managers not really for the convenience of shoppers.

Whether this is a good idea or not is probably an open question. Has anyone every really tried to build a store just the way shoppers might want it? And how could "how they want it" be known without detailed knowledge of their chosen paths and behavior?

These are pertinent questions because quite obviously a great deal of merchandising management is done in an effort to manipulate the shopper into buying more. This is a very laudable goal, but the question remains: How far should you go to meet the customer where they are, rather than attempting to move them?

This returns us to our original perspective about bringing the merchandise to the customer but at the same time expecting the customer to come some distance to meet the merchant. The entire point of Effective Distribution is to move beyond the idea that having a product in the store is an adequate distance to go in meeting the customer. Rather we need to see where the customer goes in the store and select appropriate merchandise to place there, not expect them to come to the product. It's the retailer's duty and opportunity to go the final mile. This means rational space management requires a detailed understanding of where shoppers go (location, location, location).

Pushing this idea further, given the large number of micro-stores in a typical supermarket, what is the best management style to optimize the location of merchandise sections? Bear in mind that even a modest sized supermarket has at least several hundred micro-stores, in addition to the anchor departments.

Presently all management of these markets is largely under central control by the store management. There are good reasons to think there is a better way beginning with the miserable failure of command economies in heavily socialized or communistic countries. Although application of PathTracker principles to merchandising are yet embryonic, simply defining scientific merchandising will not allow implementation of true market forces within individual stores. This will require some loosening of the control of individual micro-markets so they can compete with each other for exposure to the proper shoppers. That is, bread must be allowed to compete with crackers (or breakfast cereal) on a level playing field without the central management of a "planned" economy.

The mall parallel here is the opportunity that individual stores within the mall have to compete with other stores. Although the mall leasing agent and contracts may manage this competition to an extent, individual stores can succeed or fail on their own merits in relation to the traffic that passes them.

We conclude that as the PathTracker project moves forward, not only must we elucidate scientific merchandising, but also capitalistic management of the micro-stores within the retail stores. We see the growing system of category captains as one step in this direction. But the role of the captains needs to be expanded to not only the internal management of the category within the micro-store, but in competing with other micro-stores for store traffic and location.

[This comment is quoted from my 2003 paper titled "The Science of Shopping," in Marketing Research from the section of the paper on "The Micro-Store Hypothesis."]