Category space and store size optimisation

The challenge

A leading Australian department store chain came to us looking to answer:

1.      What is the optimal allocation of department and category space by store, for both current and planned future store space?

2.      What total store size should be targeted for optimal profitability?

‍

The solution

Applying our unique clustering methodology, we began by defining distinctive customer groups, markets and store types, each with differing category demand patterns.

Through leveraging our capability in space intelligence, opportunities to move space from lower to higher productivity areas across and within departments were identified and evaluated based on commercial impact.

Armed with the right tools to assess the relationship between space costs and margin improvement for each store, the client was also enabled to identify significant potential for space reduction, leading to a double-digit increase in space returns.

Lastly, we forecast optimal use of space over five years to assist margin forecasting and rental cost projections.

‍

The results

The client unlocked a profit opportunity totalling over AU$50m through gross profit optimisation and space-related cost reductions from category space resets.