Report points to the ROI of store remodels

A new study, published in the May issue of the American Marketing Association's Journal of Marketing, points out both the need for and the benefits of store remodeling projects.

Each year millions of dollars are spent to create and/or remodel retail store environments to influence customer behavior. This is expensive business with "the average total store remodel today costing $3.5 million for décor, equipment, fixtures and labor. Add in lost sales during the remodel period and the loss from markdowns and remodels ends up costing approximately $3.7 million per store." (Weitzel 2010). For retail chains with hundreds of stores, the cumulative costs are substantial.

Monash University marketing researchers found that sales increase after retail store remodeling, and this increase lasts an entire year. In an even more striking result, researchers found that the sales increase is much more substantial for new customers compared with existing customers. In a small independent retail store, the sales increases in the year after the remodeling were 43 percent for new and 7 percent for existing customers. For a large multi-store retailer the contrast was similar, 44 percent for new and 10 percent for existing customers. Even more impressive is that between 30 percent and 80 percent of the growth in sales revenue after remodeling is attributable to new customers.

It is also found that new customer visits to the store were 16 percent higher after their first purchase in the remodeled store, whereas the rate of visits for existing customers only increased by 2 percent. Finally, both retailers recouped their remodeling costs within two to three years — much less than the average time between remodels of seven to 10 years.


Topics: Consumer Behavior, Point-of-Purchase / POP, Store Design & Layout


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