MerchLogix research report finds that a retailer’s financial performance is highly responsive to modest in-store space planning improvements
MerchLogix, a leading provider of space planning and merchandise operations software, and DM Buck Advisory, a research and financial consultancy, today published a research report, Retailers and Shoppers Turn Attention (and Investments) to Stores: A Financial Analysis. The findings are based on six years of SEC filings by public retailers and an online survey of shoppers in April 2021. MerchLogix commissioned the in-depth study to learn how retailers respond to growing omnichannel demands, the evolving role of the store, and how retail segments, including grocery, hardlines, and apparel, are investing in their future. The study points towards a renewed focus by retail management teams on store efficiencies as consumers, including millennials, return to in-person shopping.
Read More: Titan Brands Ranks On 2021 Inc. 5000 Fastest-Growing Private Companies
During the pandemic, online sales spiked when stores closed, but the report finds both consumers and retailers hungry for the sales and ambiance that stores provide. The study found that:
- Ninety percent of transactions for public retailers are completed in-store, not online (even during a pandemic).
- A Physical Retail Composite Index shows the same-store sales trended solidly positive in the past three years with stable profitability.
- Ninety percent of consumers anticipate doing more in-store shopping this year (or already have). Millennials and younger shoppers were more emphatic towards preferring the in-store experience.
“E-commerce grew significantly in recent years, so it’s been easy to underestimate the vital role that physical stores continue to play in generating enterprise-wide revenue,” said David Magee, ASA, CFA, of DM Buck. “As a result, it’s critical for retailers to step up store investment to ensure brand relevance and customer connectivity. At the same time, the greater price transparency in this omnichannel world means that retailers must offset that investment through initiatives that drive labor productivity and reduce wastage. The research shows that incremental changes to in-store efficiency can have a multiplicative effect on overall profitability.”
The report uses the following metrics to assess performance and define opportunities by retail segment:
- Sales momentum including topline sales, same-store sales, and square footage growth
- Online penetration based on the percentage of sales attributed to e-commerce
- Inventory efficiency using gross margin return on investment or GMROI
- Operating Margin Profitability to gauge profitability at the operating level or EBIT
- State of Investment including the direction of capital investment in the business, pretax returns on assets, store investments, and lease durations.
- Stock price performance by retail subsectors and as individual companies relative to peer groups
“Improved control and compliance of store space have a dramatic impact on a retailer or grocer’s bottom line,” said Nick Downey, CEO of MerchLogix. “As our retail customers improve in-store execution, planogram compliance, and overall space planning with MerchLogix solutions, we’ve continually seen their financial health improve. MerchLogix commissioned this third-party study to quantify what retailers should expect from their investments. The store drives of the vast majority of retail sales, and this report points to where, and in which segments, modest in-store space improvements can boost profits and attract shoppers.”
Read More: SalesTechStar Interview with Scott Schnaars, Vice President of Americas at Cloudinary
