Are you a destination or impulse driven brand?
Building a retail brand from the ground up often follows a familiar path. You want branding & foot traffic so naturally the first places that come to mind are large A grade shopping centres. Yes you’ll be paying exorbitant leasing costs…maybe more than you originally thought but you want to make a statement so agree to take the plunge.
If at this point you’ve opened a few stores and believe foot traffic is critical to the success of the brand, then you’re likely to continue to pursue those precincts that offer quantity over quality. Alternatively, you believe there is another path to success and decide to pursue store locations in different retail formats…why not other brands are doing it.This is where the growth plan can come unstuck.
Many business owners mistakenly believe that their brand is so loved by the public that they can open anywhere and be successful. Build it and they will come!
Let’s look more closely at the strategy of picking different store formats/retail precincts and examine how this could impact the business and whatever network plan you’ve agreed to implement. The below chart represents an analysis of how different store formats can make a brand either destinational, transient or both.
A brand is considered destinational when a person (customer) makes a conscious decision to visit a store before leaving home or work. A brand can be both, depending on the strength of the brand. McDonalds for example can exist on it’s own out in the middle of a highway (provided the other fundamentals of the business are correct) and in a high pedestrian foot traffic environment like a shopping centre.
McDonalds has such pulling power it is also considered a “precinct generator” where other QSR competitors will cluster around the store and hope to offer an alternative food option for those that might still be undecided when entering the drive thru pad. Alternatively, could Sushi Sushi exist on it’s own in a similar environment to McDonalds?
The other consideration that could have a massive impact on store performance is whether any of the stores in your network are cannibalising sales from each other. Brands that are highly destinational in certain formats ie McDonalds/KFC/Red Rooster will feel the impacts of cannibalisation more and need to be mindful of understanding how large the trade area around each of their stores can be and how close another franchisee can be before cannibalisation impacts can be felt.
Looking at it another way- brands that tend to be more destinational rely more on the surrounding demographics of the area where the store is located (other than a shopping centre). If you primarily have an impulse driven brand/store, than it is factors such as foot traffic, signage & visibility, positioning, adjacencies, competition that will likely have more of an impact on sales performance.
For example would you have to put a Maserati dealership on a main road that gets high numbers of pedestrian and vehicle traffic? The answer is no, someone looking to buy an expensive luxury brand like Maserati will find you wherever you are….. provided the surrounding demographics align with your brand.
Many food brands now see drive thru as the answer to increasing sales, however not all brands can thrive under this format, so it’s important to understand the relationship between the different formats before taking the plunge.