All retailers segment their stores into basic clusters. Every retailer has a concept of a geographical cleavage in their stores, or a concept of format or banner. While these divisions do reflect tangible differences in the way that different stores trade, they often do not go far enough in providing an accurate reflection of differences between markets. In order to truly reflect the dynamics at play that determine how consumers shop a Store retailers should look beyond whether a store is located in the east or west.
Some things to consider when attempting to segment one’s stores:
How are consumers different? Are there fundamentally different purchasing behaviors between urban or rural locations? Do areas with high concentrations of ethnic populations have different behaviors? Do the demographics of some areas skew younger, or have a larger propensity to have larger families? Depending on your business any of these factors could have a large impact on how your stores are shopped.
What is the customer’s mindset when visiting your store? If a store with larger footprint is visited with the purpose of a large shop, then this store will trade differently when compared to a smaller store that is used by consumers to pick up a few items at a time.
Don’t neglect the basics. Though geographical location, store size and urban density cannot tell you everything about the differences in the way stores trade, they are often a good basis for clustering stores.
Properly segmenting stores based on the fundamental differences in the way they trade is an essential method to improving efficiencies. Assortment and promotional programs can be tailored to each store type, allowing for a better reflection of the type of consumers that shop the store.
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