Store facelift can increase sales by nearly 50%


Despite the initial costs, renovating a store can offer big returns. Retail sales get a nearly 50 percent boost when a shop gets a new look.

A new study looks at how both first-time visitors and existing customers react when retailers undertake major remodeling of their premises.

Stores are remodeled every seven to 10 years on average. Because shopping is an important part of daily life for many people, the financial return on investment has the potential to be substantial, says Tracey Danaher, professor of marketing at Monash University.

“The in-store experience continues to have high relevance; retailers must keep their appearance modern, fresh, and in line with that of competitors. The look, feel, and mood of a firm’s retail or service environment are unique and crafted purposefully to contribute to the brand and ultimately, its profitability.”

The findings, published in the Journal of Marketing, show sales to new customers increase by 43 to 44 percent after remodeling, and those to existing customers go up by seven to 10 percent.

“We found sales for new customers were significantly higher than those for existing customers after the remodel, and this difference persisted for a year,” Danaher says.

“Higher sales to new customers were primarily due to the fact that more new customers were drawn to the altered store, they spent more each time they visited, and they subsequently visited more often.”

Store remodeling should be regarded as a marketing investment, designed to retain and attract new customers, similar to mainstream advertising, Danaher says.

“It is vital that retail firms understand how remodeling the store layout influences customer perceptions and purchase behavior.

“New customers’ perceptions of the retail environment—including its atmosphere and layout—were much higher than those of existing customers. They also perceived significantly greater service quality and higher levels of customer satisfaction.

“However, for all customers, remodeling not only enhanced perceptions of the store’s layout itself, but also changed psychological responses and purchase behavior.”

The study also shows the difference between new and existing customers endure for the long run.

“Store remodeling is expensive, so managers must weigh the benefits against the costs,” Danaher says.

“It might take a couple of years to recoup the outlay, but the encouraging returns shown in the study should prompt managers to view remodeling as a strategic marketing investment rather than a necessity to endure every decade.”

Source: Monash University


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