Determining the Optimal Retail Store Size

[TCSlaguna]

Hey Everyone! 

I was wondering how everyone determined the optimal retail store size they needed for their business. I know retail stores like Apple calculate profit per square foot. But for those of us who are just starting a business and may not have a PhD Candidate as an Operations Manager, I was wondering: 

How did you determine the optimal retail store size for your business? 

Did you compare with competitors? 

Did you estimate the amount of inventory you were going to carry? 

Did you look at retail displays you would potentially carry? 

Did you just buy/lease what was available? 

Would love to hear your insight! 

@Twpchair @homeprogreen  @Sheli @followell6912 @saydad @SammyGrace2414 @vinesandrushes @TheRealChipA  @VanKalkerFarms  @doc_choc  @rtfulk  @londontea  @JupiterGames @Twiggy @dasap1234 @Michael_L  @OurCupCakery @HairbylauralynL @Candlestore @shopfybr @pieous @nella @JTPets @JessPoynter @jjgard  

[TCSlaguna]

and.... @JUYBoutique20 @dieterslicke @MamiesToffee @TOTSC @Thevioletfox @mulberryandgran @Doran @Donnie-M @DinaLRosenberg @page158 @signature_home @BlackAngelDsgns @BofBArtStudio @HC_Charlie  @PartyManiaMD @LocavoreStore @anucrown @timberhillwine @timberhillwine @alexandriak @Abigails_stl @MichiganFarmsta 

[vinesandrushes]

I started small (as a proof of concept) and added on to the building as we went, so not a very good example for you to work from.  

[TCSlaguna]

@vinesandrushes  So you had space on the land to build an addition? 

[vinesandrushes]

Yeah - started with a tasting room and a production room. The tasting room was too small and we used the production room for hosting but it was a hassle. Added warehouse space two years later to alleviate some of that space pressure and then a few years later added another 3,600 sq ft to one side of the building and a few years later another 3,600 sq ft to the other side of the building. A year after that  we renovated a machine shed into additional warehouse space. It’s been a busy 10 years. Each addition solved a few problems for customer-facing areas, production, warehouse, kitchen, etc. 

[Candlestore]

@TCSlaguna ;

I bought the store that was there with inventory.   So I would not be a good person to ask what Size store we need or anyone else.  Right now we are on 1 acre with 3 buildings totaling 16,000 sq ft.  2 of the building are just for inventory and materials for making candles, Glass jars, wicks, wax etc.  Now I am trying to figure out where to put a Candle making class area where regular customers would not be walking in on the class or standing in the back hearing what others are paying for etc.

[Twiggy]

In the 1980’s we did look at SPF and then learnt to merch upwards/vertically.  4 stores later our main concern is based on access - listed below.

What way does the store face - south facing great for plants terrible for flowers - North great for flowers but lighting can be bad and great for flowers.  West is terrible as heat at end of day. East North east is best as we don’t have to fridge our flowers (store kept at 16ºC - 10ºC / 50F -60F)

Can the large lorries access the road we are on - these are big - with a height of 4 metres, and a width of 2.55 metres (or 2.6 metres for refrigerated units) 12 metres in length and trolley access.  Can we and customers load outside 

Are there tolls / is there pedestrian only access and customers parking Can we dispose of our recycling easily / daily. Footfall and security.

Then looked at what was in the price range - with get out breaks or those with a rolling lease.

[Twiggy]

These are the 4 sizes of lorry that deliver

[Michael_L]

In my case, we expanded as we had need... and budget.

It started with a small studio space, which was enough to hold my camera setup plus a reception area and a small back room for storage.  I had calculated the amount we could make and the lease on the space and figured it was manageable - which proved to be correct.  As we grew I rented office space for our shipping and editing work in a separate location.  I didn't like separating the team, but second-floor commercial space is much less expensive than expanding a shop with a visible storefront.

We've reconfigured again so we now have two camera rooms, a couple work-from-home team members, and our shipping is handled by the photo lab.  The space we rent is basically what we need with not much extra.

So ... the most helpful aspect of this might be to consider what parts of your company could be handled in a less expensive work space and what requires the customer-facing and more expensive space.

[TCSlaguna]

That's great advice @Michael_L. It's definitely convenient having everything under one roof, but if part of the business can be done elsewhere more cheaply, it is worth it. 

[DinaLRosenberg]

So, when we started our shop we did quite a bit of competitive analysis. Where competitive shops were located, what they carried, pricing, etc.

We were very deliberate in where we are located and what our product mix is, style of merchandising, etc.

Sales per Square does factor into our product line decisioning. if we carry a line that has a large retail footprint it needs to be "worth it"- and keystone pricing just isn't enough, 

there have been many times we have picked up a line or a segment of products and discontinued b/c the sales per square just weren't there.

I don't think you need to be a PhD candidate to understand that every inch of your store (for the most part) should be making you money.. the more space you use for non-selling (storage,etc) the higher the sales needs to be in the rest of the shop to carry it.

Everything you sell needs to "pay rent" to be there.. so If you have a huge display that is, say $1 incense sticks (this is a HUGE pet peeve in our industry- the amount of shops I see with a gigantic incense display is bonkers)... well, how much money does that really make? 

A lot of this comes down to reasonable assumption. For me, incense sells no matter what kind I have out and where I have it. So we have a pretty small display of it because honestly the margin on crystals is better.

we started with a small shop but were able to expand to take over the whole building.. We eventually added the book shop- a year in and we're still trying to see if the bookshop experiment makes sense

[TCSlaguna]

Love how you consider each item you carry and its footprint. 

We used to be considered a metaphysical bookstore. Now we only have one bookshelf. Margins are small and it's hard to keep up with the latest releases. We mostly carry the informational books on crystals, pendulums, etc. 

[BofBArtStudio]

We researched many other similar businesses in our industry, created a floor plan, and then purchased a 4000 square ft building.

Over the last 10 years, we have utilized every inch and maximize our revenue per square foot.

[TCSlaguna]

That's great that you have grown into your location and are now maximizing the revenue per square foot! 

[Doran]

For me, it was about budget.  I  knew I needed a treatment room and waiting/retail area.  I probably could have gone smaller but the place I found was in budget and neighborhood.  It worked out when I decided to expand the retail part of my business.  I'm currently looking for a larger space and still just what fits in the monthly budget is my key focus.

[TCSlaguna]

Good luck with the search @Doran! 

[Bronze_Palms]

I started out in one room, renting out of a larger salon suite. Then, starting touring places to build out a salon. The market dictated what size I was going to move forward with. In my area, the smallest place was about 650-800 sq ft that would be appropriate for a tanning salon (IE not in a commercial office complex). 

I ended up in a 960 sq ft place and had to build rooms. Even though I was only renting one unit amongst a dozen or so units in the plaza, my criteria for the plaza played a large factor in deciding the right unit for us too. 

[rtfulk]

Our situation is a little different than everyone else. Our "store " is physical, but not permanent. We work 15 state fairs a year. Almost all of them run 12 days with the exception of  The State Fair of Texas it runs 24 days. The fairs range from having 100 vendors to over 400 depending on the size of the fair. 
When we apply for a fair and if we get accepted you are assigned a location, after a couple of years you start trying to move to better locations. Ideally we want a 20x30 spot, some fairs we can only get a 20x20. We like the main aisle at the main door. We have 2 setups one for 20x20 and one for 20x30. Everything has to be mobile and put up quickly and torn down quickly. We can set a booth up and stock it in 2-3 days and have it torn down in 4 hrs.

[HC_Charlie]

I graduated my biz over several years, and went from doing 10x10 foot booths, to a larger 15x15 farmers market stand...and then when I went to a brick & mortar store I knew I couldn't fill anything over 1,000 sq. And I could afford the rent for that size space anyway. It's not easy to find anything smaller than 1,200-1,500 sq in my area but I was lucky to find just the right size at 630sq. The only downside is it's in an older, tucked away strip mall that had it's hey-day back in the 1980s. It's very charming, but it just doesn't receive as much love and attention from the landlord or local patrons.

I think for anyone starting out, figuring out what fixtures you need to sell your items, that will help calculate square footage. I've heard formulas for calculating profit per square footage, but I don't use that precisely. I usually just look at my displays for what hasn't moved, and think about the lost sales/profit from that small area in the store and try to change the inventory up to refresh and get more sales.

[homeprogreen]

My 1st shop was only 144 sqft. Small but within my budget to start with. Made it work by installing slatwall. That worked for 2 1/2 years until I had built up enough revenue stream to be able to afford moving into the space I really wanted in the same building. Currently I’m in a 500 sqft space which is a good fit. It allows me to maximize profit per square foot and is large enough that it doesn’t feel crowded if 4-6 customers are in the shop at the same time 

[doc_choc]

We put absolutely no thought in to our first store, considering we make and sell chocolate perhaps we should have. The lack of AC with the hotter longer seasons is a consideration. Windows where does the light hit inside the shop and will this affect the product quailty. Have the right light in the shop, we had our chocolate sprouts turn blue one year. Fat traps do you have space to install one, oh and mice they love chocolate, how do you keep the fury friends out. Shop two we still didn't learn, it was like a gold fish bowl, windows every where. So really look at your products and see if the space nurtures them.