We have been working with small & medium retailers (mostly with traditional retailers), and in our journey, we learned a vital point that in the first phase after implementing any system, process, and solution, the solution provider should always ensure to make these stores profitable in the next 9-12 months complying with all the right processes.
And in the second phase, they should take them on the journey of scalability at the right pace, maintaining the store’s stability and sustainability.
Recently, I was referring to the 3rd Edition of Retail Management (OXFORD University Press) for my advanced studies in Retail Management and found insightful information. Here’s a verbatim paraphrase of the same:
A retail business operating more than one store is usually classified as a chain store technically, but for some practical purposes, a retail store can be referred to as a chain store when the retail business operating it has more than eleven stores”.
What it essentially means is scaling to multi-store operation has its own multiple benefits. (This is a very good reference book for those who want to build a career in Indian and International Retailing written by Chetan Bajaj, Rajnish Tuli, and Nidhi Verma Srivastava).
In this phygital world, scaling has become a necessity, not a luxury. However, it does not mean that plan for opening up 100 stores in the next 1-2 years without profitability. So retailers need to take calculative steps and cautiously scale to the correct number of stores in the right geography within the suitable time and with the proper processes compliant with the best practices in retail. Upon following the aforementioned, the store will have a 10X profitability in the next 18-24 months of the store’s scaling process. But the retailer should first focus on making their single store truly profitable and sustainable, without which the scaling process would be akin to committing financial suicide.
And if the store is profitable but still not planning to scale then that is like getting choked up and getting suffocated by several external factors in today’s retail journey such as modern retailing by big format stores, big e-commerce giants, D2C penetration, and last but not least the quick commerce through dark store models of recent times.
And being a small & medium retail store, adding the right number of stores will always add value and strength to the retailer. The major 6 benefits of scaling to have multi-stores are:
- Can have a significant impact on competitiveness by using the trust level you have built in your area where consumers will immediately connect with you emotionally;
- Can have better buying power (economies of purchases);
- Can spread the key managerial salaries;
- Can spread the promotional and marketing cost;
- Can have better visibility of the brand geographically;
- Can get a chance to learn fast about the demand and taste of the consumers across a city or district which in turn make the future roadmap clear and intuitive.
And these two things i.e. TRUE Profitability and Scalability can only be ensured through a compliant process or SOP in place. Regardless of the store using any technology or even a spreadsheet, there has to be a process in place.
So the simple scalability journey of a traditional retail store should be: