Space planning isn't a new concept, but its applications, as well as benefits to apparel companies, are continuing to evolve says Stacy Baker.

The future will bring a new perspective on space layout tools, with a greater focus on collaboration in a much less isolated view than the industry has seen in the past.

Look for more retailers and manufacturers embracing the technology as an integral part of the merchandise lifecycle as companies continue to put the squeeze on costs and emphasise lean, trim operations.

"Utilisation of space has a significant impact on retail profitability. Real estate is expensive and labour is costly and in short supply. Space planning relates to both. It is also at the core of merchandise planning in that it is what provides for the presentation of the item to the consumer," says Cynthia L Renfrow, senior director of global retail practice, SAS Institute Inc.

"When you look at assortment planning as part of the lifecycle in managing merchandise - and you're able to tie space opportunities on the floor to this iterative process, that's where a retailer will be able to track and analyse inventory performance.

"Space planning delivers predictive models that tie to sales per square foot and the overall margin contribution to your business."  
 
Collaborative growth
Like with many other technology solutions, one potential for growth and greater efficiency lies in the collaborative aspect - i.e. the ability of retailers to work with their stores and vendors on space layout decisions.

Collaboration is further aided today by the ability to integrate intelligent clustering into the merchandise planning process. This allows assortment planning to be done at store cluster levels.

The traditional process of centralised space planning is evolving. Stores serve a greater role than just being the execution arm. They are a critical player in the collaborative process.

"In department stores with different spaces, different fixtures, varying products and so on, we struggled with questions like, 'What linear footage do we have?', 'What sort of space have we got?', 'How many options can be displayed?', and 'What volumes of these offers should be out?'" says Colin Porter, supply chain director for House of Fraser.

"Previously, linear footage and conversions were estimated manually and were often disregarded due to their inaccuracy." The company implemented the smartVM solution from Torex Retail in an effort to evaluate different plans and their impacts on financial performance.

"We sat down with buyers, digested information and gave ideas on how to merchandise," added Phil Hill, visual merchandising controller at House of Fraser. "However, we never knew if all that product would fit into each store. It was also the case of visual teams having to predict how a buyer wanted their range interpreted in-store."

Best product proposition
The tool allows the retailer to bring information from a variety of financial plans into a single database that facilitates the layout of products, fixtures, etc, in order to maximise the presentation and distribution of products within the available space.

"The ultimate objective is to get the best product proposition out there for our customers and help drive sales and profitability on the back of it," says Porter.

"In terms of processes, the Torex Retail VM solution comes in right at the beginning, when we are planning our square footage in our stores. It then carries through into what fixtures we have and where and how that varies in terms of different square footages within the business, in large, medium and small stores."

According to Renfrow, space layout solutions like these open up opportunities to do cross-functional planning in order to optimise penetration on the floor.

For example, retailers position themselves to be able to request that certain vendors case pack particular merchandise so that it's shelf-ready which improves efficiency and drives profitability.

"In the past, retailers have shipped the same merchandise assortments across all stores. Many times the stores have the same layouts and presentations. All of this when we know that merchandise does not sell the same in every store. The result is too frequent markdowns, over-inventoried conditions and ineffective store layouts…all driving higher operating costs and shareholder loss," she explains.

"Now we're able to determine packaging for cluster stores ahead of time so that it can be direct shipped and assembled with sizes and colours that the consumer is buying in that store.

"We're moving to a more total view of how we put merchandise in stores to sell through more effectively on regular priced items or pre-planned markdowns that have profitability goals."
 
Another exciting benefit for apparel retailers is that although you can drill down to shelf space, you can also do what's called "block planning," a functionality that allows you to take a look at a particular department to determine how to best use the space at a macro level across categories and departments.

Through modelling and analytics, planners can assess spacial opportunities in the store - where to give more or less square footage for particular categories, how to maximise promotional space, etc.

Optimisation solutions
Optimisation, however, is not always based on optimising prices alone for particular products, says Renfrow. Retailers can analyse based on store traffic patterns, margins, loss leaders, promotions and more.

"Space planning is an integral part of merchandise planning - the goal is to remove as much intervention by store personnel as you can. The technology looks for opportunities to optimise, then the business solution comes back to you with insights and options," she explains.

Optimisation solutions draw business insights from transaction level systems such as inventory management, replenishment, vendor performance management, purchase order management and point of sale (POS).

Data is extracted from the transaction systems into a data warehouse or enterprise intelligence database. It is from this enterprise intelligence database that business intelligence is drawn.

"In partnering with retailers on demand planning, the benefits from pre-season proactive planning to in-season execution at store level are clear," she adds. "Working together with your vendors means tighter execution throughout the lifecycle of the merchandise.

"Not only do you reduce returns, but also at a higher level, you increase the involvement of the vendor in managing your inventory. While your vendor is always interested in volume orders, they will see the financial opportunities represented by collaboration with you on space planning - and merchandise planning as a whole. Profitability will soon override pure volume."

Ultimately store layout planning is about increasing a customer's experience. When you have space that is laid out efficiently and effectively, you have fewer requirements for store labour intervention.

Fewer store associates are handling and re-ticketing merchandise, less markdown periods are triggered, and the right levels of inventory are coming onto the store floor. The associates are better able to handle other customer service issues and create a more Zen-like environment conducive to selling, which at the end of the day creates a stronger sense of loyalty among shoppers.

By Stacy Baker.