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Space Optimization: A Retail Case Study

The Company

A leading fashion retailer with over 1,000 stores

The Challenge

The retail chain had spent years investigating means for improving how they allocated in-store space. After numerous meetings with consultants, they divided their layout with a clustering scheme based on market demographics. The result was inconclusive, however, and management was back to square one.

The Solution

The retailer decided to relaunch a clustering scheme with the support of APT’s Test & Learn™ and Space Planning Optimizer software. Space Planning Optimizer helped the retailer track the relationship between space allocation and profit in distinct categories of similar and substitute products. Next, space plans for each store in the network were optimized. By clustering on the resulting plans, the retailer was able to provide grouped stores with the same recommended allocation plan, allowing for customization to drive profits. The retailer then used APT to profile each cluster to understand the common demographic, competitive, and psychographic attributes of each cluster.

The Results

By optimizing their merchandise presentation by cluster, and by targeting the customers in each cluster with greater precision, the fashion retailer is expected to realize $6-7MM in incremental annual profits.
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