PM Network - December 2015

The product mix also needs to be tailored to urban living with the understanding that most customers will arrive on foot or by public transportation. That translates into microstores stocking balcony sets rather than large patio furniture and selling four-packs of paper towels versus 12-packs.

“It’s having the right mix of products and then merchandising them so they are easy to find,” says Michelle Greenwald, a professor at New York University Stern School of Business, New York, New York, USA.

In large-format stores, consumers can’t possibly explore every aisle, so they don’t even try, Ms. Greenwald says. Instead, they head right for the items on their shopping list. With a smaller selection, “it’s so much easier to shop the entire store to see what’s new.” Mr. Scamehorn agrees. What’s critical, he says, is “providing the differentiated types of products people want from a particular retailer in just enough variety that they feel like they still have choices.”

The IT Factor

The logistics of stocking the stores can also be a
challenge, as merchandise must be delivered using
city streets and alleys, and inventory has to be
stored in tighter quarters. All this requires a highly
efficient back-of-the-house operation, according
to Mr. Scamehorn. Project managers must work
closely with IT to incorporate “smart” inventory
systems into plans to create and maintain produc-
tive stores in small urban footprints.

“The challenge is that everybody on the manu-
facturing side is trying to be more efficient too, so
they want to consolidate deliveries and use fewer
and bigger trucks to ship more stuff,” he says.
“That’s one area where I think there will need to
be some interesting innovation coming along for
Technology also impacts how customers interact
with the front of the house. More than just providing
a physical location where customers can pick up and
return merchandise ordered online, brick-and-mortar
retailers must meld with the digital experience as part
of an “omnichannel” strategy. Project managers now
need to incorporate in-store technology ranging from
digital menu boards and mobile point-of-sale termi-
nals to touch-screen monitors for product videos and
online ordering.

“Technology is just going to get better and better at interacting with individual shoppers,” Mr. Scamehorn says. “Retailers need to customize the level of technology usage to each kind of shopper and find a good mix that will keep customers coming back.” —Diane Landsman