Finding over-spaced stores across an Asian hypermarket chain

The challenge 

As part of its property and store development planning process, a leading Southeast Asian retailer approached us for help to determine the optimal sizes for its hypermarket stores.   

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The solution 

Our approach enabled the identification of the optimal store size for each location through comparative analysis of the net profit from increasing space with the marginal costs – such as rent and utilities – of providing the space. We also identified the optimal category mix to enhance the profitability of all space to be retained.

Features of the analysis included scenarios where space allocation is unrestricted and where decisions are constrained by the location of fixtures and other building features. A range of conservative and aggressive scenarios were developed for senior leadership to incorporate into strategic planning.

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The result

The combination of store size reduction and optimisation of category space allocations for the remaining space delivered a forecast profit opportunity of SG$6m p.a. and approximately 30% reduction in existing floorspace.