Retail segmentation explained for those considering store segmentation

Importance of Retail Store Segmentation

Using Retail Segmentation to segment your stores

As data insight and analytics specialists, we understand the importance of analysing stores at estate level but also at each individual site. All too often, retailers forget that each of their sites, although part of a larger chain, will have differing characteristics and potential propositions dependent on its location and site attributes.

At S2, we help our clients understand how each of their stores will perform, based on different factors. For instance, it’s site location (High Street, Residential, Retail park), nearby proximity drivers (transport hubs, attractions, transient work force), local competitors and the consumer profile within catchment.

Store segmentation is the process of grouping stores with common characteristics. This enables optimisation of store level activity including ranging, pricing, merchandising and promotions that are suitable for that particular segment of store.

If each store is different therefore, it stands to reason that stores shouldn’t be treated the same, with a blanket approach to sales and marketing activity. This potentially extends to a different pricing and ranging strategy.

The segmentation model most appropriate for your organisation, will be dependent on the nature or type of business. A bespoke segmentation will inevitably use a hybrid of factors based on relevancy. 2 basic store segmentation models are based on store characteristics or shopper driven characteristics.

Benefits of Store Segmentation for Retailers

  • Developing bespoke sales and marketing mix with promotional activity to suit each store’s specific target audience
  • Informs retailers of where prioritisation of resource or investment is needed based on store opportunity
  • Optimisation of store and category space based on potential uptake of specific products
  • Ability to size the market opportunity around each store based on its segment type and catchment
  • Improving customer engagement providing the right products and pricing in the right stores.
  • Develops tailored customer service appropriate to store strategy

To conclude, store segmentation is a valuable exercise for all retailers. Understanding the mix of your stores and how to optimise the right mix of products, merchandising and promotions will improve overall profitability for each. Furthermore, the more you can tailor your offering for the relevant audience, the more sales you will generate.

For more information please read our full article  on retail store segmentation which covers the process, benefits and performance monitoring of retail segmentation.

If you would like help or advice on segmenting your stores please contact a member of our team on [email protected]

 

Retail Segmentation Case Studies: –

Vue Cinemas – Estate Segmentation  

WHSmith – Store Segmentation

Coca Cola Ents – Estate Segmentation

Tui Travel – Customer Profiling & Estate Segmentation