New Concept and Format Development
Defining and launching a new retail concept is a complex process that requires an informed and thorough approach. Developing a concept that is compelling to consumers and owners/investors, and is substantially differentiated from competitors’, is not easy, and the failure rate is quite high. There are many components that must be thought through in detail and executed correctly, and it often requires organizational change and focus — without disruption of the existing business.
L.E.K. Consulting can help you tackle this challenge and achieve successful results. We have helped numerous retailers develop and roll out new store concepts and formats to increase store productivity, reduce costs and serve as a platform for growth. In addition, we have helped our clients identify acquisitions that can support market expansion and growth.
We utilize a systematic approach that aggregates and analyzes customer insights to develop a new store concept or format:
Create: In this phase, we collect and analyze customer insights to identify needs and opportunities. Leveraging these customer insights, we develop high-level store concepts in collaboration with our client.
Define: After prioritizing potential store concepts, we test the preliminary attractiveness of each concept with customers via primary research. We utilize these insights and rigorous cost-benefit analysis to determine the optimal store concept.
Develop: In the final phase, we and our client launch pilot store(s) and analyze performance by closely tracking sales and soliciting customer feedback. Armed with additional data, we refine the store concept as necessary and develop a complete launch plan for store openings/conversions, with key milestones and project resource responsibilities.
Our approach to concept development has helped dozens of retailers evolve their customer experiences and achieve success in their new store concepts and formats.
Men’s specialty apparel retailer: We guided the creation of a new store format that was a radical shift from the legacy strategy, but delivered a superior value proposition to the consumer, including outlining an implementation plan and facilitating testing and launching of the new store format. The concept has been so successful that the client is completely transitioning its business to the new format and has opened 150+ stores over a five-year period.
Pet-centric big box retailer: We assisted the client in identifying and developing a new, smaller, convenience-style format to capture share in urban and suburban markets. To date, the client has rolled out more than 100 new format locations, and the fully realized convenience concept is estimated to add an additional ~$1 billion in incremental revenue.
Regional grocery store chain: We assisted the client in developing a new natural and organic specialty store with an assortment, layout and in-store labor model to better align with consumer needs. The client experienced a 4,000 basis point improvement in test store performance (reaching 30% annual comp growth) and the concept rollout is on schedule.
Major casual dining chain: We designed a new restaurant format to allow the client to target smaller metropolitan areas where its current format did not have a presence. We led multiple aspects of the new format design, including everything from determining the size and layout of the formats to planning the number of employees and menu pricing. The final concept cut construction costs by ~50% and offered estimated EBITDA margins of 20-25%.
Major department store chain: We developed a new food-only store concept to help our client maximize future growth potential. The client has since rolled out more than 200 new concept stores and achieved 15 straight quarters of comp store sales growth.