Background and challenge
A leading U.S. specialty retailer of pet food and supplies wanted to maximize its value in anticipation of a future IPO. The company needed to create an alternative, smaller retail format to capture share in urban and suburban markets to support further profitable growth. L.E.K. Consulting was enlisted to evaluate numerous small-format concepts and determine the most attractive option, and to develop a cohesive strategy across merchandising, pricing, store branding and staffing.
Approach and recommendations
Our team addressed four distinct issues during this project:
- Merchandising. We leveraged industry sales data, the retailer’s sales patterns, and competitors’ assortments to develop the category allocations and basic store offerings
- Pricing. We used consumer research and competitive benchmarking to establish the right price positioning for the retailer’s new market
- Store branding. We interviewed consumers, assessed new concept successes in adjacent markets, and partnered with the retailer’s branding agency to develop name and branding recommendations for the new store concept.
- Staffing. To better understand the right staffing model for a smaller store concept, we benchmarked a range of similar-size store formats and assessed the financial implications of the proposed staffing model
We recommended a detailed assortment plan by category and key brands within categories, as well as a store layout and staffing model that helped the client quickly understand how to operate the new concept cost effectively and maximize potential profits.
To date, the client has rolled out more than 80 new-format locations. The fully realized convenience concept is estimated to add ~$1 billion in incremental revenue.