Background and Challenge

A major retailer in the pet food supplies and services industry was focused on reaching new target consumers and optimizing store locations. To achieve these goals, the retailer was evaluating a smaller, convenient store format. L.E.K. Consulting’s first engagement for this initiative projected that this new convenience model would generate $1 billion in incremental revenue, and planned for an eventual roll-out throughout the United States. As a follow-on project, the retailer enlisted L.E.K. to establish strategies for new store merchandising, pricing, and store branding, and to also define its staffing model.

Approach and Recommendations

The L.E.K. team addressed four distinct issues during this project:

  • Merchandising: The L.E.K. team leveraged industry sales data, the retailer’s sales patterns and competitors’ assortments to develop the category allocations and basic store offerings
  • Pricing: To develop the pricing strategy for this concept, L.E.K. used consumer research and competitive benchmarking to establish the right price positioning for its new market
  • Store Branding: L.E.K. interviewed consumers and assessed new concept successes in adjacent markets. L.E.K. also partnered with the retailer’s branding agency to develop recommendations for new store concept names and branding
  • Staffing: To better understand the right staffing model for a smaller store concept, L.E.K. benchmarked a range of similarly sized store formats and assessed the financial implications of the proposed staffing model

L.E.K. recommended a detailed assortment plan by category and key brands within categories, as well as a suggested store layout and staffing model that helped the client quickly understand how to operate the new concept cost effectively and maximize potential profits.

Results

The retailer adopted L.E.K.’s recommendations and has fast tracked pilot store development. Based on the early success of its three initial pilot stores, the pet retailer is rolling out this concept nationally.