One of the most compelling lectures I ever attended dealt specifically with this topic. Until that day, I had not given much consideration to the value of tracking the effect of a well-done remodel. That day changed how I viewed the value of display as it relates directly to revenue.
When you enter a high-end multiline retailer in a mall, what is the first thing you see? Yes, the cosmetics counter! The higher the retailer profile, the more the cosmetic company spends on their display counter. That display image is directly related to their selling price and only the high-end brands will be given space. This image directly relates to their revenue.
While the seminar dealt with remodels, the same logic (without sales history) applies to a well-done new office. For people contemplating a remodel the burning question is always, “how can I afford it?”. To make the point of Revenue to Display, we will give a marketing example.
Store A is 15 years old and has had no upgrades during that time. The businesses around it have changed and are still very viable. To upgrade the merchandising displays we will assume a cost of $45K. We are also going to assume the store sells 6 pair of glasses per day and is open 6 days per week. The owner decides to lease the fixtures with $5K down and (without listing all the details) a monthly payment of approximately $660. This defines the cost side of the project.
The store currently has an average selling price of $250 per pair for lenses and frames. The new display fixtures are installed and instantly the store has a new fresh upscale look. The reps that have been calling on the store for years take instant notice of the new improved look. Rather than showing their “basic” line they automatically want to position their higher end frames in the newly minted space. In my experience, even if the frame lines do not change, the typical average selling price commanded by the new space goes up 20%. In a seminar I gave a few years ago, I made this very claim and someone in the back of the audience said that did not happen for him – instead he said he had a 37% increase in revenue.
It is always best to take a conservative approach to budgets. If you increase your average selling price from $250 by 20% the difference is $50. If you have a 50% gross margin on material cost, you just netted $25 more than your previous sales. $25 (net margin) X 6 (pairs per day) = $150 per day NET. This business is open 24 days per month for a total of $3,600 additional NET dollars.
While results vary, it is easy to see by this example that compelling retail display changes can instantly generate additional revenue and more than support the return on investment. In this case, the client nets an additional $2,940 per month and in turn has a more highly motivated staff that enjoys the new look and feel of their space.
