Posted on March 20, 2023 by CBSF


Posted on March 20, 2023 by CBSF

How Much Space Does Your Retail Store Really Need?

If you’re a retailer, you’ve asked yourself this question: How much space do I need for my retail business?

This a challenging question to answer.

Of course, opening a retail store can be an exciting venture, but it is essential to make sure that you are taking all of the necessary steps to ensure success.

In our ongoing series to help new retailers overcome the pitfalls of retail growth (we’ve already looked at topics like the pros and cons of operating in a mall vs a standalone store, how Ikea uses psychological weapons to increase cart value, and the top 5 traps you can fall into before you open your retail store), this post digs into one of the most important considerations: how much space you need for your retail business. Obviously, this decision will depend on various factors, including what type of products you sell, your budget, and your projected growth. 

In this blog post, we’ll look at some tips and tricks for figuring out how much space you need for your retail store.

The Formula For “Selling Space”

The formula for determining how much space you need will vary from business to business. The size of the store may depend on factors such as the types of products being sold, the average number of customers per day, and even the geographical area in which you are located.

Generally, larger stores tend to draw more customers and generate more sales than smaller stores.

However, if large stores are not feasible due to budget constraints or lack of available space in the area, smaller stores can still be successful when adequately managed.

With every new business, many of your starting assumptions must be based on research and comparing similar stores in the same area.

To get a rough estimate of the amount of selling space your store needs, you can divide your planned sales volume by your industry’s standard sales per square foot.

Here’s how it works:

For example, if you believe your store will do $800,000 per year in sales and local market data says the average sales-per-square-foot in your industry is $987 (we’re using Toronto’s Fairview Mall’s 2019 average sales numbers), by running the numbers your business can support roughly 800 square feet.

Your current needs may only account for part of the equation when deciding on a space for your retail business. Consider future growth plans when making this decision.

Will you add new products or services that require more space over time? If so, factor that into your decision-making process now so that you don’t need more room down the line or have to move locations entirely.

Market Factors

When deciding how much space you need for your retail store, it’s also important to consider market factors like local competition and customer demand.

If a large retailer is already in the area selling similar products, it may be wise to have a smaller store to keep from directly competing with them.

On the other hand, if there is no competition in the area or customer demand is high, having a larger space may allow you to capitalize on those opportunities by offering more options and services than would otherwise be possible in a small location.

Your Current Capital

Your current capital is another critical factor when determining how much space you need for your retail business.

If money is tight or if you don’t have access to enough funds to open up a large store right away, then start off with something smaller that requires less upfront costs while still allowing room for growth later down the line. This way, you can slowly build up your capital over time until you can expand into a more prominent location when necessary. 

You want to ensure that whatever space you choose is within budget while allowing enough room for current needs and future growth plans.

Also, consider additional storage requirements, such as product displays or materials needed for customer service purposes like checkout stands or customer service desks, if applicable. 

Additional Inventory

For example, if customers typically purchase more items during peak seasons like Christmas or summertime than usual, then having extra storage areas set aside ahead of time can help ensure that product availability is manageable during these periods of higher demand.

Likewise, if certain items become popular quickly, having extra storage areas ready will allow businesses to keep up with consumer needs without running out of stock too quickly. 

Where People Get Tripped Up

When deciding between two rental spaces, it’s essential to consider more than just size.

Location significantly impacts the cost of advertising and can often be worth more than any rent savings from choosing a larger space far away from potential customers.

Even if you’re tempted by extra square footage elsewhere, choose the smaller footprint in an optimal location that allows for maximum visibility without expensive ad campaigns.

As a startup retailer, it can be easy to get carried away with lofty business projections of tripling your profits within three years. However, before considering expanding the size of your store – and incurring extra costs associated with heating, cooling maintenance and insurance- remember that statistically speaking, most retailers only reach profitability in year three.

We Are Here To Help

Figuring out how much space your retail operation needs can be tricky, but following these tips and tricks should help point businesses in the right direction when making this important decision!

Ultimately, however, it comes down to considering factors such as capital availability, market conditions, product demand, inventory levels, and geographical considerations.

By considering all these things before opening a store, businesses should be fine picking out just the right amount of space they need.

And once you find the perfect location, we come in.

Having delivered for 10,000+ locations and 200 million+ sq ft of retail space over 15+ years, we know what it takes to grow a retail business.

Contact us today to get a project plan and quote.

When launching a store, it’s essential to consider the impact of important location factors. Analyzing data and identifying customer profiles can help ensure early success. Also, consider the following:

Type of Goods Sold

Taking a closer look at the products you offer can help determine what type of store your business will become.

For example, are you striving to create an all-inclusive shopping experience, or are more specialized goods in order? Is convenience for customers central to the shop’s vision and purpose? Answering these questions helps shape the future of your retail space.

Population and Your Customer

When picking the perfect spot for your retail store, dig deep into local history and engage with other small business owners in the area. Investigating population size and customer preferences is key to finding a profitable location.

Accessibility, Visibility, and Traffic

There needs to be more than just having a lot of foot traffic; it’s vital that the customer demographic matches what they offer. To get an edge, small stores can consider setting up shop near larger ones for a boost from their high volume traffic – but only if those shoppers fit its target market needs.

Also, consider:

  • How many people walk or drive by?
  • Does public transportation service the area?
  • Can customers and delivery trucks get in and out?
  • Is there parking?

Signage, Zoning, and Planning

Signed leases are legally binding, so it’s important to do your due diligence before signing. Even the seemingly minor details can have enormous repercussions; ensure you understand all zoning regulations and sign policies associated with your chosen retail store location. Doing research upfront will ensure a smooth start for the business!

Your Competition and Neighbouring Businesses

To ensure your retail shop’s success, it is important to consider the coexistence of competing businesses within its prospective location. Carefully analyze which services are available nearby to determine if they offer a supportive environment or potential roadblock for your business endeavours.

Location Costs

Additional costs exist when choosing a retail store location beyond the base rent. For example, be aware of who will cover lawn care and security expenses as well as any necessary updates like painting or remodelling that may need to be done. Additionally, retailers must determine if they’ll incur property taxes in their chosen locale.

Personal Factors

Smartly balancing personal and professional factors is essential for a successful store. Consider commuting times, lifestyle accommodations, and other potential impacts before taking the next step in establishing your shop.

Additional Resources

Are you ready to take the leap and launch your first retail store?

If so, you should check out this video jam-packed full of tips, including

  • Why location IS and ISN’T essential when it comes to choosing the right spot
  • How poor research can cost time, money, and a whole lot of headaches
  • Why people don’t focus on design and how they regret it afterwards
  • When lack of clarity on who you’re working with can jeopardize your project