Retail space is capital. Are you measuring its return?

For large format retailers, space has traditionally been one of the great advantages. Bigger footprints allow for broader ranges, deeper stockholding, stronger category presentation and more immersive customer experiences.

But I think the way we look at space needs to change.

With occupancy, construction, labour and operating costs continuing to put pressure on retail economics, the question for leadership teams is no longer simply, “How much space do we need?”

It’s increasingly, “What return are we getting from the space we already have?”

That might sound like a subtle distinction, but across a large retail network it can have a significant impact. A relatively small improvement in the productivity of each square metre, repeated across 50, 100 or 200 stores, can translate into considerable value.

That’s why I believe space productivity needs to be thought about as more than a property or store design issue. It’s a capital productivity issue.

Sales per square metre is only the starting point

Sales per square metre is still one of the simplest and most useful measures in retail. It gives us a common way to compare stores, formats, departments and categories.

But it doesn't tell the whole story.

Two categories can generate exactly the same sales from the same amount of floor space and deliver very different commercial outcomes.

One might generate stronger gross profit. Another might require substantially more labour to replenish and maintain. A service area may appear relatively unproductive if you only measure the sales that occur within it, but could be having a significant impact on conversion or basket size elsewhere in the store.

So rather than asking only, “How much does this square metre sell?”, I think the more useful question is, “What job is this square metre doing for the business?”

That means considering sales alongside gross profit, conversion, average transaction value, stock productivity and labour efficiency. It also means understanding the operational cost of maintaining that space.

When you start looking at stores through that wider lens, some interesting things become visible.

A fixture with great sales productivity might be labour-intensive to replenish. Increasing merchandise density might improve stock capacity but make the store harder to navigate. Allocating additional space to a service function might reduce selling space but improve conversion across an entire category.

The point is that retail space doesn't operate in isolation. Every decision has a downstream effect somewhere else in the store.

At network scale, small things become big things

This is where the conversation becomes particularly relevant for large format retailers.

We see plenty of things in individual stores that, viewed on their own, don't look especially significant: an inefficient fixture, an unnecessarily complicated merchandising change, stock located too far from the selling floor, or a design detail that adds a few minutes to a recurring operational task.

But multiply that across a national network and then across every trading day of the year, and suddenly it matters.

The same principle works in the other direction.

If you can reduce replenishment time, improve stock capacity, simplify merchandising changes, reduce maintenance or achieve even a modest improvement in conversion, those gains compound when they're embedded across the network.

That’s why I tend to think about a store format as a system rather than a collection of individual projects.

When we're developing a new format, refurbishment program or rollout, the question shouldn't just be, “Does this solution work in this store?”

We should also be asking: Can we repeat it? Can we manufacture it efficiently? Can store teams operate it efficiently? Can it adapt? And what happens to the economics when we multiply it across the network?

Those questions are often where the bigger opportunities sit.

Gross profit tells us more than revenue alone

One area I think deserves more attention is gross profit per square metre.

Revenue is obviously important, but a high-sales category isn't necessarily the most productive use of space if the margin contribution is relatively low.

Looking at gross profit per square metre starts to reveal which parts of the store are actually generating economic value rather than simply volume.

The same applies at fixture level.

If a four-metre run is materially outperforming an eight-metre run elsewhere in the store, that's useful information. It raises questions about range, adjacency, stockholding, presentation and whether that additional space is actually earning its place.

I'm not suggesting retailers should simply compress every category that falls below an arbitrary benchmark. Retail doesn't work like that. Some categories are destination drivers. Some build credibility for the overall offer. Others create cross-category sales.

But those are strategic decisions that should be made consciously.

Space should have a reason for being there.

Labour productivity belongs in the space conversation

There's also a tendency to separate store design from store operations, when in reality the two are deeply connected.

Take replenishment.

If stock is difficult to access, fixtures are unnecessarily complex, shelves need constant attention or merchandising changes take twice as long as they should, the design is creating an ongoing labour cost.

That cost doesn't appear in the fit-out budget.

It appears every week, across every store.

We often talk about the capital cost of building a fixture, but the more interesting question can be what that fixture costs the business to operate over five or ten years.

For large networks in particular, reducing a recurring task by even a few minutes can be surprisingly valuable once you multiply those minutes across hundreds of employees, hundreds of stores and thousands of trading days.

A good retail environment shouldn't just look good. It should make the store easier to operate.

Design for the next change, not just opening day

The other part of the equation that's easy to underestimate is adaptability.

Anyone who's worked in retail for long enough knows that the store you open today won't be the store you need in three or five years.

Ranges change. Categories grow and contract. New services emerge. Technology changes. Brand standards evolve. Customer expectations move.

Yet retail environments are often designed very specifically around the requirements of opening day.