Comparing the Effect of Store Remodeling on New and Existing Customers
Tracey S. Dagger & Peter J. Danaher
Comparing the Effect of Store
Remodeling on New and Existing
Customers
Although retailers invest millions of dollars in redesigning, refreshing, and remodeling their stores, it is unclear that such large investments are worthwhile. Prior research has indicated that remodeling has only a short-term effect.
However, a previously unexplored area is its effect on those who visit the store for the first time after it is remodeled
(new customers) versus those who had visited before the remodeling (existing customers). This study contrasts the effect of store remodeling on new and existing customers in two field experiments with stores that underwent a major remodeling. Treatment and control stores are used in both experiments. The authors measure sales before and after the remodeling for new and existing customers; in one store, they also measure customers’ psychological responses. In both cases, sales increased after the remodeling effort. However, sales for new customers are significantly higher than sales for existing customers after the remodel, and this difference persists for a year.
Higher sales to new customers are primarily due to more new customers being drawn to the remodeled store, their higher spend per visit, and their subsequent increased visit frequency.
S
Keywords: servicescape, store remodeling, field experiment, sales, store environment
store remodeling should be regarded as a marketing investment, designed to retain and attract customers, similar to mainstream advertising. As they do for various marketing investments, managers aim to determine whether remodeling is financially worthwhile. According to Weitzel (2010),
“the average total store remodel today costs $3.5 million for decor, equipment, fixtures and labor. Add in lost sales during the remodel period and the loss from markdowns and remodels ends up costing approximately $3.7 million per store.” For retail chains with hundreds
Comparing the Effect of Store
Remodeling on New and Existing
Customers
Although retailers invest millions of dollars in redesigning, refreshing, and remodeling their stores, it is unclear that such large investments are worthwhile. Prior research has indicated that remodeling has only a short-term effect.
However, a previously unexplored area is its effect on those who visit the store for the first time after it is remodeled
(new customers) versus those who had visited before the remodeling (existing customers). This study contrasts the effect of store remodeling on new and existing customers in two field experiments with stores that underwent a major remodeling. Treatment and control stores are used in both experiments. The authors measure sales before and after the remodeling for new and existing customers; in one store, they also measure customers’ psychological responses. In both cases, sales increased after the remodeling effort. However, sales for new customers are significantly higher than sales for existing customers after the remodel, and this difference persists for a year.
Higher sales to new customers are primarily due to more new customers being drawn to the remodeled store, their higher spend per visit, and their subsequent increased visit frequency.
S
Keywords: servicescape, store remodeling, field experiment, sales, store environment
store remodeling should be regarded as a marketing investment, designed to retain and attract customers, similar to mainstream advertising. As they do for various marketing investments, managers aim to determine whether remodeling is financially worthwhile. According to Weitzel (2010),
“the average total store remodel today costs $3.5 million for decor, equipment, fixtures and labor. Add in lost sales during the remodel period and the loss from markdowns and remodels ends up costing approximately $3.7 million per store.” For retail chains with hundreds
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