Point of Purchase Design and the Future of Retail Sales Growth

Last week Wal-Mart announced it is closing 269 stores, 154 of which are in the U.S. Wal-Mart’s stock has declined 30% in the last 12 months so it’s no surprise that the company is taking aggressive action to improve its financial performance. Given the rise in online shopping and the way in which retail store footage has outpaced population growth over the last decade, additional store closures should be widely expected. Retail is a mature business with excess capacity so rationalizing that capacity is a natural part of the evolution of the industry. So given this environment, what are the implications for point of purchase design?

Point of purchase design and in-store merchandising have always been important elements of successful retailing. But given the current retail environment, point of purchase design is more important than ever for 3 primary reasons:

  • As retail capacity is reduced, there will be greater emphasis on sales per square foot metrics, and ultimately the remaining retail space will have to produce more to make up for the sales that are being lost through store closures and space reductions.
  • As retailers cut space and staff, retailers will be looking to reduce the number of products they carry and suppliers they deal with. To stay in the game, product manufacturers will need to have excellent products and strong point of purchase designs that drive sales.
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  • Retailers will increasingly squeeze the profit margins of product manufacturers in order to improve their own financial performance. Product manufacturers who want to keep their retail space will likely be forced to accept lower margins. The pressure to increase sales velocity to make up for the lost margins will only increase. Effective point of purchase displays and in-store marketing programs represent the best chance for product manufacturers to increase sales.
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