Labor shortages, rising labor and operating costs, and declining customer traffic due to intensifying competition continue to create a challenging business environment.
Under these circumstances, deciding whether to expand the number of stores (an aggressive growth strategy) or reduce it (a defensive management strategy) is a critical business decision.
This time, let's look at the potential advantages and disadvantages of each strategy, based on the perspectives of business owners.
1. When Choosing to Expand the Number of Stores
Advantages
Expanding the number of stores means opening new locations, creating more opportunities to attract customers in new areas.
Even when customer traffic and sales at existing stores are struggling to grow, the company as a whole may still achieve growth. Expansion can also provide new insights into customer needs and preferences.
For employees, seeing the company expand can boost motivation. It is important for employees to feel that the company they work for is growing and moving forward.
Disadvantages
To get a new store up and running, companies typically transfer several employees from existing stores.
In some cases, they may also need to send additional staff from other locations to provide support during the first few months after opening.
As a result, existing stores may become understaffed. If they are already short of employees, transferring staff to new stores can make the situation even more difficult.
Furthermore, these staffing challenges may lead to a decline in the quality of products and services at existing stores.
Products and services are the face of a store. Any decline in quality can directly affect sales and the store's reputation. This is an area that requires particular attention.
2. When Choosing to Reduce the Number of Stores
Advantages
When a store closes, some of its employees can be transferred to other existing stores.
Of course, this may not be possible for everyone, but it creates an opportunity to review and improve staffing arrangements across the company.
Making the best use of the company's valuable human resources is essential.
These transfers may also strengthen staffing at existing stores, creating opportunities to improve the quality of products and services.
In turn, this can lead to increased customer traffic, higher average spending per customer, and improved sales.
Disadvantages
Closing stores becomes public knowledge and may negatively affect the reputation of the company as a whole.
Some employees may become concerned about the future of their own stores or the security of their jobs, which could lower their motivation.
In addition, it would be ideal if customers from closed stores could be redirected to other existing locations.
In reality, however, it is difficult to accommodate all of them, meaning the company may lose customers who have supported the store over the years.
3. When Choosing to Maintain the Current Number of Stores
Another option is to keep the number of stores unchanged and continue operating as you are.
However, it is important to remember that responding to changes in the business environment is essential.
It is a good idea to decide in advance when and how your company will respond to those changes.
For example, you might consider the following options:
- Maintain the current number of stores for now, but plan to expand or reduce the network to a specific size within the next few years.
- Begin opening new stores when certain business conditions are met.
- Keep the number of stores unchanged while starting to relocate stores to better locations with higher profit potential.
These are all options worth considering.
Would you expand your store network or reduce it?
