The J curve

When a new store gets ready to open, it blitzes the community with grand opening ads in newspapers, radio and even TV. The buzz in the neighborhood starts as a result of carefully placed road signs. Neighbors start to talk about the new store. Coupons start to arrive in your mailbox.

Most retailers do a huge business during the grand opening week. The store is in its best shape and there usually is plenty of help ready to assist you.

Grand opening sales week usually is the highest sales week of the year.

After shopping the new store, many people retreat to their old buying habits. Habits that usually are defined by convenience, clean, fresh, service and price, and some do not return to the new store. As a result, sales can decline, sometimes 10-30%. The retailer then begins his real test, getting those initial customers back. As he succeeds, sales can eventually return and get back to grand opening levels. It is not easy, and it takes time.

This cycle is called the J curve. The success of a retailer depends upon how short a period of time the bottom of the J curve is.

Reality also shows that a J curve is evident in not only grand opening situations; it can happen no matter what change you make in a store.

A new remodel. A reset of product. Moving a department within a store. Adding/removing a product line. All of these conditions cause some disruption to the sales and traffic pattern of a store. Some customers will like the changes, and others will complain. Invariably sales can decline post-change even though the retailer has “improved” the shopping experience. But the improvement is in “his” eyes. He needs to convince the shopper of the improvement.

The J curve becomes particularly important when large capital is invested in the grand opening or the change. Payback models are predicated on a certain sales level. Ignoring the bottom of the J curve can prove to be disastrous to a retailer.

 

John Marklin

www.marklinfinancial.com

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