Deconstructing the impact of store refurbishment

Against the backdrop of an ever-changing and challenging operating environment, retailers must find new ways to attract customers, encourage them to purchase and then gain their loyalty. Despite the growth of multi-channel retailing, the bricks-and-mortar store remains the most important channel, with some 94 percent of retail sales derived from physical stores. Academics, retailers, architects, and interior designers have long acknowledged the positive impact of the in-store experience on customer reactions. Although millions of dollars are invested in refurbishing stores, few retailers evaluate such efforts. The positive impact of store refurbishment on customer reactions is documented in the literature. However, academic inquiry into store refurbishment effects on customers is limited. Existing research does not consider the impact of a store’s “initial reference point” (the condition of the store prior to refurbishment) on customer reactions. Yet it is likely that the greater the change in a store resulting from refurbishment, the more impactful the refurbishment will be on customer reactions. In addition, past research has not investigated the relative impact of refurbishing specific store attributes on customer reactions. This thesis addresses these gaps in knowledge based on a longitudinal quasi-experiment conducted in the field, involving two stores that underwent a major refurbishment and two matched control stores. Importantly, the treatment stores were of contrasting initial reference points such that one had a Low Initial Reference Point (LIRP) and the other a High Initial Reference Point (HIRP). Thus, two treatment and two control stores were involved in the study, and a customer panel was drawn from a department store’s loyalty program. Psychological and objective data were gathered for each panel member and matched using a unique customer identifier. Psychological data were collected using a longitudinal study and objective transaction data were extracted from the retailer’s loyalty program database. The findings show that refurbishing a LIRP store is more impactful on customers’ psychological responses in the short and medium-term, compared to refurbishing a HIRP store. Both store refurbishments increase customers’ objective spending behaviour in the long-term; however, the impact is significantly greater for a LIRP store (22% compared to 15% for a HIRP store). This finding is critical as the bottom line for most retail decisions is the impact on sales. In addition, refurbishing store flooring, exterior design, lighting, and layout drives customers’ psychological responses, however the relative impact of these attributes differs. Moreover, the relative impact of refurbishing these attributes on customers’ psychological responses differs between a LIRP and a HIRP store. For a LIRP store, the refurbishment of lighting drives employee conduct perceptions, flooring and exterior design drives store image perceptions, exterior design and lighting drives store satisfaction perceptions, flooring drives feelings of hedonic value, lighting drives feelings of place attachment, and lighting drives positive WOM intentions. For a HIRP store, the refurbishment of flooring and layout drives employee conduct perceptions, lighting and layout drives store image perceptions, exterior design and layout drives feelings of place attachment, and layout drives positive WOM intentions. These findings represent critical contributions to theory and managerial practice as a store can be refurbished in many ways, but its ultimate success relies in part on consideration of the store’s initial reference point and the key attributes that optimise its overall impact.