When retailers open up a new location, it is tempting for them to make their new store a carbon copy of the original. If the first outlet was successful enough to fund a second, surely it is a solid model to work from. But the misfortunes of US book giant Barnes & Noble suggests this is not the case. Barnes & Noble’s commitment to making their stores identical ultimately led to their downfall, suggesting that strict store standardisation could jeopardise an entire chain’s future.

A few savvy retailers are taking a new approach, and showing the best way for a business to survive in multiple locations is to adapt each store’s design and wares to the local area and local clientele.

How store localisation saved Waterstones

In 2010, HMV Group entered talks to sell Waterstones, the nationwide book chain that had been struggling to make a profit for years. The bookseller was £170 million in debt and almost filed for bankruptcy before they were bought out and saved by billionaire Alexander Mamut.

Mamut secured Waterstones financially, but it was new Managing Director James Daunt who made their stores profitable again. Before he joined Waterstones, Daunt was the director of Daunt Books, his own chain of independent bookstores. Every Daunt Books store was perfectly tailored to its local area, with each placing emphasis on different book titles by country, determined by the kind of customer that lived nearby.

As Daunt told the Evening Standard, “If you pile up the latest celebrity thing in Hampstead for 1p, it ain’t going to sell. And if you pile up an esoteric history in Gateshead, it isn’t going to shift.” This taps into an important part of localisation philosophy: if the demographics of an area are different, the stores should be different too.

When Daunt arrived at Waterstones, he was concerned by the rigidity of the store ‘planogram’ – a document that told each location exactly where to place each book, and which books to promote over others. Instead, he encouraged each store to make their own decisions about stock and promotion, and tailor their planogram based on trends they noticed with their local clientele.

This localisation helped Waterstones return to profitability just four years after facing bankruptcy. Thanks to rigid standardisation of inventory, Barnes & Noble is still in perpetual decline.

How localising stock can drive sales

Waterstones isn’t the only major chain to try localising stock. Around the same time as Waterstones, Marks & Spencer announced plans to group their stores into local clusters that stock items based on local demand. Consultants said doing this would increase Marks & Spencer’s market share in each area by 5%. The actual effect of M&S’s localisation practice is difficult to determine, but the company’s UK sales did increase by 2.3% in the aftermath.

The Harvard Business Review says that modern technology, such as RFID, can help retailers understand the individual needs of certain areas with more clarity than ever. The magazine proclaimed the era of standardisation as over, and heralded localisation as the future of retail, and this was way back in 2006.

While localisation was not universally adopted, the brands that took note have certainly benefited. Waterstones aside, US retailer Macy’s found a 4.9% increase in net sales after a rigorous nationwide localisation initiative in 2013, and a recent study in localisation found that it increases gross profit margins 64% of the time.

Adapting design is also important

There is more to store localisation than simply stocking what customers in the area want. Localisation is about making your store a true part of the local area. This is why adapting the design of a store is just as important for a retailer who wants to increase their local market share.

Soap sellers Aesop have mastered the art of store design. They even have a website dedicated to their design ethos. Aesop has stores in Sydney, Sao Paulo, New York, and Milan, and each store is as unique as the city it inhabits. This exploration of Aesop’s design from Quartz looks at how each store makes use of physical characteristics of the building it is in. One store resembles the church it was built over. Another recalls the deli it replaced. The stores also take on the personality of the local area; the Chelsea, New York store is full of Paris Review back issues. This dedication to localisation has helped Aesop grow loyal local followers all over the world.

Bigger brands are also taking note of the benefits of localised design. Gap and Starbucks have been experimenting with store designs inspired by their surroundings over the past few years. Starbucks’ Downtown Disney location in California is full of cartoons for the children and peaceful refuge for the parents. While Gap’s latest store on New York’s 5th Avenue pays tribute to the city’s industrial heritage. UK branches of these stores are yet to localise their design – but we may well see a bit more local flavour even in international chains.