Comparing the Effect of Store Remodeling on New and Existing Customers

Tracey Dagger, Monash University
Peter J. Danaher, University of Melbourne

Although retailers invest millions of dollars in redesigning, refreshing, and remodeling their stores, it is unclear that such large investments are worthwhile. Prior research indicates that remodeling has only a short-term effect. However, a hitherto unexplored area is its effect on those who visit the store for the first time after it is remodeled (new customers) versus those who had visited before the remodeling (existing customers). This study contrasts the effect of store remodeling on new and existing customers in two field experiments with stores that underwent a major remodeling. Treatment and control stores are used in both experiments. We measure sales before and after the remodeling for new and existing customers; and in one store, we also measure customers’ psychological responses. In both cases, sales increase after the remodeling effort. However, sales for new customers are significantly higher than for existing customers after the remodel, and this difference persists for a year. Higher sales to new customers are mostly due to more new customers being drawn to the remodeled store, their higher spend per visit, and their subsequent increased visit frequency.

 

Dagger, Tracey S. and Peter J. Danaher (2014), “Comparing the Effect of Store Remodeling on New and Existing Customers”, Journal of Marketing, (forthcoming).