This may be an excellent retail location, but it is an excellent symbolic representation of Tokmanni’s biggest current problem. A couple of times during the spring and summer, I have explained in this thread the critical logic behind retail profitability—especially in the saturation phase. Comparable Growth! •
Simplified, there are 3 ways to grow:
• By far the best growth is in an existing store. No (significant) investment costs, and you get increased sales and economies of scale from 100% of the store’s processes! = even more profitable growth!
• With a new store, without cannibalization (e.g., the first store in a new town). Investment costs are a drawback, but you get increased sales and economies of scale from approx. 25-35% of all retail processes = more sales, and a slight increase in profitability.
• With a new store and cannibalization. Yes, some new sales, but investment costs are a burden. Economies of scale from increased sales on only 25-35% of processes, but due to cannibalization, the sales of one or, at worst, several other stores decrease, and scaling in these units becomes negative. (E.g., sales drop by -10% but central logistics, internal logistics, real estate, property maintenance, energy, electricity, cleaning, store fixtures, and personnel costs remain at the same level). The net effect on economies of scale is negative and, at best, only zero.
There are already 5 other Tokmannis within a 10 km radius of the new Kivistö store! Varisto, Tammisto, Myyrmanni, Kaari, and Konala. The micro-location of the Kivistö Tokmanni dictates that people will also primarily arrive at this store by car. Furthermore, since it is generally known in the general merchandise trade (KT-kauppa) that the average purchase of a car-driving customer is at least 3X, it can be concluded that this 6th store (within a 10 km radius) will with 100% certainty cause cannibalization (among car-driving customers) in nearby stores.
This store opening is a typical example of “Tokmanni disease”: in Finland, growth is only available in places like Ähtäri (6,000 retirees) or Kivistö, which is an area with seemingly excellent purchasing power, but it eats into its own profitability with an investment-heavy Spar concept (Spar-konsepti) that lowers profitability and still has questionable competitiveness.
A reason to avoid until Tokmanni has a working recipe, i.e., 12M rolling comp growth AND increased profitability.
PS. Investments (stores) in the Helsinki metropolitan area are strategically the most risky. When the first Costco, Amazon, Action, or Tedi store comes to Finland, it will cannibalize the Helsinki metropolitan area (PK-seutu) the most. Not all of these will come, but one or some are highly likely to.