One of the common questions from potential retailers is, “How do I decide what size of shop to have”? This needs to be resolved early on because it has a crucial impact on the future health of the business.

There are a number of softer issues that need to be considered before we come to the hard financial ones. The size or shape of the store is greatly influenced by who your customers are expected to be. For example, are they going to be women, men, the young or the older?

Stores aimed at younger people tend to be dark (think Hollister, Pull and Bear), crowded (think Virgin, Zara) and not particularly spacious with products often displayed quite dramatically. Stores for women are quite different. In his classic ‘Why We Buy’, retail guru Paco Underhill points out, “The narrower the quarters, the less time a woman will spend there”.

Women tend to linger and do not like to be crowded, “if you expect her to bend over and look at merchandise, she will not feel comfortable for more than a moment or two.” I recall when we built a home appliance boutique we paid particular attention to this and created a store which was spacious, open, clean and welcoming.

In the first week, one lady customer who came in settled herself onto the sofa near the cash desk and said, “This place is so calming, do you mind if I sit here and meditate a while?” (Our response: “Please do, Ma’am, stay as long as you wish!”)

The type of merchandise you are going to display is another critical factor. If it is garments, what is the size of your product line? Do you display them folded or hanging? If you are displaying jewellery, watches, telephones or perfumes, how many brands or lines do you have? How many different designs do you need to show and what is the size of counter or display you need to show each line?

You also need to keep in mind the level of traffic you expect. Are you in a high traffic location with scores of people coming in at one time? This would need more space for people to move around and maybe multiple cash tills. Or do you have the comfort of just entertaining a few people at one go, in which case you can get away with a tighter space?

Another soft, but important, factor that people look at is the size of stores operated by their main competitors. Should their brand have a store that is bigger, smaller or the same size? Look around the malls and notice how many small stores you see for competing brands like say Louis Vuitton, Christian Dior, Prada or Chanel. The size of the store often makes a statement about the brand.

And then we come to the two critical financial ratios.

First, the rent-to-sales ratio. Based on expected sales from the shop, what is the ratio of rent to sale? This may vary from business to business, and usually most retailers budget for a higher ratio in the first year of operations. However, the rule of thumb is that rents should be between 8-12 per cent of sale.

Second, the sales per square foot. The business needs to get a feel for sales per square foot of their own, or of comparable businesses in a similar location. For example, if you expect to do a monthly sale of Dh1 million in a 500-square foot shop, your sales per square foot is Dh2,000. How does that compare with your peers?

If they have a sale of Dh3,000 per square foot, can you increase your sales expectations? Or if you reduce the size of your shop, keeping in mind the factors discussed earlier, would you still be able to provide the required level of service to your chosen segment and also have proper displays to show all your products?

A big problem in this market is that you are often not in control of the size of shop you are going to get. In most malls, sizes are more or less fixed, so you may have to go with a store which is larger or smaller than what you would ideally want based on your calculations. Perhaps, that is one of the challenges that makes retail such an interesting business.

The writer is CEO of Tridayle Consult FZE, a retail consultancy.