TWO TYPES OF INVESTMENTS

Joel Alden, partner in the retail practice at A.T. Kearney, said that investments in technology and physical stores mainly fall into two distinct categories: maintenance investments or growth investments.



“For maintenance investments — replacing a degrading building infrastructure, for example — the cost of not making the investment is critically important,” Alden said. “For this type of investment, it’s important to track total costs to avoid cost overruns, which are often cited as a key pain point for CFOs.”



For growth investments, such as opening or remodeling new stores, the expected sales and margin lift, total ROI and total cost of ownership are essential to assessing the success of the investment, according to Alden.

He also cited a third type of investment, called innovative capital. “This is usually in support of growth, but the acceptable risk may be higher than typical growth investments,” Alden said. “It’s based on the premise that all innovation investments may not yield the designed results, but continue to be an important part of advancing the retail experience.”