Key Success Factors in Retail

Yulia Plieva: What three key success factors in retail would you highlight, considering your entire professional experience? Because in restaurants they always say: location, location, location. Is there something similar in retail?

Iryna Borovych: Actually, this is not just in retail — it applies to life and business overall. For me, it's people, people, and people again. At the core of success, it's always people — an engaged team. The product, regardless of the kind of retail, is more or less the same everywhere.

 So, if we want a customer to choose us, we need to create value.

That’s why it’s about having an engaged team, the customer, and the value we create for that customer.

Stepan Slynchuk: I completely agree that business and outcomes are driven by people. But I’d add a bit more detail to that answer — first, by pointing to company culture. That’s where people can together create growth. Because the outcome that people produce often comes at the intersection of different departments and processes. And the quality of those “intersections” — whether they cause friction/losses or create synergy and results — depends first and foremost on organizational culture.

That phrase “culture eats strategy for breakfast” wasn’t invented for nothing.

Second, I’d highlight the operational model — operations in a broad sense. I believe it's essential to do your homework. Often, we know what needs to be done, but for some reason, we don’t do it — or we do it poorly.

So the operational model is the second most important factor. But people are definitely the first.

 Business Model, Scaling and Expansion

Yulia Plieva: All the chains we observe tend to constantly open more and more retail locations. And here, the question of formats becomes very interesting. How do you define yours? How many should there be? How quickly should you grow? But most importantly — are there signals or triggers that tell you it’s time to scale up?

Iryna Borovych: Let me start with the question of “when?” The answer is — when you have a working business model. That is, when your financial indicators — which are simply the result of whether you're operating correctly or not — show positive trends, and if you have the ambition, then you should keep expanding.

Yulia Plieva: By “working” — do you mean that the network shows a net positive, or that each individual store generates operational profit?

Iryna Borovych: It’s not just about operational profit — I’m referring to specific KPIs. In retail, there are quite a few, and every chain has its own benchmarks. When your model is working, you know who your client is, whether they like your products, and you’ve learned how to open exactly in those locations where product, value, and customer come together — and that shows in your financials. There will never be a "perfect time." So in retail — if you have something to grow and if you have ambition — you need to keep growing.

To be honest, I don’t really like the word "expand," I always say "develop." Cemeteries expand — but a retail system develops.

Yulia Plieva: So we must first develop a successful business model, make sure it's working, and only then start expanding. And in your case, “development” means growing the number of retail points?

Iryna Borovych: When we talk about growth, it should serve a purpose. It might be small towns or big cities, shopping malls, partnerships, subleasing inside other chains. We explore new locations and new customers. So it’s not just about increasing the number of loyal customers but also engaging new ones.

Let me give the example of Inditex — Zara, Bershka, Massimo Dutti — they’re usually all in the same mall. What does that tell us? These are different formats for different customers. Most importantly, they provide choice.

Also, in retail, development is necessary because the efficiency of a business with 10 stores versus 50 or 500 is vastly different. We don’t expand our admin staff for 50 or even 500 stores. And correspondingly, the cost per item also drops. This allows us to either offer better prices to customers or maintain higher margins.

So economically, it makes sense. And I always say that a business can only go in one of two directions: forward or backward. There’s no such thing as standing still. If you’re not growing, your competitors are.

Stepan Slynchuk: I’ll add that customers buy when there’s both physical and mental availability. Mental availability is branding and marketing. Physical is when the customer can buy something here and now. So scaling is the best way to grow sales. But several conditions must be met.

Retail has to look inward and identify what makes a store successful. And when you look closely, you’ll see very different outcomes — from exceptional profits to losses.

Moreover, there are multiple ways of looking at losses. For example, an individual store might be breaking even operationally — rent is paid, staff paid, no losses. But once you allocate central office and marketing costs to that store, it becomes loss-making. And if you were to close it? Those fixed costs would have to be spread out across other locations. So when analyzing financial performance, you need to look at different breakeven points.

We have stores that are profitable and some that are not. We dig deeper with factor analysis: traffic, average check size, number of employees, marketing costs — what contributes to success and what’s missing?

In our case, the smaller “island” points (not boutiques or full stores) tend to have fewer leftovers, lower average checks — but in terms of profitability, they’re slightly higher than the rest of the network.

Yulia Plieva: And I guess they’re easier to open?

Stepan Slynchuk: Yes — easier to open due to lower investment and faster speed. Not only do you save on upfront costs, but you can open — and close — quickly. If something doesn’t work, you just dismantle the island and reopen somewhere else.

These are two key exercises: analyze success and failure, and look at profitability at different levels.

And I’d add one more factor — call it intuition or feeling. At Love You, we had moments when external conditions turned less favorable, and we dived back into revisiting our model. We realized later that we had missed an opportunity to scale during that time — we were too focused on short-term profit, and lost about six months. That was a lost chance.

Yulia Plieva: And how did you realize it was a missed opportunity? Did competitors advance?

Stepan Slynchuk: It wasn't about competitors. It’s that we didn’t take advantage of an opening when we had the chance, and now it’s more difficult because most of our formats are mall-based — we rely on traffic. Analysis showed that our most successful locations are the ones with 9+ competitors nearby. Why? Easy — more foot traffic, more customers, more market share to capture.

Yulia Plieva: That’s interesting — because if you ask people in food retail or optical chains, they'd say the opposite. That tough competition leads to cannibalization — sometimes even positioning stores right across from their own, just to block out competitors.

Stepan Slynchuk: By the way, speaking of scalability — we once opened a second location in the same mall where we already had a successful one. The result? We didn’t lose any revenue at the first store — we actually gained additional sales.

Yulia Plieva: So there was no cannibalization. How do you explain that?

Stepan Slynchuk: It’s different traffic flows. A great example of the physical availability principle.