The major benefit of using a top-down traditional approach is that, by using averages to group stores, it ensures the chain is operating at maximum efficiency.
The risk when using this approach is in not meeting localized demand on a store-by-store basis, resulting in a potential loss in sales.
After placing each store in a cluster, individual consumer-centric strategies can then be created to facilitate targeted marketing, advertising, merchandising, pricing, and promotion plans.
For instance, analysis of one group of stores may highlight that they are all located in a similar geographic location (in the Northeast or near large population centers) or that a particular demographic similarity may exist i.e. a specific ethnic, age or income group may have a strong preference to a particular brand or style.
The key to behavioral clustering is to find the right balance of localization to meet consumer demand while still maintaining operational efficiency.