Are big box retailers going too small with new store concepts?
Through a special arrangement, presented here for discussion is a summary of a current article from the IMS Results Count blog.
Before the age of Amazon, “big box” stores were the category killers that created the destination locations to draw the masses. Today, the big retailers are focusing on shrinking stores. The downsizing trend begs the question: How small is too small?
Some of the recent trends toward small store footprints include:
- Walmart is building 3,000 sq. ft. convenience stores called Walmart Fuel Stations. Walmart has also tested 4,000 sq. ft. Walmart Pickup with Fuel formats.
- Target plans to have 130 smaller, urban format stores ranging in size from 20,000 to 40,000 sq. ft. by 2019.
- IKEA’s typical stores are 300,000 sq. ft. but it’s opening smaller showroom locations – some under 10,000 square feet – in urban centers to reach city dwellers and supports online sales.
- Nordstrom’s is piloting a 3,000 square feet location that carries no inventory for sale and focuses on service and engagement.
- Finally, reports arrived last week that Amazon was setting a goal to open 3,000 AmazonGo locations – the first two have been 1,800 sq. ft. and 1,450 sq. ft. – by 2021.
Smaller stores are less expensive to open and fit in more neighborhoods while also more adaptive to customer’s varied omnichannel expectations particularly in the area of click and collect.
- Several key factors that make smaller stores possible and potentially more profitable:
- Virtual shelf technology reduces the need for large inventory in store;
- Click and collect also enables small stores to offer “unlimited” choices;
- Convenient local locations foster click and collect customer traffic;
- Small footprints reduce rents and enable more locations, particularly urban;
- Small stores enable curating assortments to local consumers tastes and needs.
The most important trend in bricks and mortar retail right now is finding formats to “right size” the store platform to fit customer needs.
DISCUSSION QUESTIONS: What do you see as the biggest challenges facing “big box” retailers that open smaller store formats? What factors will have the greatest impact on the ratio of big to small box stores over the next five years?