BrainTrust Query: My Pre-pandemic Pathology of ‘Formatitis’
Through a special arrangement,
presented here for discussion is a summary of a current article from Newmarketbuilders’ Right
Brain of Retailing blog.
Although "small" and "urban" are
the location-based terms most often used to describe the numerous emerging
formats U.S. retailers are developing, they fail to fully explain the diversity
that is taking shape.
With that in mind, I’ve created the following three
segments that sort out the pathology of the coming "formatitis" pandemic:
1. Proliferation – Penetrating new markets with smaller footprint stores and
fighting scale with scale.
Variations: Smaller footprint stores are where urban, and — let’s
stop leaving this out — rural areas, really do come into play. Walmart’s
Express and Target’s City Target concepts fall into this category, but
assume these stores will be "mini" versions of the mother ship.
Although consumables will no doubt take center stage, it’s hard to predict
which categories, brands, and even packaging sizes will gain ongoing placement
and, as these concepts get fine-tuned, assortments will continue to mutate.
Drug retailers, dollar stores, and hard discounters, such as Aldi, will feel
the heat. Greater store density will intensify price transparency and more
neighborhoods will become "walk-able."
2. Specialization – Capturing new niches and saturating key categories
Variations: Expect to see an influx of separately-branded specialty retail
concepts plucked from retailers’ existing private brand portfolios (e.g.,
Joe Fresh apparel) or opportunistically launched as stand-alone brands (e.g.,
J.C. Penney’s Foundry Big & Tall).
Aftermath: Spin-off specialty stores
will change the existing specialty store landscape and potentially siphon sales
away from more generalized competitors. Mega retailers will deploy these concepts
at will and decide how far they will spread as they go along (rather than committing
to rollout plans up-front). Most spin-offs will initially focus on the retailers’
owned brands. However, just as J. Crew, Gap, and other private-brand-based
specialty chains have begun to augment their assortments with select national
and licensed brands, the same may eventually hold true here as well.
3. Localization – Driving loyalty by closely connecting stores with their
Variations: These concepts may be highly customized, as with the all-out,
hyper-local approach used by Whole Foods — where each store has a local "forager"
who pushes for local products and a community advocate whose role is to immerse
the store in all types of neighborhood activities — or formatted, as
with the newly-refined "palettes" that are guiding Starbucks’ new
store designs ("Heritage," "Artisan," "Concept," and "Regional
Aftermath: Much has already been stated about big box retailers
putting "mom-and-pop" stores
out of business. A rush of highly-efficient, hyper-localized concepts could
pose an even greater threat to business as usual and woo a new generation of
shoppers. I often talk about the reality of retailers being brands. In the
future, individual stores will become their own brands and the concept of "retailer-as-brand"
will continue to evolve into "location-as-brand."
Consider yourself inoculated!
Discussion Questions: Which format trend identified in the article holds the most potential to transform U.S. retail? Which categories or channels will be affected most? Given over-storing concerns, is there “room” in the U.S. market to support the creation of these concepts?