BrainTrust Query: The Big Shrink
Through a special arrangement,
presented here for discussion is a summary of a current article from the
Emerson Advisors blog.
In recent posts, I’ve covered a major dilemma facing
many retailers, namely the glut of selling space relative to a weak and uncertain
demand. It appears that many retailers have begun to address the situation.
recent Wall Street Journal article outlined steps taken by some of
the bigger national players. These include:
- Sears has gone into the sub-leasing business, leasing space to Whole Foods
in one store as well as a Century 21 store in another. Sears is offering
deals on its website for virtually all its locations.
- Best Buy is venturing into new categories, including musical instruments
and health and exercise equipment in its big box. They have also announced
that they are slowing the growth of the big box format to focus on much smaller
Best Buy Mobile locations.
- Walmart is experimenting with Walmart Express along with much smaller (40,000
square foot) traditional store formats.
- Home Depot is selling off portions of its huge parking lots to fast food
and auto repair shops.
- Gap, which used its flagship to spin off separate formats (GapKids and
Gap Body), is now reversing the process, bringing its spin-offs back under
Interesting. In addition, there was a story on CNet that Apple, one
of the most productive four-wall retailers, is lowering store inventory (and
working capital requirements) in order to increase the area devoted to customer
training for all the new iMacs, iPads, and iPhones they are selling. This is
not an entirely new idea nor is it restricted to electronics. Williams-Sonoma
offers cooking demonstrations, some golf equipment stores have extensive indoor
driving ranges with professional instructors, Home Depot offers courses on
various DIY projects, and CVS has added in-store clinics. In each case, the
brand and the shopping experience is extended and customer loyalty is built
while reducing space and inventory — no small matter in an environment where
building market share is the only real growth vehicle.
Is this a strategy that can be applied through other
channels and formats? Maybe. What is certain is that there is too much space
and inventory chasing too few customers and this imbalance is relentlessly
moving back to equilibrium. Just in the last month, Borders and Loehmann’s
have gone into bankruptcy. More are sure to follow. While this is a daunting
time for retailers, it is also an exciting one. There has never been a higher
demand for creativity and extraordinary new strategies. It will be fascinating
to watch this period of retail history unfold.
- The Big Shrink – Emerson Advisors
- Welcome to the Ghost Town Mall – the future of 4-wall retailing – Emerson
- As Big Boxes Shrink, They Also Rethink – The Wall Street Journal
- Rumors of Apple retail nixing boxed software persist – CNET
Discussion Questions: What do you think of the many steps retailers are taking to capitalize on underutilized retail space? Is the retail industry ready to kick its addiction to over-expansion?