Is the Future for Stores Getting Smaller?
By Jeff Weidauer, Vestcom International
There’s been a lot of discussion in recent months about store sizes, in particular the fact that stores are getting smaller, primarily because of the impact of e-commerce. For example, Walmart and Target are both committed to offering smaller format stores.
The theory is that this shift to small is directly related to the shift to online shopping. Most people shop online, so the theory goes, and brick and mortar stores aren’t as viable as they used to be. Some pundits are predicting the demise of brick and mortar altogether. But is this actually the case? Are stores actually getting smaller, on their way to disappearing altogether? A dive into the facts draws a somewhat different picture.
There are two major factors driving the belief that smaller stores are taking over. First are the previously mentioned moves by Walmart and Target to smaller boxes. But it’s important to note that neither of these companies is in growth mode, and both are struggling to regain relevance in a changing market. There’s no guarantee that smaller stores will provide the growth larger companies are looking for.
The other factor is the growth of the dollar segment. The recent battles among the major dollar retailers have brought to light just how powerful they are. There’s ample evidence that much of the pain Walmart is feeling has more to do with the dollar segment than it does with online purchases. The fact is the three major dollar players are opening stores as fast as they can—more than a 1,000 per year. This growth of small (less than 15,000 square feet) stores skews the curve, and from a macro level makes it appear that stores are getting smaller, and that the only growth is in those small stores.
A recent interview with Kroger chief executive Rodney McMullen touched on the topic of stores size. Kroger recently opened a new 121,000 square foot store in Athens, Ga. When asked about this in the context of other players going small, McMullen stated that their Marketplace format had been very successful for them. He also mentioned that Kroger was experimenting with smaller stores but gave no indication that the company was looking to go smaller anytime soon.
The final argument for a small-store future is the impact of online shopping. Stores don’t need the selection they once did, so the story goes, because people can just shop online. Having a larger store only provides a bigger showroom for consumers to use, and then they place orders with online retailers using their phones.
This is an interesting argument and sounds logical with the advent of showrooming, except a funny thing happened to our shopping habits. Where consumers used to make lists and plan shopping trips, that is an activity that is becoming more rare, especially among younger shoppers (those highly desirable young families, for example). More and more people today shop “in real time,” meaning they run to the store when they run out of something they need. That might be for dinner or for health and beauty supplies.
This activity isn’t really helping the electronics retailers; most of those purchases are planned, and researched. But for the fast-moving consumer goods retailers—food, drug and mass—this means they need to be in-stock on most of the same products they’ve always needed to have on the shelves. Shopping has become, in many cases, a daily activity, where it was once a weekly chore. The other good news for food stores in particular is that most consumers still prefer to buy food in the real world; this is doubly true for perishables. We still want to pick out our own tomatoes, for example. Having a smaller store won’t meet this trend.
Retail has always been a challenging business; that’s part of the fun of it. And it will remain challenging for many years, as younger consumers grow up and form their own habits. But stores aren’t going the way of slide rules and steam engines; quite the opposite. And the only stores likely to get smaller are those with a specific strategy, like the dollar retailers, and those who can’t compete in the new world.
Jeff Weidauer is VP of marketing and strategy for Vestcom International Inc,a Little Rock, Ark.-based provider of integrated shopper marketing solutions. He can be reached at [email protected].
More Web Exclusives/Guest Commentaries