Daily Dose of iQ: Big-box Retailers Move Back to Small-box Format

Jan 09, 2012 — Allan Pulga

Ten to 15 years ago, the big-box retailer was all the rage. Monolithic superstores like Costco, Sam's Club, Home Depot and Best Buy were popping up in suburbs across North America. They quickly signaled the demise of thousands of small businesses -- mom and pop grocery stores, hardware stores, electronics dealers, etc. -- and changed the way people like you and me shopped for everyday items.

Then something happened. Online retail grew rapidly (as did mobile technology), giving consumers the power to buy what they want without having to leave the house (or while on the go, with m-commerce), with products that are confirmed in-stock, AND at a lower price. Suddenly, retailers that were once the envy of the industry find themselves on the brink of collapse.

Now, as Sean Deale of InStoreTrends.com reports, these same big-box retailers are taking a new approach: Opening smaller spinoff stores "to bring stores closer to the aging shopper and to increasingly dense urban areas."

Not only have stores like Best Buy and Staples decreased their average store footprint by 15-20% and 10-15% respectively, but many others (including Walmart, Sainsbury's, Marks & Spencer and Loblaws) are "transforming in-store departments into standalone specialty outlets," Deal writes. This approach, of course, is not entirely new (Best Buy launched its Best Buy Mobile chain in 2007). The fact is, more and more big-boxes now employing the strategy.

Deale identifies the following examples:

  • Walmart opened its first standalone pharmacy in Mexico City in 2011 (see above photo).
  • Canadian supermarket retailer Loblaw has opened 7 standalone Joe Fresh stores (selling its popular clothing line) in Canada, as well as a number of stores in the New York metro area.
  • U.K. big-box retailers Marks & Spencer and Sainsbury's spun their ready-to-eat food departments (Food-on-the-Move and Fresh Kitchen respectively) off to standalone locations.
  • Today, there are about 325 Best Buy Mobile stores in the U.S. and 13 in Canada.

What's going to happen?

It's clear the big-box retailer is looking to compete with stores of all sizes, whether in the busy downtown areas or off the suburban freeway exits. These corporations are so big they're going to do whatever they can -- in this case, mixing their delivery channels/store formats -- to maximize their sales per square foot.

Once again, the small business owner is forced to control what he/she is able to control: customer service and the in-store experience.

What are your thoughts? Please post your comments below.

Topics: Retail Operations, Wireless Trends, Mobile Industry, Customer Experience, e-Commerce

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