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.
RetailROI launches #RetailFightsEbola relief campaign
Nashville— Responding to the Ebola virus that has ravaged West Africa, the Retail Orphan Initiative (RetailROI) is launching a major campaign to help fight Ebola in Liberia. Working with its partner charities operating in Liberia, the #RetailFightsEbola campaign is rallying retailers, manufacturers and individuals to provide much-needed medical and hygienic supplies to Liberia.
RetailROI’s goals are twofold. First, the initiative seeks to raise more than $1 million in donated goods from retailers and manufacturers. RetailROI is working to provide specific items requested by its partners and the Liberian Ministry of Health, including first aid supplies, as well as food, clothing and linens to help with practical aid and care for survivors and the more than 3,400 children that are newly orphaned from the disease.
Second, the initiative intends to raise $250,000 in financial contributions from companies and individuals for immediate relief. The financial contributions will help RetailROI partners provide additional relief until the goods arrive. One hundred percent of the funds will go directly to Ebola relief; RetailROI is a foundation that is part of the Giving Back Fund, a 501(c)(3) charitable organization.
“For obvious reasons Liberia’s government is primarily focused on mobilizing hospitals, treatment centers and coordinating with others to help with the treatment and keeping order,” said Katie Meyler, founder of More Than Me, a RetailROI partner whose original mission was to provide education and opportunity to the most vulnerable girls in Liberia’s West Point slum, but has recently expanded to combat Ebola.
“When it comes to practical aid for those most at risk, the vast majority of the work and distribution is being done through community groups and non-government organizations with boots on the ground like us,” Meyler said. “Survivors of this disease lose everything; their entire household and belongings are burned to stop the spread of the disease, and several thousand survivors are now orphaned children. These funds and resources will be a great help and will save lives and help slow the spread of this disease.”
RetailROI partners, including More Than Me and several others, have successfully reduced the number of new cases by up to 90% in some of the areas hardest hit by the disease, through education, community outreach and delivery of basic medical and hygiene supplies. These efforts have been so successful that the Liberian Ministry of Health reached out to them to expand their work to additional Ebola hotspots within the country.
“The goods that Liberia has requested are readily available from nearly any supercenter, drug, clothing, or grocery store in the U.S.,” said Greg Buzek, co-founder and donor trustee, RetailROI. “We are asking retailers and manufacturers to donate products at their cost from overstocks or out-of-season goods. This is retail’s chance to make a difference in the lives of people that desperately need our help at the source of the outbreak and will be key to helping contain this epidemic.”
For more information, to donate or get involved visit www.retailroi.org/ebolarelief. A video announcing the #RetailFightsEbola campaign is also available:
An informational webinar is scheduled for Tuesday, Oct. 28th at 2 p.m. EST for those interested in getting involved. Interested parties should register here for details.
Retail analyst Chen joins Cowen
Cowen Group, Inc. has designated Oliver Chen as a Managing Director in the company’s Equity Research department focused on key retail sectors.
In his new role, Chen covers specialty retail, broadlines and department stores, and luxury stocks. Chen is based in New York and reports to Robert Fagin, Cowen’s Director of Research.
“We are thrilled to welcome Oliver to Cowen,” said Mr. Fagin. “He has a thorough and creative approach to equity research, and as a recognized thought leader in the retail sector, he is an indispensable resource to buyside institutional investors.”
Chen joins Cowen from Citigroup, where he spent over seven years as a senior analyst covering a broad spectrum of the U.S. consumer retail landscape, including specialty stores, apparel, footwear & textiles, luxury retail, department stores and broadlines. Prior to Citigroup, he worked in the investment research division at UBS, in the global mergers and acquisitions/strategic planning group at PepsiCo International, and in J.P. Morgan’s consumer products/retail mergers and acquisitions group.
Chen holds a Bachelor of Science degree in business administration from Georgetown University and a Masters of Business Administration from The Wharton School at the University of Pennsylvania, and is a CFA charterholder. Chen was named one of the top three analysts in the Retailing/Specialty Stores sector in the 2014 Institutional Investor All-America Research Team survey.