Why Small is Big for Today’s Retailer

If you enjoy browsing for hours through big-box superstores that offer acre upon acre of shopping madness, enjoy it while you can. Even the two biggest mega-merchandisers, Target and Wal-Mart, have scaled back while other retailers and service providers are joining forces with complementary business to share space in some locations. Let’s take a closer look at this “shrinking” trend:

Why Go Small?

It’s not too hard to understand why a store would go bigger. Traditionally, most capitalist organizations have had one goal in mind: to expand and increase profits. With more space and more selection, retailers could attract higher numbers of customers and convince them to buy more. Think about it; how many times have you grabbed a cart at Wal-Mart intending to get “just a few things” and ended up with double what you planned on before you reached the cash register?

Figuring out why a retail giant would go smaller takes a little more thought. Here are a few reasons why retail footprints are shrinking:

• Online sales are becoming increasingly popular – As more people purchase everything from clothing to electronics online, brick-and-mortar sales have been shrinking. Sales in some big-box stores are no longer high enough to support the expense of a large operation.
• Space just isn’t there – It takes a huge parcel of land to support a superstore. In addition to a few acres for the store itself, the property must have even more land available for parking. In some areas, lots of this size are non-existent.
• Big cities didn’t have room for superstores – If the big retailers want to make inroads into the urban marketplace, they must typically use vacant space instead of building from scratch. Few urban retail facilities are super-sized.
• Small towns have a reputation for fighting the superstores – Many small towns try to keep the superstores out in order to protect local businesses. A smaller operation might receive less resistance.
• Superstores can be overwhelming – Some customers simply can’t take a shopping trip at one of these superstores, especially if they feel sick or they’re disabled. Instead, they’ll choose a smaller store for a quick, easy trip even if it means the selection is poor or the prices are higher.

Who Is Going Small?

The most well-known retailers trimming store sizes are Wal-Mart, Target, and Best Buy. Wal-Mart Express stores are expected to cover about 15,000 square feet. This retail giant says it will open hundreds of stores in this format. The City Target stores will be a little larger at 60,000 to 100,000 square feet, substantially smaller than a full-sized Target. Best Buy, one of the biggest retailers to be hit by increasing online sales, has been scaling back on square footage for a few years now. This retailer hasn’t re-branded its stores, but they are only stocking their most popular and most profitable products. For a full selection, customers will have to go to the Best Buy website.

Who Is Combining Operations?

Small retailers and service providers are going even smaller by combining operations with similar or complementary businesses and sharing a single storefront. For years, fast-food restaurants have been popping up in big-box stores, but retailers are taking this idea one step further. Like kiosks in the local mall, Verizon sells new phones and service plans in Costco warehouse stores. A few auto insurance companies are running sales counters in auto-parts stores. In Europe, post offices are opening up satellite operations in local grocery stores. One of the longest running combinations has been the PetSmart model. This business combines Banfield veterinarian services with a pet supply store. This venue also includes a grooming salon and a non-profit pet adoption service.

Although big business is shrinking in one way, it continues to grow in others. Individual stores will be smaller, but total square footage per enterprise will continue to grow as will online sales. These retailers have learned they must be flexible and change as the market changes to stay profitable in a challenging economy.

Some agencies who work with retailers include Makovsky PR, Finn Partners and Ketchum PR.