LITTLE ROCK — Baby boomers helped fuel the growth of the big-box retail format in recent decades. Increasingly, it appears, they are growing less fond of the superstore, and the generation they raised didn’t develop the same passion for endless aisles jampacked with choices.
The result is a trend toward smaller stores as retailers expand their businesses or replace existing facilities.
“Boomer families, the kids have moved out. So you have a whole class of people who don’t need to do a stock-up kind of trip,” said Leon Nicholas, senior vice president for Kantar Retail, a global research and consulting firm.
And the younger generation, he said, has embraced online and mobile shopping, which provides access to an endless array of products without setting foot inside a store.
“So put those together with the speed and easiness of online, you don’t need as much space as you did before,” he said.
A third variable, Nicholas said, is that many of today’s shoppers don’t have as much desire, or ability, to spend as much per trip as in the past, so they are more likely to make multiple trips, perhaps spending only $10 at a time.
“We’ve seen a real decline in stock-up shopping, especially among the low-income shoppers,” he said.
Among recent moves by retailers:
Best Buy said in March that it will close 50 of its big-box stores and intends to open 100 small-format “mobile” stores that focus on smart phones and other mobile devices. It has two such stores in Arkansas, at malls in North Little Rock and Fayetteville. The company cited the shrinking size of electronics in general as a contributing factor for going to the smaller format.
On Tuesday, Best Buy said Brian Dunn, chief executive officer, had resigned, and it cited “a mutual agreement that it was time for new leadership to address the challenges that face the company.”
Last year, Kohl’s signaled a move away from its 90,000- to 100,000-square-foot stores to a format in the mid-60,000s.
Target has developed City Target, featuring a selling floor of 60,000 to 100,000 square feet, down from the 125,000 to 180,000 range.
Shopko of Green Bay, Wis., has introduced Shopko Hometown, a smaller format it is applying in some new stores and in former Pamida stores that are being merged into the company.
Wal-Mart Stores Inc. of Bentonville has tested the water with its Wal-Mart Express format, but at the of end of its fiscal year Jan. 31, it had only 10 of the stores, which the company has said could be used in both dense urban areas where space is costly and in underserved rural areas. The three Express stores in Arkansas fit the latter category — they’re in the small northwestern towns of Gravette, Gentry and Prairie Grove.
The company also has Neighborhood Market stores, with a traditional supermarket format, which are significantly smaller than its supercenters and discount stores.
“We continue to see tremendous growth opportunities,” Deisha Galberth Barnett, senior director of corporate communications at Wal-Mart, said in an emailed statement. “We will add 210 to 235 units this year. That includes new stores, expansions, relocations and conversions. Within that total, 80 to 100 will be small formats, primarily Neighborhood Markets.”
She added, “Supercenters remain the priority and the best format for capturing market share.”
The company had 3,029 supercenters at the end of its fiscal year. The combined grocery and general-merchandise stores often exceed 200,000 square feet.
Claudia Mobley, managing director of the Center for Retailing Excellence at the University of Arkansas at Fayetteville, said shoppers’ economic circumstances are a factor in the move to smaller outlets.
“We’re not making the big trips. We don’t have the money to spend that we once had because our stock portfolio has gone down the tube. We’re not making as much money as we used to,” she said.
One key to small-format success for Wal-Mart and other retailers, she said, will be whether they can maintain competitive prices. If so, she said, the format could open doors to urban markets.
Paco Underhill, president of Envirosell, a commercial research and consulting firm based in New York, said that, with improvements in supplychain management, merchants have a better feel for what’s on the shelves and what customers are buying.
“The holy grail is to be able to shrink the size of the store and keep sales the same or improve them,” he said.
Underhill said urban markets are the “last frontier” for many U.S. retailers, and numerous chains are seeking a format that will work. In some cases, he said, that means localizing the products it stocks for Hispanic or other ethnic shopper bases.
Wal-Mart has 31 stores under three different banners that are tailored to Hispanic shoppers: 26 Amigo stores, three Super Ahorros stores and two Supermercado stores.
Underhill cited an example of two Swedish grocery seller clients who have refrigerated storage in the front of the store so that customers can shop during their lunch breaks, go back to work, then pick up their items as they head home.
“America’s cities are being repopulated with the young, the wealthy and the childless,” he said. “All the major U.S. chains are working on a small, urban format.”
Jeff Green, president and chief executive of Jeff Green Partners in Phoenix, said retailers have come to realize that they need to maximize sale per square foot, rather than simply total sales.
“They’re getting smarter about not keeping too much inventory,” said Green, whose company specializes in feasibility studies and demographic profiles for retailers seeking to locate facilities in new markets.
Green said the track record on Wal-Mart’s Express format is still mixed, given the low total number of stores. But eventually, he said, he expects that the small urban stores will do “very, very well.”
That’s due in part, he said, to an aging population that doesn’t particularly like shopping in huge stores. And the younger crowd, he said, is drifting increasingly to online and mobile shopping.
On Kohl’s move to a format about one-third smaller, Green said: “I think it’s going to work out very well. They’re going to be great about editing their assortment.”
In the past, Green said, the retail mind-set among the major chains was that bigger was better, that shoppers were more impressed with a bigger store.
“That really wasn’t true,” he said. “That might have been true back in the 1980s, but they continued to do that 20 years later.”
Business, Pages 63 on 04/15/2012