From the Publisher: Small is big

As other retailers shrink their stores, does it make sense for supermarkets to follow suit?

By Seth Mendelson

Suddenly big is bad. At least that is what various retailers are saying when they talk about the size of their stores and what the game plan is for remodels and new units.

As reported in The Wall Street Journal in early March, many retailers, including Home Depot, Sears and even Walmart, are taking steps to shrink the size of some of their stores. As the Journal noted, many retailers are cutting store sizes to save money in the face of this vicious recession. Others, including Best Buy, say they do not need as much traditional floor space because they are doing more business online.

The logic, I assume, is that with everything available on their websites, the retailers no longer need these stores to serve as showrooms for the public. In addition, many retailers think that they are offering too many products and cutting back will save money in many ways, especially distribution costs.

Frankly, this makes a lot of sense to me. Consumers, as a whole, want to have as easy an experience as possible when shopping for their basic needs. The idea of walking 200 or 300 yards through a huge parking lot, only to traipse around an 180,000-square-foot store for canned soup, toilet paper or toothpaste, is not sitting very well with more and more time-crunched consumers.

So these retailers are doing all sorts of things to downsize. Some—usually those stuck with long lease agreements—are sub-dividing their stores and leasing out space to other merchants as well as to banks, restaurants and even roller rinks. (One retailer mentioned that a local museum was interested in some space.) Others are simply opening up smaller units, hoping that these stores will entice consumers to make a quick stop for certain products.

But the big question is do smaller store formats work for supermarkets? While I am not an advocate for super-large grocery stores, smaller does not necessarily work in the grocery industry. Unlike other retail formats, consumers want to get everything done in one fell swoop at the supermarket. That means creating a floor plan that caters to as many consumer needs as possible, including a well-developed fresh department, a nonfoods section and, of course, a center store area.

As history shows, doing all of this in 25,000 square feet of selling space is not easy. Unlike many other mass retailers and specialty stores, supermarkets still need to present a healthy array of products to their customers. Cutting back on store size just does not work for the grocery industry.

That said, supermarket chains still need to understand the realities of the day. Besides cranky and demanding consumers, retailers must pay attention to other things, including real estate and utility costs. So while smaller may not be the ideal thing for supermarkets, finding ways to conserve space is still a good idea for food store operators.

The bottom line is that size matters and for supermarkets, at least, bigger is still better.

This entry was posted in 2011 04 Article Archives, Columns and tagged , , , . Bookmark the permalink.