Big Box Retailers Think Small

Toner News Mobile Forums Toner News Main Forums Big Box Retailers Think Small

Date: Tuesday January 31, 2012 07:54:05 am
Viewing 1 post (of 1 total)
  • Author
    Posts

  • Anonymous
    Inactive

    Big Box Retailers Think Small

    As shoppers do more of their buying online and brick-and-mortar stores look to cut costs, big box retailers are starting to open stores that, well, aren’t so big.

    Companies like Office Depot, Walmart and Best Buy are reworking their merchandise mix and shrinking their stores, while other companies are creating new concept brands and squeezing into denser, urban settings to save on overhead expenses and boost sales per square foot.

    "If you’re a retailer and you’re building a box, the question is what is the matrix — how do you make money," said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consultancy in New York. "If online sales keep sucking up more and more sales, and you say, ‘Well, we’re just going to keep building the same size box,’ isn’t that sort of crazy?"

    "Given the phenomenal growth of online retailing in the past seven or eight years," he added, "it just means you need a smaller footprint."

    Best Buy stores, for example, averaged 40,000 square feet in 2007, according to CoStar, which tracks the commercial real estate industry, but new leases in 2011 were closer to 33,000 square feet, and new leases for the electronics store hhgregg and children’s store, buybuy Baby, dropped by several thousand square feet. Best Buy has also rolled out 280 standalone Best Buy Mobile stores, which average 1,400 square feet and have 10 locations in New Jersey, a spokeswoman said. And last spring, Modell’s opened an 8,900-square-foot store in Ramsey, about half the size of its typical stores, a spokesman said. half its normal size in Ramsey.

    In Hoboken, Office Depot recently opened a 5,000-square-foot store that is part of a strategy to replace its typical 26,000-square-foot locations as those leases expire, said Kevin Peters, president of Office Depot’s North America division. The company saved shelf space by offering a fraction of its products, but what it stocks makes up 90 percent of its sales.

    "We spent quite a bit of time over the last year or so talking with customers about what they valued most, and what they told us is helping them save time and money was critically important — specifically, time," Peters said, who admitted he found his own stores tough to navigate. "It was clear to us that we needed a bit of a makeover."

    Hoboken’s population of local businesses and home offices made it an attractive site, and it offers free same-day delivery in the area to better accommodate the pedestrian-friendly neighborhood, said district manager Tom Shea.

    Walmart has also launched two brands with smaller footprints — Neighborhood Markets, which are 40,000 square feet and Walmart Express, at 15,000 square feet — and opening a New Jersey location of one of those brands in the future is "certainly is a possibility," said spokesman Bill Wertz.

    Statewide, there is "considerable" activity around 10,000-square-foot spaces, said retail real estate broker Chuck Lanyard, president of the Goldstein Group in Paramus. And as retailers are trying to be more creative when they look to expand, said Matt Harding, president and chief operating officer of the North Plainfield-based Levin Management Corp., which manages more than 85 shopping centers in six states. Landlords have become more flexible if a prospective tenant wants a smaller space.

    "Given where the economy has been, retailers are looking across the board at what they can do, and if they can shrink the size of their store and lower their operating costs, then they’re going to do that," he said.

    The shift is in the experimental stages, as retailers try to balance what to stock in a physical store and what can be shipped to customers from a warehouse overnight, according to Jesse Tron, spokesman for the International Council of Shopping Centers.

    "They’re playing with different concepts to see what works best," Tron said. "It remains to be seen if it continues, or how it continues, and into what formats and how exactly they’re going to flesh a lot of that out."

    At the Office Depot in Hoboken, the concept seemed to be working. Victoria Balson, who runs her own interior design business from her apartment two blocks away, needed some client binders and printer ink. On her way back from the gym, she ducked into the store, figured out immediately where the items were stocked, and made her purchase within minutes.

    "It’s a lot more convenient than driving to Jersey City and Staples," Balson said. "Now, I can just walk over here."

Viewing 1 post (of 1 total)
  • You must be logged in to reply to this topic.