The race to small could individualize stores

Articles
December 14, 2010

The race to small could individualize stores

It shouldn’t surprise the nation’s grocery operators that Walmart would use its mounting insights into small stores – from its small formats abroad, and its Marketside and Neighborhood Market stores in the United States – to eye dominance at both ends of the size spectrum.

It shouldn’t surprise the nation’s grocery operators that Walmart would use its mounting insights into small stores – from its small formats abroad, and its Marketside and Neighborhood Market stores in the United States – to eye dominance at both ends of the size spectrum.

Why not? 

Internally, it needs growth vehicles to offset sluggish comps in its big box formats and help stem the drain of core customers with household incomes under $70,000. Training its eye on urban and tinier markets, it is channeling some capital expenditures toward sites as compact as 5,000 square feet, the Financial Times analyzed. That’s about one-third the size of Tesco Fresh & Easy, which itself focused U.S. retailer attention on smaller stores and spawned emulators, and which is closer to convenience store size.

If small stores have been treated as laboratory tests the past couple of years by most retail experimenters, they’re about to leave the petri dish. The year 2011 could mark the start of ‘the race to small’ for several reasons, believes The Lempert Report:

  • Coming out of the recession, retailers may view expansive real estate sites as more of a weight than an opportunity. Smaller sites could shoehorn into more types of markets, cost less to operate, and could be more nimbly overseen and shed if necessary. Most importantly, they enable retailers to chase the denser dollars available in cities with high populations and rents.
  • The number of one-person households in the U.S. – 31.4 million – makes up 27% of the nation’s households and far outnumbers the households of married couples with children, according to the U.S. Census Bureau. Their numbers could accelerate once adult children living at home with their parents (post-college, unable to find jobs) if the economy rebounds.
  • The aging Boomer populace wants less hassle in their shop, which means quicker in-and-out formats with refined assortments and demanded products that are easy to find.

However, small stores alone won’t be effective unless retailers use their shopper insights to localize assortments to what will work within specific trading areas. For example, Macy’s greatly expanded its number of localized districts to bring its My Macy’s initiative to 69. Popular local items not only build performance, they build bonds with shoppers who feel that stores understand them.

Likewise, by being smarter about what they put on food-store shelves, miniaturized supermarkets could become powerful traffic magnets in all kinds of neighborhoods.