Big box retailers downsizing for smaller footprints.
While some retailers look to expand in an effort to boost business, many are now taking a 180-degree turn and opening up smaller centers to capture different markets and turn bigger profits, saving money while possibly helping the environment.
Sprawling retail stores often conjure visions of excess and waste, and warehouse-size stores are shrinking due to changes in the economic climate or decisions to be more economically in-tune.
Expanding by contracting
Many major retailers are downsizing their stores, switching them from stand-alone buildings into more compact spaces that can fit within a strip mall or more easily in urban areas.
Smaller format stores enable retailers to penetrate dense, urban areas where a large building may not be feasible. With a smaller profile, retailers can target the high foot traffic of cities.
Smaller stores can benefit retailers and customers alike. Compact stores enable business owners to make changes more quickly and respond promptly to market trends. That means they can more easily offer targeted sales and switch over inventory to meet demand, more so than with a larger store. Cutting down store sizes also enables these retailers to move into previously untapped markets. Rather than shoppers having to drive several miles to the outskirts of urban areas for their favorite chain stores -- which eats up fuel and puts wear and tear on automobiles -- they can now shop closer to home.
Enabling formerly big-box stores to move into urban areas also helps increase business in towns and cities where commerce may have been struggling. These well-known retailers still have name recognition among consumers and may lure consumers to other shops in the general vicinity.
Because development capital has remained constrained through the recession, and potential franchise owners may find loans difficult to obtain thanks to more stringent lending requirements, smaller stores may require a smaller investment. This could expand business possibilities to those who were previously priced out of the scenario.
Smaller stores mean less drain on natural resources, which in turn spells advantages for the environment. It costs much less to light, heat and cool a 3,000 square foot space than a 30,000 square foot one. Smaller stores also may generate less trash because they don't need the same amount of inventory to stock shelves as larger stores.
More compact stores that spring up in urban areas eliminate excess travel and fuel consumption. They may also cut down on the building materials needed to get started with store construction, particularly because many of these stores are occupying spaces formerly owned by stores that closed up.
Changing shopping landscape
There are several different companies already downsizing. Pizza Hut has begun developing and implementing smaller delivery and carry out models they've dubbed Delco lite stores. Pizza Hut has opened more than 300 of these stories and is mostly building them in favor of the larger, stand-alone stores. The small-format stores are still called Pizza Hut and focus more on take-out services.
In March of 2012, Kohl's announced the opening of seven new smaller format stores across the United States. The stores are two-third the size of the traditional Kohl's department stores, and in store-features include reinvented beauty departments, updated checkout stations, electronic signage in all departments, and upgraded fitting rooms.
Petco is pushing deeper into submarkets with its new "Unleashed by Petco" stores. Many of these new, smaller centers are taking over former Blockbuster Video end-cap locations and stand-alones. These stores specialize in high-end organic products.
Even megaretailer Walmart has launched several smaller format stores to fit into urban spaces and shopping malls. The struggling Best Buy chain has reduced store sizes as well.
The trend isn't just in North America, either. as smaller offshoots of Tesco and Sainsbury's have opened in the United Kingdom.
Many retailers are operating under the premise that the best things come in small packages. Downsizing of retail space has spurred new sales and many other benefits.
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