America's largest retailers, including Target and Wal-Mart, are starting to shift towards smaller locations rather than utilizing huge retail stores billed as "super" or "mega." This reverse in approach by retailers is happening at a time when more and more customers are able to order things online and have them shipped to stores.
Customers take advantage of omnichannel options that allow them to send any items to the closest retail stores through the retailer's e-commerce site. Wal-Mart or Target can find items in one store and send them to another, or they can send items from a warehouse to these smaller locations. The key to the success of this model comes from underserved demographics.
Wal-Mart and Target are both finding success in populations that do not have nearby retail stores. Smaller formats work among dense populations or even rural areas that lack any kind of discount retailer that have the same kind of selection carried by these vaunted chains. Statistics show that customers increasingly want e-commerce choices combined with smaller stores.
Sales at Wal-Mart's largest locations fell by 0.3 percent in 2014, while the smaller Neighborhood Market format rose 5.6 percent compared to the previous year. The sales figures led Wal-Mart to announce it was moving away from Supercenters and opening more stores that are just 20 percent as large. As of 2016, Wal-Mart operates more than 650 of these types of retail stores, which average 42,000 square feet.
Target expanded its smaller retail stores starting in 2012, and it now has fewer than 20 of them in operation, as of 2016. These stores come in at less than 50,000 square feet. The retailer plans to open 14 more smaller stores in 2016 compared to just one large location. Target entered an agreement with CVS to develop these locations. The one thing driving these changes isn't necessarily the traditional "location, location, location" ideal.
Other large retail chains, such as Lowe's, Sears and J.C. Penney, are following the trend as well. Lowe's studied the spending habits of shoppers in Manhattan for 18 months before deciding to open smaller stores, and shops that once served as anchor stores at various retail centers are beginning to disappear as mall owners veer focus to smaller spaces.
Shoppers want availability more than anything else. If they can't find it in stores, they want to be able to pick up from that location. This makes retail operations more efficient thanks to smaller stores that use less power and stores that need to hire fewer individuals. Instead of clerks picking out items or overnight stockers filling shelves upon shelves with items, customers themselves drive what items appear in each location when they click or swipe each e-commerce website.
Retail chains continue to evolve to suit the needs of customers who want more control over the items they purchase. Instead of megastores that are open 24 hours, retailers seem to be moving towards a fulfillment center model that makes any item available for pickup for customers. Retail stores are less about opening all the time and more about having any item anywhere.
Photo courtesy of Mike Mozart at Flickr.com