If all of the markets which can support easily superstores have been saturated, what growth vehicles are left for maturing companies like Wal-Mart Stores, Home Depot and Target? One option would be to move into a variety of markets with a smaller store footprint.
This strategy may be on the horizon for these large operators and is probably making smaller players like Shopko and Building 19 nervous. And another option will be to develop smaller stores for densely populated areas. One analyst expects to see WalMart test a 10,000 square foot store that may feature a site-to-store retail format where “shoppers buy online and have an item sent to a store.” WalMart has already announced that is dividing the U.S. into three geographic regions to be staffed with real estate teams that will focus on finding new sites and developing new kinds of stores that suit each market.
As large format retailers develop smaller format stores, they may encounter the following challenges:
- Learning how to offer the proper merchandise mix to appeal to a different kind of shopper.
- Balancing the product mix to ensure a profit.
- Competing with entrenched marketers who understand this landscape well.
Part of this shift in retailing can also be attributed to changing demographics. The new U.S. consumer no longer thinks bigger is better – whether it comes to stores or homes. Tighter finances means people will continue to look for bargains as well.
As the shift toward smaller stores plays out over the next few years, look for accompanying marketing changes. Analysts suspect that large companies may try to emphasize a specialty. For example, Target may need to again play up the “treasure hunt” angle. And local companies that have long owned these geographic regions, whether they are in rural areas or inner cities, are likely to increase marketing efforts to stay in the game.[Sources: Bustillo, Miguel and Talley, Karen. WalMart Combining some US Units, Dow Jones Newswire, 1.28.10; Wal-Mart, Target Seek Big Returns in Small Stores, Reuters, 2.3.10]