Bigger Is No Longer Better in Retailing

In our view, the current worldwide financial crisis is the final nail in the coffin of retail bigness. The age of "Bigger Is Better" in retailing is dead.  The issue here is "stores on steroids", the actual physical size of the store, not the total sales volume or the number of stores in a chain. Stores on steroids must go away!

• Retail spaces being over-sized is a leading indicator of failing retailers.  Just look at the falling sales per square foot of many chains and independents.
• Customers have been begging for more and better service, not less. But, the greater the square footage an associate must cover, the less service can be given. 
  
• Customers are insisting on newer, fresher merchandise, not piles of marked down goods. But, stores that are too big still must be filled. Malls and other developers have built spaces that independents must fill with product. This slows down turns, causing higher markdowns, thus lower margins. 

Mercifully, the use of technology in retailing has exploded in recent years. Now the urgency to cut down the lead times of supply chains can be realized with current, leading edge technology. Smaller stores can benefit the most! 

• All retailers can replenish inventories much quicker today than even a year ago. 
  
• Smaller stores can out-maneuver big stores day in and day out. 
  
• And they now can raise turns considerably and thus reduce markdowns. Maintained margins will climb! And the percentage of new, fresh merchandise on the shelves will rise!
  

But who will benefit the most with this "death to bigness"? Customers!  Especially those customers who increasingly are using the web for merchandise information and purchasing. They only want new merchandise, not old and marked down items. They seek knowledge about products and usually smaller stores can provide it best. Since online shopping is not the ultimate in service for hassle-free experiences, smaller stores will grow to be a fine alternative.

Our conclusion: The next ten years will witness the greatest growth in retailing coming from nimble, smaller stores that exploit high tech for their customer's advantage. And how refreshing THAT will be!