What’s going on with Big Box Retail?

By Maureen Aylward

Office Depot and Best Buy have announced that they will reduce their existing square footage in the US by 10 percent. Will other big-box retailers follow suit? We asked our Zintro experts what’s going on with Big Box retail.

Ken Dailey, an expert in category management, says that the era of big box is not over. “The era of big box category killers may be on its way out though,” he says.  “AC Nielsen’s data indicates that shopping occasions have decreased to specialty retailers. Office Depot and Best Buy are under pressure by other big box retailers like Wal-Mart.
One-stop shopping is more prevalent with consumables as the key occasion.”

Dailey points out that drug stores have adapted to this by adding more food items to their stores and positioning themselves as a convenient alternative to grocery stores for a quick trip. “It’s all about looking at the market environment and consolidating the shopping resources so efficiencies work,” Dailey says. “The stores currently reducing their existing footage are probably a result of store rationalization where gentrification has occurred and sales are down as the demographics have shifted.”

Mark Garrett, a commercial director in the retail sector, has a UK perspective. “It may be too soon to predict retail Armageddon, but there are definite signs of a paradigm shift in the retail landscape across both the US and Western Europe,” says Garrett. He says that in the UK, one of its larger consumer electronics retailers, Comet, revealed that it was shopping around leases to 22 of its most expensive retail locations. “This issue highlighted the potential closure of not only unprofitable stores within its chain of 250, but also many of their flagship locations in key shopping destinations,” says Garrett.

This news was quickly followed with rumors that Best Buy, a recent entry into the UK market, was considering halting its initial plans for UK expansion, having opened only 11 of the planned 80 stores.

“Both brands deliver a strong in-store proposition of service and impartial expertise. And the question is does this contraction from large format locations represent the latest failure of the retail sector trying to find its place in the multi-channel world? With consumer electronics standing at the leading edge of a tectonic shift, this story is far but over,” says Garrett.

Flora Delaney, a retail consultant, says that several trends are colliding to predict that big boxes are passé, with the exceptions being Wal-Mart and Target with a food/mass merchandise combination.

Online retail has claimed the selection niche. “In the past, the clear advantage to a big box specialty retailers like Best Buy, Staples, PetSmart, or JoAnn Fabrics, was that there was a wider selection than could be found in a traditional mass merchandiser like Kmart, Sears, Wal-Mart or mall-based, small specialty retailers,” says Delaney. “But brick and mortar can’t possibly compete with the endless virtual shelves of Amazon, New Egg, or Overstock.com. Without the selection advantage, big boxes have to reinvent why they should retain their customer’s loyalty.”

Delaney says that each retailer has selected different approaches:

  • Best Buy and Staples highlight their installation and trouble shooting services, which are difficult to replicate with an online store.
  • PetSmart offers training classes and pet hotels.
  • JoAnn Fabrics has classes and even summer kid’s camps.

A post-recession big company backlash. “The market once served by big box retailers is not in the same psychological relationship with big business as they once were. Americans began to realize that faceless corporations did not hold themselves accountable for the devastating impact on local communities,” Delaney says. “American sentiment has turned against big companies as locally-owned retailers have banded into community activist networks promoting dedication to local communities and jobs. And consumer spending patterns have changed.” She says that millennials hold big box retailers in disdain.

Convenience is over; service or experience is left. “Big boxes can offer unparalleled expertise and a laser focus on a targeted area that cannot be replicated by mass merchants or online,” says Delaney. “Unfortunately, they will need to dedicate more resources to selecting, training, and arming store personnel with real-time technology. Experiences like indoor golf or tennis simulators, rock walls, shooting ranges, and immersive try-before-you-buy environments are difficult to replicate. Most merchants have not figured out how to monetize those investments. I advise big box retailers to deliver local solutions in new concepts that leverage their national and international supply chains with savvy, well-trained store employees in small, targeted stores.”

By Maureen Aylward

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