Professor Sheri Bridges Explains Why Some Retailers are Reducing Store Sizes

8.25.2012 Article, Faculty News, Retail

Retail chains thinking outside the box
Reposted from Star Telegram | by Barry Shlachter

Bigger is not always better.

Around the country, some retail chains are cutting back on their store size, at times giving up space in current locations or, like Office Depot in southwest Fort Worth, moving a few blocks to smaller quarters.

Industry analysts say it's a national trend as retailers look to curtail costs while trying to compete with online rivals.
Then there is Wal-Mart, which is using smaller formats like its Neighborhood Market to fill geographic gaps or cater to people making quick purchases.

Some of the newest stores in Tarrant County have been 38,000 square feet, others 58,000, a fraction of the Supercenter format, which can reach 250,000.

Similarly, Target has downsized in some markets to fit into tighter urban quarters.

"Small is a big idea nowadays. There is definitely a trend to a smaller footprint," said Sheri Bridges, a marketing professor at Wake Forest University and faculty director of its retail marketing center.

"Companies realize that the cheapest real estate in the world is on the Internet, and they're responding to the growth of online retailing by downsizing bricks-and-mortar stores associated with significant fixed expenses, high labor costs, and showrooming," Bridges said.

Showrooming is the term for shoppers checking out merchandise and prices at a store, then browsing the Internet to find a lower price.

Where will all this lead?

"Concept stores, with limited inventory and staff, have been popping up not only in space-cramped urban areas but also in suburbs," Bridges said.

She cited spinoff formats like Best Buy Mobile, which is a fraction of the size of its big-box sibling and focuses on cellphones. Dick's Sporting Goods has tried True Runner, and Toys R Us has Holiday Express, she said.

"The stores aren't always just about lower square footage," the professor said. "Companies also want to enhance the customer experience. The concept stores focus on narrower, specific target markets and use exterior and interior design, lighting, service and other features to encourage customers to stay longer, try out products, receive training.

"Best Buy calls it 'community-oriented retail.' The smaller stores are essentially boutiques, which used to be associated strictly with high-end apparel."

So-called category killers like office supply chains are reducing their footprints by as much as 30 percent, said Ian Pierce, a spokesman for the Weitzman Group, a Dallas commercial real estate company.

That was the case with Office Depot. Several of its 15 North Texas locations are undergoing relocations or shrinkage through remodeling, said Stephanie Sampiere, a public relations consultant for the chain.

"The company continues to evaluate real estate opportunities as leases come up for renewals," she said.

"Customers told Office Depot that the stores are too large and they are not easy to shop, and the organization has also seen that the big-box format doesn't seem to resonate with customers like it used to across all retailers," Sampiere said.

Next month, its 30,000-square-foot Eastchase Market store is relocating within the same shopping center to an 18,000-square-foot space.

Last year, Office Depot relocated a 25,000-square-foot store to 18,000 square feet at a shopping center at Hulen Street and Loop 820.

But not everyone is downsizing.

And North Texas hasn't yet wholeheartedly embraced the national trend, some industry sources said.

"We're still seeing big-box stores, and Fort Worth is still getting Kroger Marketplace stores at 120,000 square feet," Pierce said.
He noted that Golf Galaxy, a specialty unit of Dick's Sporting Goods, is taking a huge chunk — 65,000 square feet — from a former Albertsons supermarket at 2100 W. Northwest Highway in Grapevine for its first Tarrant County store.

Overall, the trend here might be muted because "we're not seeing a lot of construction," Pierce said.

Charles Wetzel, CEO of the Fort Worth-based Buxton Group, which advises retailers on site selection, said downsizing has gained less traction in North Texas because, unlike other urban areas, this one still has plenty of room to grow, northward from Fort Worth toward Denton, and from Dallas toward Frisco.
Wetzel prefers to call 2012 a year of experimentation rather than footprint contraction.

"This amount of experimentation hasn't been done in years," he said.

He noted that big retailers like Neiman Marcus are moving around traditional departments while others, similarly unable to easily downsize, are creating "stores within a store" and not trying to compete head-on with online-only retailers.

"The reality is that not everyone is an Amazon shopper today," Wetzel said. "Quite honestly, a lot of retailers have come back to the customer service days where the customer feels loved. If you can win on service, even if a product is online, people will come. They enjoy the entertainment factor of shopping in the store."

J.C. Penney has moved the most radically, doing away with coupons and weekly sales, which upset its older core customers.

Nearly 700 stores will be renovated by 2014 with a stores-within-a-store concept, featuring such brands as Levi's, Liz Claiborne and Izod — along with free haircuts in August for school-age kids.

"These things can't be done overnight," Wetzel cautioned, "but the [corporation's] board or Wall Street wants it immediately."