Friday, March 30, 2012

Retailers move from big box to small box

Bigger is no longer better for many retailers. For the past ten-plus years, big box retailers such as Wal-Mart, Home Depot, Target and Best Buy thrived as consumers drove to these stores to find aisles and aisles of goods. However, Craig Johnson, president of Customer Growth Partners, believes consumers
have shifted away from a willingness to spend much time browsing in these stores and instead are looking for quicker, easier shipping experiences. (Note: this quicker, easier shipping experience is fueling alot of the ecommerce growth)

According to Mr. Johnson, "Retailers want smaller stores but more stores. That way, consumers will be be more likely to find one no matter where they go."

Examples of retailers moving towards small include:
  • Target who is planning smaller future stores because they are going into more urban locations where it is harder and more expensive to buy larger tracts of lands.
  • Walmart recently announced plans to build hundreds of smaller stores over the next three years in rural and urban locations.
  • Best Buy, who just announced a disappointing fourth quarter earning report, plans to close fifty stores and open 100 Best Buy Mobile and smaller stores this year.
Like the ecommerce boom, this shift from big box to small box will probably affect not only transportation requirements but also locations of warehousing/distribution facilities. It's possible that retailers may take a page out their ecommerce counterpart's book and locate warehousing/distribution facilities closer to urban areas/metropolitan locations for quicker fulfillment requirements. This in turn will result in more frequent but smaller deliveries thus benefiting small parcel providers FedEx, UPS and also regional parcel delivery companies such as OnTrac. 

It has been noted in previous blog entries that the retail industry is changing thanks in part to the growth of ecommerce. Now add to the downsize from big box to small box to the retail trends that will likely have a positive affect for small parcel providers.