retail news in context, analysis with attitude

Advertising Age has a piece about how retailers that previously focused on big box stores - Walmart, Kmart and Target - now are focusing on smaller stores. “Small has suddenly become beautiful -- or at least a lot more alluring,” Ad Age writes, and “the big-box epoch may be winding down.”

Here’s how the story explains the strategy at Walmart, which seems to typify all the chains’ thinking: “Smaller locations' same-store sales growth was more than three times Walmart U.S.'s overall figure. They also had positive traffic for the entire year, vs. only the fourth quarter for Walmart U.S.

“Part of the story is product mix. Neighborhood Markets, mostly with food sales, benefited from food-price inflation. They also have little exposure to categories (such as apparel and electronics) that have been declining for Walmart. For example, same-store electronics sales had been dragged down by deflation rather than boosted by inflation.”
KC's View:
First of all, I hate pronouncements like “the big-box epoch may be winding down.”

Sure, maybe it is. Until it isn’t anymore.

Life is rarely this simple. There will be markets and customers for which big stores will be appropriate, as well as markets and shoppers for which smaller stores will be appropriate, and markets and customers for which online alternatives will be appropriate. What retailers may be learning is that they cannot be monolithic - the same customer may want a big store on Saturday, and online option on Tuesday, and then a small store option on Thursday... And retailers have to decide if and how they want to try to meet these various need states.

Beyond that, there is one sentence from the story that needs to be highlighted: Walmart and other big-box retailers must determine how to remove selection from stores at the same time as they use them as outposts to deliver a wider range of products online.

The key to Walmart’s small store strategy is to use these units as drop-off depots for products sold online, which positions the company - it believes - to better compete with Amazon.