The Future of Small-Box Retail

On Tuesday, September 16th I attended the COPA breakfast seminar on "The Future of Small Box retail" which was held at the Riviera Parque Convention Centre in Vaughan, Ontario.

The speaker was Hannah Donoghue a senior analyst with RetailNet Group (RNG) where she specializes in retail, channel strategy and strategic planning. She leads RNG’s research and advisory work for the Americas region, RNG’s specialty small box practice area and supports RNG’s Executive Education programs at UCLA Anderson School of Management. She is an industry analyst and strategist for leading retailers and manufacturers such as Target, Coca-Cola, Mars, Hewlett-Packard, P&G, and Northgate Gonzalez Markets.

Hannah Donoghue of RetailNet Group

In a word, she knows retail and provided the attending group with a wealth of knowledge regarding the current state of retail in both the USA and Canadian markets - with a look to the future outlook for retail.

In summary, big box retail is being challenged on two fronts:

1. by the burgeoning internet market landscape which is seeing "Tech" replace "Real Estate";
2. by deep discount "Dollar Stores" who will continue to grow that category over the next 5 years;

In order to combat these potential threats, according to RNG, traditional retail have come up with several strategies:

•  they are closing non-performing large stores;
• they are shrinking their formats to smaller more intimate footprints in high density urban areas;
• they are localizing the looks of many of their stores to give a more neighbourhood, community feel for their shopper's experience;
• they are targeting their merchandise assortments to gain more spend from the peak spending age group of ages 45 to 54;
• retailers are offering more services, with a greater focus on providing solutions to bring shoppers into their stores;

It's all about gaining a competitive advantage

 

Why is the Dollar store experience so appealing? It's not just pricing.......

• price and value are obvious keys, especially to a younger, thriftier generation on tighter budgets;
• a younger audience is also more urban with fewer transportation options - so proximity and convenience play a large role in their success;
• simplified shopping with limited assortments, so instead of multiple brands offering basically the same thing - you get only 1 or 2 options;
• the "Treasure Hunt" experience - what will I find today?

There are really only two avenues for future retailers - either move to being a low cost provider or differentiate your business to attract a loyal clientele. Those retailers who are not adapting will find themselves in the "Valley of Death" - the 50% of retail who will not be around in coming years.

However, for big retail there are challenges:

• there is a cost to shrinking their stores - and they lie in decreased profits;
• for every Supercentre store - it takes 15 small format express stores to equal the same productivity of a large store;

In our own industry we have seen stores that were traditionally 18 to 24 thousand sq. feet reducing sizes to 5 to 15 thousand feet.

Retail is always in flux and whenever the latest, greatest idea seems to take hold - there is always a better mouse trap right around the corner.

Editorial: This presentation was really good and I strongly encourage everyone in our industry to take a closer look at some of these offerings from COPA. COPA is striving hard to bring relevant information to our industry. Information that can help you manage your business. Take a closer look at COPA and see what they have to offer you.
This presentation, in its totality, is available from COPA in both written and video formats. For a transcript summary or a full video copy, please contact COPA at events@copa.ca.