Shoppers find that smaller is better
Consumers have different needs -- and less time to browse -- and stores are downsizing to match those interests.
Bigger is no longer better in the retail world. Wal-Mart (WMT), the top retailer in America, saw the writing on the wall last year and began scaling down. The company has been busy this year rolling out smaller Wal-Mart Express stores that are only around 12,000 to 15,000 square feet -- a far cry from the behemoth supercenters that can easily exceed 200,000 square feet.
JC Penney (JCP) is also downsizing -- but in a different way. Instead of casting itself as a massive department store with everything you need, it's overhauling its design to feature 100 mini shops from well-known brands such as Disney (DIS). JC Penney is taking the concept of the entire mall and shrinking it into one location.
And then there's Staples (SPLS), which said Tuesday it's cutting its square footage in North America by 15%. It will have closed 30 stores and downsized or relocated 30 others in its current fiscal year.
It all fits a larger pattern of going smaller. "The days of hawking non-essential commodity goods inside humongous square footage are long gone," wrote NBG Productions analyst Brian Sozzi in a note to clients.
What's causing this change? The main culprit is the Internet, which has completely changed the way Americans shop. Years ago, if you wanted to buy a new outfit, you would head over to the large, bustling mall and spend a few hours popping into different stores to check out what was available. Now? We go online to find selection and prices. Perhaps we get regular e-mails from our favorite stores offering deals. We know what we want and how much we'll pay for it long before we step foot inside a store.
The second culprit, which is related to the first, is that Americans don't want to put the time in anymore. It's too much of a commitment to park outside a giant Wal-Mart and walk all over creation just to get a new ink cartridge. Why not just buy it on Amazon (AMZN), probably for less money?
The third culprit is the economic turndown in recent years. People have less money to spend. They are very focused while shopping and don't waste time browsing items they can't afford.
Even the shopping mall is getting on board with the changes. Malls are remodeling themselves into "lifestyle centers" with more restaurants, movie theaters and entertainment options. They're also making more stores and restaurants accessible directly from the street rather than boxing everything inside. They know that people just want to park, get in and get out quickly.
One company is still doing just fine with the bigger-is-better mentality, however. Costco (COST), king of the 20-unit box of, well, everything, saw its share price hit a 52-week high this month. Costco made $386 million in profit in its last reported quarter -- more than analysts had expected.
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