Has the Big-Box Era Been Downsized?
Sep 13th 2011 11:30AM
Updated Sep 14th 2011 12:43PM
Wal-Mart (WMT). Best Buy (BBY). Home Depot (HD): From sea to shining sea, big-box stores dot the landscape as pervasively as mile markers on the highway. And like those nondescript numbered signs, they give no reliable indication of which U.S. city, town, or state you're actually driving through.
But your days of living in "Generica," that land of asset-bubble-fueled cookie-cutter consumerism, may be drawing to a close.
Smaller is Spectacular
If the number of big-box names now studying smaller store formats offers any indication, big is no longer beautiful in retail.
Former behemoth bookseller Borders is wrapping up its liquidation as we speak, and shrewd competitors such as Britain's Tesco and the United States' Trader Joe's, both nimble small-box retailers, have pushed other renowned retail giants to diminish their footprints.
Wal-Mart's strategic outlook now includes far more Lilliputian sites, where its online customers could utilize drive-thrus to pick up merchandise. (Would you like an order of Cheetos with that?) Last spring, Wal-Mart management revealed plans to debut "hundreds" of smaller stores over the next three years.
Target (TGT) has experimented with pop-up shops in some markets. These tiny, temporary retail locations function only for the holiday season or some other limited-time event, carrying only a handful of hot merchandise. Then one day, poof -- they're gone.
Meanwhile, Best Buy Marketplace, which will include third-party sellers, represents the retailer's most recent competitive volley against online giant Amazon.com (AMZN). It sounds nothing less than desperate on Best Buy's part; even if Marketplace does increase its online sales, it'll hardly do much good for the company's own bricks-and-mortar business.
The ups and downs of the last decade have made American consumers far more frugal today. They've also proved that big isn't always beautiful, especially when your company's growth depends on someone else's asset bubble. If these big-box retailers ever want to recapture the growth they once enjoyed, they may have to start getting small.
Motley Fool analyst Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Wal-Mart and Best Buy. Motley Fool newsletter services have recommended buying shares of Home Depot, Wal-Mart, and Amazon.com, as well as creating a diagonal call position in Wal-Mart.