Here’s the deal: What’s causing the mass extermination of big-box retailers is that they’re big-box retailers, with all the drawbacks and vulnerabilities thereof. These drawbacks and vulnerabilities include (1) poor in-store service, (2) not being price-competitive with the Web, and (3) not recognizing that drawing a spending crowd is as much about entertaining shoppers as it is about selling compelling merchandise. These problems go with the territory when one store’s employee count numbers in the hundreds — managers can’t watch, train, and retrain all of them all the time — and when there’s more than 100,000 square feet of selling space and merchandise to take care of.
[Note: I am uniquely qualified to make this assessment, as I used to be an operations manager, a sales manager, and an assistant store manager for a couple of major big-box chains.]
Oh, sure, it worked until a few years ago because to buy something, you essentially had to go to a retail locale. That made retailers arrogant, thinking it was their special skill, quality of sales training, or knowledge of the customer that drew a crowd.
Surprise! It wasn’t.
As it turns out, Sears is boring. Dillard’s isn’t selling the hottest fashions. Shoppers may know more about the technology they’re looking to buy than most Best Buy employees do. These retailers did reasonably well through the early 2000s mainly because shoppers had little choice but to go to those places if they wanted to buy something.
The rise of Amazon.com (NASDAQ:AMZN), the ensuing rise of all e-commerce, and the proliferation of the smartphone has indeed given shoppers this choice. And that’s the key: It’s not the smartphone itself that’s killing big-box retailing. It’s that the smartphone (along with the Internet) has exposed what a lame, annoying, and dissatisfying experience in-person shopping can be.
Sure enough, malls are seeing less and less traffic — with the exception of Apple (NASDAQ:AAPL) retail stores.
How does Apple do what nobody else can (draw a crowd)? There’s the key point again: Apple’s stores offer great service, and they entertain — no, dazzle — shoppers with well-informed and charismatic employees and an ever-more-exciting product. The only potential pitfall for Apple’s retail stores is that they don’t compete with other retailers of Apple’s goods when it comes to price, and they’re generally more expensive than comparable consumer electronics sold elsewhere. But when you’re as cool as Apple, you don’t have to be ultra price-competitive.
The only solution to those big-box problems is simply to stop doing business as a big-box store — intentional death, at least in some regards.
Think about this — while Best Buy ranks right up there with the industry’s most-hated stores based on the total shopping experience, we have to at least give the company credit for recognizing that the megastore concept is passé and that smaller, more focused stores (called “small box” stores) manned by well-informed associates who aren’t trying to sell you extended warranty coverage is the way to go.
Although it’s pulling the plug on all of its big stores in the U.K., Best Buy is simultaneously expanding its presence by acquiring the Carphone Warehouse chain, which has less square footage per store but a clearer theme. It will also let employees be specialists, in a sense, focusing on doing one thing very, very well. And rather than continue to man each Best Buy store’s average 45,000 square feet, the company announced an initiative in July that will wall off about 10,000 square feet in some of its California stores to be subleased to other retailers.
Kohl’s is seeing the same writing on the wall and taking similar action.