The incredible shrinking store

BY Australian Retailers Association
18 October 2016

By Gary McCartney*

Size matters when it comes to the store of the future.

Bugis_Junction.jpgThere’s a trend towards miniaturisation going on in retail. At the more extreme end of the scale, I spotted a tiny shop in Rome selling manchester, complete with a window display of miniature made up beds. It’s a highly engaging and smart use of a retail space the size of a walk in wardrobe.

In Singapore, miniaturisation affects whole malls. Bugis Junction is almost claustrophobic, as it crams hundreds of tiny stores into a warren of narrow passages and galleries. It doesn’t seem to put the
crowds off, and the place is crammed with enthusiastic Singaporeans mostly under the age of 25.

The retailers seem to be mostly local, with few international names that you’d find in the neighboring Bugis+ shopping mall down the road. The concentration on local is a welcome change from the growing trend of homogeneity in shopping malls, and more smaller lease spaces make the offer accessible to smaller businesses.

Shrinking stores are a phenomenon we are seeing in supermarket retail. Over the last couple of years, Tesco has reduced the average size of its larger stores, in some cases sub-leasing the space to other retailers. This goes hand in hand with reducing the amount of choice it gives in its ranges.

Mini_Manchester.jpgIn 2014, Tesco was stocking a bewildering range of 28 ketchups and an overwhelming 228 SKUs of air freshener. The combination of over-innovation from suppliers and cash payments to the retailer for listing these new products blew out the ranges out to where it was not only confusing to shoppers, but difficult to maintain availability and keep prices down.

By comparison, Aldi has just one ketchup in one size. Its minimal SKUs is one reason why shopping at smaller stores like Aldi and Lidl is simpler and cheaper.

The talk of the Australian supermarket scene is the push to much, much smaller formats. Woolworths has just opened its smallest ever store on York St in Sydney - a diminutive 310sqm. At this size, the line between supermarket and convenience store starts to blur. You certainly can’t call this small shop a supermarket, but it’s clearly not a convenience store as we know it.

Convenience stores tend to focus on fast food, soft drinks, tobacco, confectionery, and ‘emergency’ items, and have a generic range of merchandise. A small format supermarket focuses more on fresh food with a range of prepared meals and a general emphasis on healthier eating.

If Woolworths’ latest Surry Hills store is anything to go by, the offer will be carefully tailored to fit the local customer base. There simply isn’t room for anything that’s irrelevant to the customer. 

Daily_monop.jpgFrench supermarket chain, Monoprix, has developed an inner city brand called Monop’, with an average size of 290sqm, and an even smaller, food only Daily Monop’ at 120sqm.

Interestingly, in some stores, there is space for customers to heat up their prepared food and enjoy it instore, presumably with an accompanying “petit verre de vin”. This feature is added in recognition of the fact that many Parisian apartments don’t have a kitchen. Localisation is vital to this type of offer. 

I believe that this model, when it’s refined and fully evolved, will eventually take over from large supermarkets. Shopping for commodities like toilet paper and dog food is becoming increasingly automated. The logical outcome is that basics will be bought online from aggregators and be delivered directly from a distribution centre.

Our shopping habits are already evolving into smaller, more frequent baskets. As we become more conscious of waste and more particular about freshness and the convenience of healthy prepared food, this pattern will only increase and lead to smaller, conveniently located mini supermarkets
closely geared to their local populations.

With online channels becoming more sophisticated, it’s natural that every category of store will shrink - and so will shopping malls. Driverless technology will lead to fewer car parking spaces, and separation of fulfilment methods from the actual purchase will see a reduction in stockholding.

Same day delivery will mean that fashion stores need only carry one size of each garment. US fashion retailer, Bonobos, already does this. Shoe retailer, Jack Erwin, has no inventory instore, only try on pairs. That’s a reduction of around 30 percent of the space requirement for the category.

Reducing the footprint of the store is tempting, given the cost of retail rents, but this leads to a smaller version of the same thing. Stores are no longer about buying product. It’s now easier than ever to do that online.

What customers crave, and will pay for, is experience. What about using some of the freed-up space to create a real retail experience, something that customers will come to because they want to, not because they have to?

*Gary McCartney is owner of McCartney Design. Find out more at www.mccartneydesign.com.au.Jack_Erwin.png

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ABOUT THE AUTHOR

Australian Retailers Association

Founded in 1903, the Australian Retailers Association (ARA) is Australia’s largest retail association representing Australia’s $310 billion sector, which employs more than 1.2 million people. As the retail industry’s peak representative body, the ARA works to ensure retail success by informing, protecting, advocating, educating and saving money for its 7,500 independent and national retail members throughout Australia. For more information, visit www.retail.org.au or call 1300 368 041.

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