More stores appear the same to shoppers today.
Since the early 90’s most major retailers have gone for years without developing a new concept. The result was a perceived “sameness” in store offerings, according to consumers. The major chains bought smaller, regional chains, and eventually all their stores began to look the same. Even when a large chain bought an extremely well-positioned smaller chain, the smaller chain would become indistinguishable from the parent-chain to the customer.
For the past 25 years, many major retailers have shied away from significant store innovation. Now, an opportunity is on the horizon. According to shoppers, WalMart is showing signs of weakening. For the first time since their inception, WalMart has shown signs of a decline in their brand strength among shoppers. They are no longer quite the deterrent they use to be.
Is the changing shopper getting bored? It seems that consumers no longer flock to Ho Hum retailers. An increasing number of consumers are becoming less drawn to the Big Box stores, which have dominated the landscape for the past 20 years, and seem to have become less attractive and exciting over the past 6 years. Younger customers expect to be entertained. Older customers don’t need as much “stuff” and don’t see shopping a 200,000 square-foot store as easy, convenient or enjoyable.
The rewards of higher multiples and greater growth potential has proven to exist via new concepts, rather than the “organic” growth of traditional ones. Since even a majority of “successful” new concepts take 3 years to develop to acceptable profit levels, a great number of premature evaluations are being made, and “strong concepts” are being killed before operational excellence can be achieved. It also should be noted that increasing competition, and decreased product consumption, among key demographic groups results in a more competitors fighting for relatively fewer dollars.
Today’s mistakes and rewards are bigger. It took several of today’s large, iconic chains over 75 years to open 1,000+ stores. Today, successful new concepts can be rolled out at the rate of over 100 per year. The costs associated with:
- rolling out an ill conceived concept
- not rolling out a strong concept, at the right time
to the right target in the right location
- over-reacting to a bad competitive concept
- ignoring a breakthrough concept
… have grown dramatically in terms of both real and opportunity costs.
The worst mistake a merchant can make is to NOT spend resources creating a New Concept Store – BEFORE HE HAS TO. Remember the prophetic quote from Walter Wriston: “Failure isn’t a crime. Failure to learn from failure is a crime.” Following the New Concept development steps of “the best” merchants is expensive, and may even hurt the short term stock price or profitability … but so will going out of business. On the other hand, running a business for the short-term interests of your stockholders, rather than consumers, is what can get you into trouble in the first place.
Over the past two decades, the best new concepts have been developed by merchants who didn’t HAVE TO develop them as a means of survival. They just wanted to exploit the opportunity by moving away from “sameness”. (i.e. Whole Foods, Trader Joe’s, Central Market). But many of the traditional merchants today “WANT TO” because they “HAVE TO”, and that is extremely difficult! They now realize they have been painted into a no-win corner and their time as a future empire is tenuous.
The problems of developing a successful new concept when you HAVE TO are endemic to cultural difficulties in changing course, the short term financial pressures of the times causing a lack of innovation, objectivity, patience and persistence on traditional food retailers – and throw in Levitt’s Marketing Myopia Effect for good measure.
As noted earlier, for the past 25 years, most major retailers have shied away from significant store innovation. However, for the past 3 years, a flurry of “new concept” activity has taken place. However, for “new concept” activity to be considered “innovation” it has to be successful. The idea of In-Store Beauty salons was not exactly a true food store innovation. The only constant we will continue to see is that the largest chains will disappear and new powers will emerge. Not much different from when King Kullen replaced the General Store; A&P replaced King Kullen; Kroger replaced A & P and WalMart replaced Kroger as the dominant player and way of shopping for food. Only today, it will happen sooner rather than later.
The consumer market and competitive conditions that exist today make the chances of success in the development of new store concepts the highest they have been for more than 30 years. It’s the Perfect Storm condition for New Retail Concept Development.
William “Mac” McDonald has worked as a Senior Retail Marketing Specialist for over 40 years, focusing on consumer actions that affect retail tactics and strategies. Mac is also a senior advisor to the National Retail Federation (NRF).