The Wall Street Journal ran an interesting article yesterday on reasons why big box retailers like Best Buy, Circuit City, Home Depot, and Office Max are opening smaller locations.
In particular, new Best Buy and Circuit City locations are 30% to 40% smaller in size from the stores they opened a decade ago. The majority of Best Buy locations are 45,000 sq. ft. but new locations are no more than 30,000 sq. ft. And new Circuit City locations will be 20,000 sq. ft., down from their past average of 34,000 sq. ft.
“With more consumers buying entertainment online, Circuit City stocks 30% fewer CDs and DVDs at its smaller stores than in larger ones, primarily by keeping fewer of each title on hand. Meanwhile, televisions require less storage space now that prices are plummeting on flat-panel TVs. Likewise, laptop computers have increasingly displaced larger desktop machines. "Frankly, in most of our categories...the devices are getting smaller," Circuit City Chief Executive Officer Phil Schoonover said on an April 4 conference call with investors.” [source]
The article also mentions how big box retailers “… now need smaller structures to penetrate fast-growing suburbs, rural areas and gaps between their larger stores -- places that can't support one of their superstores.”
Hmm … can’t help but revisit the RadioShack situation. What if Best Buy or Fry’s Electronics were to wrestle control of RadioShack locations? I wonder what they would do with 2,000 sq. ft. of selling space? Could they make better use of RadioShack’s locations? Could they make RadioShack relevant again?
That's an interesting by-product of technology advancing.
I have to wonder how much more it'll shrink once CDs become obsolete, that's easily 1/3 of a store you can eliminate.
Posted by: Dave | May 13, 2007 at 10:10 AM
John,
Years ago a very smart and successful entrepreneur advised me to keep inventory to a bare minimum if you want to succeed. Won't small boxes build cash flow faster than big boxes?
Less square footage demands less inventory. (We're a long way from eliminating electronic products that are the size of a CD or smaller. Think TVs, speakers, and modular furniture to hold and encase our electronic toys.) Less inventory equals lower costs. Less floor space required means lots less building costs. Reduced costs without reducing services equals greater cash flow.
Posted by: Lewis Green | May 14, 2007 at 10:00 AM
So Radio Shack had it right all the time! A shack + a radio > big box + 90s style home entertainment console.
It is kind of funny: I happen to be a somewhat reluctant technology adopter - I admire the stuff but never feel compelled to buy the latest and greatest. However, I've noticed that the latest versions of my DVD player, television, satellite box, etc. all now fit comfortably on a shelving stand I've had since college, 20 years ago. If I had made big purchases in the 90s or early oughts, they would have crushed the thing: DVD players were mammoths (and you usually hung on to the VHS player for recording) the latest TVs weighed 200 lbs and took up 5 cubic feet of space. Laptops were luxuries (and thicker than they are today.)
Radio Shack may very well have been the tortoise to Best Buy's hare.
Posted by: Dan | May 14, 2007 at 12:31 PM