Expanding or Not, U.S. Retailers Rethink Stores

U.S. retailers believe there is life left in their brick-and-mortar stores, and they’re trying new ways of making them more inviting by pampering customers — both the two- and four-legged kinds.

PetSmart, for instance, will offer overnight dog accommodations at more stores. Macy’s is offering a “virtual concierge” kiosk, and handbag maker Coach is opening up dozens more men’s sections this year.

These are just some services retailers are trying to keep stores relevant as they try to compete with mobile devices, the Internet and daily deals.

“The customer is changing dramatically and is wide open to new ways of shopping,” Macy’s Chief Executive Terry Lundgren told Reuters last month at a conference in Tucson, Arizona.

Macy’s other initiatives include a “virtual concierge” kiosk that can make beauty product recommendations and a $400 million multiyear make-over of its flagship in Manhattan.

U.S. cities are littered with empty retail space, wreckage from aggressive expansion last decade that contributed to the demise of chains like Borders book stores and Mervyns department stores, and led to lower sales-per-square-foot for many that made it through.

“We will always have stores. But they’re going to get smaller, they’ll have new technology and different services,” said Madison Riley, managing director at consulting firm Kurt Salmon.

U.S. retail spending continues to recover from the recession: the National Retail Federation expects sales to rise 3.4 percent this year, below last year’s 4.7 percent clip. Only 31 percent of U.S. retailers surveyed in 2011 by NRF and KPMG said they planned to expand in 2012, underscoring the emphasis they are putting on existing stores.

Reconfiguring stores
Top chains are also changing how they use their space. Coach, for instance, is betting it can have as much success with men’s wallets and travel bags as it has had with women’s handbags. It plans to have 100 of its 350 North American stores stock items for both genders by the end of this fiscal year, up from 42 last quarter, a project CEO Lew Frankfort told Reuters was its “most important initiative.”

Retailers are trying to offer services available only in their stores.

PetSmart, a 1,200-store chain will double the 200 “pet hotels,” or kennels, they already offer shoppers in hopes of luring in owners, who now can turn to wag.com or Costco Wholesale Corp.

“What you really want to do is build an environment where you become the local pet store,” CEO Robert Moran said in April.

Morningstar analyst Paul Swinand applauded such plans, saying services available only in stores are crucial.

“People are trying to think up stuff you can’t download,” Swinand said.

Others are adding stores.

Michaels Stores, an 1,066-store arts and crafts chain planning an IPO, said in its prospectus it thinks it could eventually have as many as 1,500 stores in North America. So it is trying out smaller formats to reach urban.

Family Dollar is planning on some 400 new stores this year, and has been adding hundreds of food items and remodeling its current shops.

The 25 largest chains had 2 percent more stores in 2010 than in 2007, led primarily by dollar stores, drugstores and discounters like Wal-Mart Stores, according to NRF data.

Because such chains sell staples and draw shoppers more frequently, they need more locations, Kurt Salmon’s Riley said.

Experts said the vision of physical stores disappearing is apocalyptic and rooted in a lot of panic. At the same time, retailers cannot sit still, or they could suffer the same fate as Circuit City, Linens ‘n Things and other defunct chains.

“If retailers aren’t experimenting, then they are doomed to fail,” said Wendy Liebmann, CEO of WSL Strategic Retail.

(Source: Reuters, 05/21/12)

Author: alisonsawhill

Marketing and Advertising Manager, 20+ years of success, working with clients on a local, regional and national level. Experienced in strategy, development and execution of clients marketing plans using all media tools, including Radio, Internet, Social Media, Events and Promotions.

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