Retailers’ appetite for smaller stores grows

For many years the focus in retail has been skewed to ever larger stores located out-of-town and many operators have been unwilling to dirty their hands operating smaller units on, god forbid, the high street.

Some retailers like Asda have publicly stated their aversion to opening smaller, convenience type stores, in town centres because they deliver pitiful returns compared with hypermarkets.

This may be true to some extent but retailers like Tesco and Sainsbury’s have been a little more enlightened and have for some time recognised that smaller units can still be a great driver of growth when the rest of the estate is producing sluggish numbers. They also help expose non-core shoppers to your brand.

Despite the scepticism by some, there is no doubt that interest is definitely picking up in smaller formats. This is down to a combination of lower property prices on the high street, and the growth of online shopping, which is reducing the need for certain retailers to sell their entire stocks in physical stores.

Over the last few weeks we have heard numerous operators highlight plans to push ahead with opening smaller format stores including even former sceptic Asda. But please don’t call them convenience stores within earshot of Asda chief executive Andy Bond who clearly doesn’t want to be seen to be undertaking a U-turn on his policy of avoiding such stores.

Among the other retailers advocating a shift towards convenience is Waitrose that is to shortly open its first smaller store that will be a mere 3,000 sq ft compared with the 70,000 sq ft for its full supermarket format.

Waitrose convenience stores coming to a high street near you

Not to be outdone, Sainsbury’s is also putting its foot on the small store accelerator. Speaking at the recent Retail Week Conference Sainsbury’s property director John Rogers highlighted how the company is “driven by the opportunity in the property market…with the high street suffering it’s our opportunity to step on the pace in convenience and bring life back to the high street”.

This will see the grocer open 150 convenience stores by March 2011 including some as small as 3,000 sq ft, which is significantly more petite than its previous smallest convenience format that measured 7,000 sq ft.

A more suprising entrant into the smaller store arena is DIY chain Focus that is in the next few months due to open a 12,000 sq ft unit described by chief executive Bill Grimey as an “urban in-fill store”. This will be the first of its kind for the company and Grimsey reckons it will produce the same returns as a 30,000 sq ft store.

Based on this forecast he believes there is the possibility of opening 100 such smaller urban in-fill stores. Grimsey is clearly another man who prefers it if you don’t call them convenience stores. But whatever moniker you choose, this trend towards smaller units has to be a good sign for the many run-down high streets and town centres that litter the country.