Multi-channel wreaking havoc with property strategies

Strange things are happening in the world of retail property. On the one hand there is a strong argument from some retailers that large stores are best as they are more cost efficient. But on the other there is the counter view that smaller stores are more beneficial in an increasingly online-focused world.

More stores up for grabs.

Over recent weeks there has been a raft of media coverage and announcements by various retailers on how they are going to ‘right-size’ their store portfolios. This typically means they either focus on small stores or do the polar opposite and concentrate on their larger units and ditch the smaller footprint units.

Sir Philip Green, boss of Arcadia Group, has stated how he intends to offload hundreds of stores as the leases on as many as 500 of his high street units expire over the next three years.

The view is that there has been an unequal increase in the rentals on smaller outlets and that this is prompting him to close some outlets and consolidate his existing stores into larger sites.

Sir Philip Green (left) to offload unwanted property.

Also moving into ever-bigger store territory is Next. Apparently it has a plan to open stores with garden centres attached and coffee shops inside. This sounds (rather ominously) similar to the doomed strategy of opening ever-larger stores that Next founder George Davies initiated during his period of megalomania that ultiomately led to his ousting.

In the smaller stores camp are a host of retailers that are recognising that large units do not fit particularrly well into a world where an increasing percentage of retail sales are being transacted online. So why not, therefore, right-size the estate to have smaller stores with select ranges displayed and the bulk of the products made available online via in-store ordering at kiosks.

Best Buy is among the big names believed to be considering breaking out of its straightjacket of only operating big-box units and instead looking at opening smaller stores in the UK, which recognises the shift of consumers to buy electrical goods online.

Best Buy: maybe not just a big-box operator after all.

This schizophrenic view of the role that physical stores play in the retail model is not that surprising as the industry is in the midst of great uncertainty as it comes to terms with the reality that multi-channel is not just a buzz-word but is a business model and that all retailers must embrace it in some way or other if they are to survive and thrive.

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