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Recent developments have seen DIY retailer B&Q announce plans to open small-format city centre stores across the UK, featuring significantly more homewares than existing stores, whilst Tesco has revealed intentions to launch a fashion format in the West End offering an extension of its F&F range, previously named Florence & Fred.These moves both follow John Lewis’ launch of ‘John Lewis at home’ stores, announced in October 2009; two more ‘at home’ branches are due to open in the autumn, and will take the total number to four. So the important question is can smaller format stores work for other department stores? What are the benefits and what should retailers consider before launching into such an expansion?
TIM DENISON BSC MSC PHD MCIM
I’ve said on more than one occasion in the past that some store formats are simply now too big. On the face of it, being able to offer the largest ranges offers competitive advantage. However, it means more cash is tied up in stock – not something that is desirable at the moment. Just as importantly though, customers can find that too much choice makes their decision-making more taxing and the whole experience far less pleasurable. In my view a successful retailer is one that works carefully at editing the ranges it offers its customers, such that true choice is still offered, but customers are spared the hardship of evaluating shelf upon shelf of models with barely any differences between them. Any retailer that offers excessively extensive ranges is simply highlighting their marketing frailties of not understanding their customers needs well enough. So the concept of smaller store formats has some appeal to me. They too can have their drawbacks in this world of convenience and demand for one stop shopping. As long as the retailer communicates clearly their purpose and proposition, and they meet a market need that has been carefully researched, small formats can successfully extend a retailer’s geographic reach and penetration. Tesco, to mention but one, has demonstrated that multi-size formats can work. Most recently the company has announced plans to open a store in the West End, specifically to showcase its
8 Department Store Buyer
latest clothing ranges. Some would argue that this is an expensive and extravagant way to build profile and product awareness. To others it demonstrates once again the fresh thinking that Tesco brings to retailing, tackling head on how to raise visibility and be seen above the haze of competitors. The British shopper will judge ultimately whether the initiative is successful. For the more conventional department stores, building a smaller format that serves a clear purpose and that customers will cherish is not straightforward. After all, it is the breadth of range and extended choice upon which department stores have built their standing and reputation. That said, I recently ventured to Oxford Street specifically to compare and contrast ranges of crystal glassware at a flagship department store, prepared and expecting to find the greatest conceivable selection. To say that I was underwhelmed by the choice and the whole experience is a gross understatement. Perhaps my expectations were too high, after all one cannot rationally expect a department store nowadays to have the fullest product range in every category. As I have argued above, it is not desirable in everyday shopping. When, however, you journey on a once-in-a-while mission, when you are happy to put effort in to know that you have found the best product on offer, perhaps there is scope for department stores to spin-off smaller specialist stores that can offer extensive depth of product and knowledge, focused on a category: plus ça change…
This month’s question: can smaller format stores work for department stores?
GRAHAM HOYLE MANAGING PARTNER OF RETAIL
PERFORMANCE IMPROVEMENT
Yes, of course smaller format stores can work for other department stores, but, only if they can really play to their product strengths! What B&Q and John Lewis are doing is exactly that, playing to their individual, well known, well-recognised and appreciated strengths. Tesco manages to do this rather well with its varying formats, ensuring everyone knows the difference between a Tesco Express and a Tesco Extra. So, it is incumbent on anyone thinking about such a venture to really examine their own core retail strengths. What are they? How do they compare and contrast to other similar competitors in that specific product field? How well might these stand up to being separated from the rest of the store’s offer? After all, for many customers the strength of a given department store is often in the breadth, width and depth of choice that the store offers, along with the experience of visiting and shopping the whole store as a shopping destination. If you were to decide to embark on a small format store, where would you locate it? Within the heartland of your existing trading catchment, or somewhere outside, where the danger might be being less well known for your name or product offer or even customer service? Consider where geographically might be under- represented in your core strength. Careful research needs to be undertaken before stepping down this path. You need to understand your existing customer, their motivations to visit and buy, how they see your core strengths as opposed to the overall total store offer. What indeed does make
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