Big-Box Retailers Open in Cozier Corners By Kris HudsonEvolution of ElectronicsAs a Result…The Idea is…But, Best-Buy and Circuit City downsizing will be more substantialWhat They Will ChangeWhy Change?Space Allocation PlanningSlide 9SourcesBig-Box Retailers Big-Box Retailers Open in Cozier Open in Cozier CornersCornersBy Kris HudsonBy Kris HudsonBA 495BA 495Spring 2007Spring 2007MW 2-4pmMW 2-4pmNicole CecchiniNicole CecchiniCarrie FoxCarrie FoxAmanda MorneaultAmanda MorneaultEvolution of ElectronicsEvolution of ElectronicsThe size of electronics seem to be getting smaller every year.The size of electronics seem to be getting smaller every year.TelevisionsTelevisionsVCR and DVD playersVCR and DVD playersHome and cell phonesHome and cell phonesComputersComputersAs a Result…As a Result…Electronics stores need less Electronics stores need less spacespaceBest BuyBest BuyCircuit CityCircuit CityPlans for new stores 30-Plans for new stores 30-40% smaller than current40% smaller than currentOther factorsOther factorsConsumers increasing Consumers increasing their music and video their music and video purchases onlinepurchases onlineSmaller stores will allow Smaller stores will allow market penetration of market penetration of suburbs and urban areassuburbs and urban areas""We're taking a square footage and a revenue We're taking a square footage and a revenue number for a market and, instead of trying to force number for a market and, instead of trying to force it into one large box, we're spreading it across it into one large box, we're spreading it across smaller boxes that are more convenientsmaller boxes that are more convenient," Best ," Best Buy's vice president of real estate, Pat Matre, says. Buy's vice president of real estate, Pat Matre, says. US Investors are beginning to want a bigger bang US Investors are beginning to want a bigger bang for the invested capital buck.for the invested capital buck.Who else is changing?Who else is changing?Home DepotHome DepotLowe’s Lowe’s Office DepotOffice DepotEVEN Wal-MartEVEN Wal-MartThe Idea is…The Idea is…But, Best-Buy and Circuit City But, Best-Buy and Circuit City downsizing will be more downsizing will be more substantialsubstantialTypical Best-Buy store = 45,000 sq. ft.Typical Best-Buy store = 45,000 sq. ft.New store = 30,000 sq. ft. or lessNew store = 30,000 sq. ft. or lessTypical Circuit City store = 34,000 sq. ft.Typical Circuit City store = 34,000 sq. ft.New store = 20,000 sq. ft.New store = 20,000 sq. ft.These retailers will maintainThese retailers will maintainSizes of existing storesSizes of existing storesStore colorsStore colorsLayout within the store (sections,Layout within the store (sections, aisles, position of checkout) aisles, position of checkout)What They Will ChangeWhat They Will ChangeProduct OfferingsProduct OfferingsFewer CDs and DVDsFewer CDs and DVDsFewer floor modelsFewer floor modelsFewer appliancesFewer appliancesFewer items in inventoryFewer items in inventoryAll this means…Fewer employeesAll this means…Fewer employees•Standard Best-Buy store = 125 employees Standard Best-Buy store = 125 employees •New smaller store = 100 employeesNew smaller store = 100 employeesWhy Change?Why Change?They could be reaching market saturation for They could be reaching market saturation for support of their big-box stores:support of their big-box stores:Sixty-six percent of the U.S. population lives within 10 Sixty-six percent of the U.S. population lives within 10 miles of a Best Buy store, and 62% within 10 miles of a miles of a Best Buy store, and 62% within 10 miles of a Circuit City, according to ACNielsen.Circuit City, according to ACNielsen. Expanding electronics offerings by Target, Costco Expanding electronics offerings by Target, Costco and Wal-Martand Wal-MartCreate smaller stores to surround their Create smaller stores to surround their competition.competition.Space Allocation Space Allocation PlanningPlanningAbout 20% of About 20% of average retailer’s average retailer’s inventory is either inventory is either obsolete or not obsolete or not wanted by the wanted by the retailer’s target retailer’s target market (pp 460)market (pp 460)These big box These big box retailers have retailers have realized their greatest realized their greatest productivity resides in productivity resides in the development of the development of smaller retailerssmaller retailers Determine the most productive Determine the most productive allocation of space allocation of spaceWhat do you What do you think about think about the changes?the changes?SourcesSourcesThe Wall Street JournalThe Wall Street Journalwww.wsj.comwww.wsj.comGoogle Google www.google.comwww.google.comSearch “Search “Big-Box Retailers Open in Big-Box Retailers Open in Cozier Corners”Cozier
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