August 9, 2023
Since the late 1990s, the American retail landscape has changed tremendously, as a number of “big box stores” that were once the “go to” places for shopping have closed their doors forever. The emergence of Amazon and ecommerce have changed the way brands connect with their customers, proving to be the number one challenge to big box stores, but the big box stores face other obstacles to their survival as well. Traditional brick-and-mortar stores, both “big box” and “mom-and-pop” stores, have faced this new retail paradigm in different ways and with varying levels of success. Notable big box stores such as Kmart and Bed Bath & Beyond have failed to properly adapt and have gone out of business while others, including Walmart, have thrived. The new challenges have forced the big box stores to realign their business models as they enter this new phase in retail history. How well big box stores, as well as corner stores, adjust to changing consumer tastes and technology trends in this new economic reality will determine which brands are successful and which are left by the wayside.
The term “big box store” is somewhat open ended and a bit ambiguous, but it generally refers to physically large (approximately 50,000 to 100,000 square feet or more) retail establishments that are usually part of a larger national or global chain. Walmart is perhaps the most recognized big box store in North America, while Carrefour is a similar chain in Europe. Big box stores can be general merchandise type department stores like Walmart and Carrefour, but specialized “category killers” such as Best Buy, Hobby Lobby, and Menards are also considered big box stores.
Many retail experts, entrepreneurs, and consumers believe that big box stores are past their prime and may be a thing of the past within a few years, yet some trends suggest that they may be about to catch their second wind. The more forward thinking big box stores are utilizing new technologies and developing intriguing ways to engage new consumers and strengthen existing connections with loyal customers, which may be the key to their survival and success in the coming years. So let’s take a look at the background of big box stores, the challenges they’ve faced, and how some of the more successful brands have risen above these challenges to offer consumers new shopping experiences.
Big Box Stores Then and Now
Big box stores were born in the US during the 1960s, when many aspects of society were undergoing major changes. Among the first big box stores were Target and Kmart, which were followed by Walmart and others in the 1970s, before the trend was exported from North America to the world. The growth of malls helped early box stores, as they often served as anchors for malls, but both were often the death knell for mom-and-pop brick-and-mortar stores.
Big box stores were hurt by the emergence of ecommerce in the 2000s, but the COVID pandemic also threw a monkey wrench into the space, which retailers, entrepreneurs, and consumers are still trying to understand. Malls, which were already reeling from changing consumer habits, closed and although big box stores stayed open, they lost a large share of their profits to ecommerce giants such as Amazon. Fortune reported in 2021 that 12,200 US stores closed in 2020 and that 630 companies, including big box store JC Penney declared bankruptcy. Of course, other major big box stores such as Sears have already all but disappeared, and big box original Kmart has shuttered its doors permanently in the US. These bankruptcies and closing have left many to wonder what’s the future of big box stores and retail brick-and-mortar stores in general, but the trends show that the survivors of the space are positioned to take advantage of emerging technology and social trends.
One would think that in the current retail climate it would be financial suicide to physically expand on the big box model, yet some brands are doing so with apparent success. In particular, Target plans to build 150,000 square foot stores in more popular locations in the coming years with one goal being to account for a surplus in inventory the stores experienced after supply chain issues were alleviated. With this in mind, the backrooms of each of these larger stores will be five times larger than normal sized stores. These larger stores will offer not only more products but also serve as digital fulfillment centers. Consumers will be able to purchase items online more easily, or on a mobile app, and then pick them up at their local Target hassle free. Many consumers will like the reduced steps in the retail process while others will appreciate saving time and gas by doing less driving and more convenient shopping.
A number of big box home building stores are also planning to increase their physical space in order to stay competitive with ecommerce. Home Depot introduced seminars for its loyal customers during COVID and due to the program’s success, they’ve decided to keep and expand on the idea. The home improvement giant also plans on expanding its distribution centers in the coming years, which they believe will ultimately reduce costs that they can then pass on to their customers.
One of Home Depot’s major competitors, Lowe’s, has also made consumer friendly adjustments in the new retail landscape. Lowe’s developed a customer loyalty program known as the “Pro Zone,” where higher paying customers, often contractors, can use special checkouts for convenience and can access special sections of the store where they can purchase commonly used tools and other items.
Farm and home improvement giant Tractor Supply has also made serious efforts recently to increase its footprint in the retail sector. Tractor Supply recently made a deal with Carhartt to expand its presence in 100 stores, in a “store within a store” model. The store within a store idea has been around for awhile, but Tractor Supply’s embrace of it may signal a trend that other big box stores will pick up on as they look for new ways to connect with a greater number of consumers.
As some big box stores increase the physical space of their locations, in order to cater to customer demands of convenience, others are decreasing their size to give consumers better customer service and an enhanced shopping experience. Electronics giant Best Buy is one of the brands at the vanguard of this trend, notably opening a much physically diminished 5,000 square foot store in North Carolina in July 2022. Although this and other smaller stores will have fewer items, it promises to offer consumers better support and other features, including pickup lockers outside the store. Retail experts see the trend of some big box stores going smaller opening the door for a potential resurgence of nonchain and mom-and-pop brick-and-mortar stores as well.
Studies and sales figures show that most people like the lower costs big box stores offer, and the convenience of ecommerce, but many consumers want their values reflected in the stores and brands they support. Many smaller families and singles, especially those in urban locations, often look for a different shopping experience a part form big box stores, which can be a pejorative term to many urbanites. These consumers like to “buy local” and claim that the smaller brick-and-mortar stores offer a better customer experience. With this in mind, many nonchains as well the big box stores have opportunities to connect with new consumers. Because the vast majority of big box stores are located in suburban locations, the trend toward smaller stores could mean a new footprint for big box stores in urban or even small town markets. These chains will have to be cognizant, though, of what consumers in these areas prefer and why they patronize nonchain stores.
If big box stores are to survive the next ten to twenty years, they’ll have to develop new and innovative approaches to business. As ecommerce businesses allow their customers to try items, such as clothing, virtually before purchasing, big box stores can do similar things. IKEA and Apple are known for their stores where consumers can spend time trying devices, furniture, or other items before purchasing and then have them delivered to their homes. General merchandise big box stores will likely follow this trend, although the degree to which it offered will probably vary from store to store.
Big box stores will also benefit from omnichannel marketing. Channels are the ways in which brands and consumers interact, so omnichannel marketing describes all the ways brands connect with their consumers, simultaneously. These channels can include print, television, radio, internet, mobile apps, or even billboards. Big box stores are uniquely positioned to take advantage of omnichannel marketing, even more so than ecommerce companies, due to their resources and presence in both physical and virtual spaces.
Utilizing Tech Trends
Finally, if big box stores are to challenge ecommerce in any meaningful way, they’ll have to incorporate tech trends into their business models. Successful big box stores will likely embrace the automation trend, from their distribution centers to their checkout lanes. Automation will save both companies and consumers money, and it appears that the public’s negative attitudes toward automation have largely subsided.
Big box stores will continue to reach and retain customers through other tech trends, including using QR code displays that consumers can scan with their phones to learn more about a particular product. Expect many of these displays to be interactive as well, giving the shopper a new, memorable experience.
Enhanced customer service through new technology is another element that big box stores will utilize. No longer will customers be forced to sit on phones waiting for customer services at big box companies, but they will be given a number of options including mobile chat and instant messaging in addition to phone and email.
The future success, or lack thereof, of big box stores in the United States will depend on a number of factors. Ecommerce has definitely hurt the bottom line of big box stores, but those that have adapted by being innovative, utilizing tech trends, and above all, understanding consumer needs, will be poised to survive the transition into a new retail economy.