Small Box Stores are Big Again: Brand Implications
Parking lot shopping-cart wranglers might want to reconsider their job security as major retailers continue to focus on opening more small-box format stores. Walmart and Target are just two companies racing to invest in small-box urban stores aimed not at stock-up shoppers but rather quick-trip ones who are more likely to carry a basket — if they use one at all.
It’s a trend food and beverage manufacturers are tracking closely, since smaller footprints mean even fiercer competition for shelf and cooler space. The product lines that do win slots will have fewer of those prestigious spots for eye-level, aisle-facing placements, forcing brands to rank the offerings in their own portfolios and work harder than ever to stand out on shelf and maintain healthy turn rates.
News that smaller stores are reporting better same-store sales growth than big-box retailers is helping drive the push for more small-box stores. In September, Walmart expanded its small-box plans, announcing it would build some 200 small-box stores under the name Neighborhood Market while opening another 115 of its massive Supercenters. Target began testing its “TargetExpress” small-box, urban format earlier this year.
But there is already fierce competition in the small- to medium-sized store space: Save-A-Lot and Aldi are both thriving, and Aldi announced expansion plans earlier this year. Over the next five years, the company plans to increase by 50 percent the number of small- and medium-size U.S. stores, which currently number 1,300. What’s more, three similar small-box chains — Dollar General, Dollar Tree and Family Dollar — are locked in a hostile takeover pretzel competing for access to the kinds of low-income shoppers Walmart has locked up in the suburbs but has a harder time reaching in city centers.
The implications are stark for brand managers, who will have to fight fierce turf battles for access and prime placements in small-box stores while competing on the shelf against inherently advantaged and increasingly sophisticated store-branded offerings.
Facing that challenge starts with understanding why smaller stores are thriving. One reason is that U.S. households are smaller than they used to be, with more than 60 percent now consisting of one or two people and only 40 percent having children. Working, family-postponing young adults and empty-nesting Baby Boomers don’t see the appeal of, or need for, time-consuming and fatiguing stock-up sprees in giant stores. Instead, they are far more likely to make quick trips to the store to pick up food for dinner that night, either as prepared fare or fresh and packaged ingredients to whip up something easy yet nutritious and delicious.
“People have less time, and they are too tired to cruise the whole store,” says Bettina von Patow, Tetra Pak’s global retail manager. “They are getting bored with it.”
So what can brand managers do to get their products slotted into small-box stores and keep them there?
Consider compactness: With space at a premium, producers should consider whether their packaging is as compact as possible, a desirable attribute for retailers. For example, the Tetra Recart carton package takes up to 40 percent less space on shelf as compared to rounded packaging.
Remember size matters: People living in small households don’t want to lug home a heavy gallon of juice or milk and worry half of it will go bad. They are thirsty for new multi-serve sizes, including 1-liter and 1.5-liter sizes. Most, if not all, small-box store planners designate large swaths of the stores for prepared foods, so grab-and-go sizes are also a must.
Differentiate on shelf: Convenience-shopping consumers make decisions quickly; standing out on shelf with an unusual size, package shape or arresting graphics can help boost visibility. Carton packaging is advantageous for differentiation with its large, flat printable space for maximum eye-catching billboard effect.
Be restock-friendly: Make replenishment as easy as possible for the retailer. Smaller spaces can make refilling shelves more challenging, and brands with packaging that makes this task easier will win friends and influence buyers.
Micro-target your mix: In smaller spaces, such as beverage coolers, brand exposure will be crowded, with room for only one to three consumer-facing cartons, for example. Creating the right product mix is vital, since having a product overstay its welcome is an invitation to be dropped. Micro-targeting assortments based on a store’s consumer demographics and preferences can help. Also, having one seasonal variety or frequently changing flavor can help keep things fresh for today’s notoriously fickle shoppers, who more than ever are brand promiscuous and always ready to try new things.
As more small- and medium-box stores open their doors, brands must have attractive, conveniently packaged and, above all, fast-moving products to win coveted slots on shelf. To keep them, they’ll need to carefully tune into market data to offer an appropriate mix of flavors and sizes with enough variety to turn that busy and slightly bored shopper into a sale.