Dick’s takes on a small-format concept

Dick’s Sporting Goods announced a test concept (Chelsea Collective) dedicated to yoga and fitness wear in a small-format concept. While the length of the product life cycle for “athleisure” is uncertain in length, it’s worth a shot, as I discuss on today’s RetailWire forum:

It’s a worthwhile experiment for Dick’s to try a small-format store dedicated to the growing “athleisure” business. There are plenty of customers for yoga and fitness apparel (whether for use at the gym or on the street) who would rather not shop for it in a big-box store among the golf clubs, elliptical machines and so forth. It’s also a chance for Dick’s to take a high-margin concept to the mall or lifestyle center…although it will find plenty of competition between Lululemon, Athleta and others in the same space.

Toys “R” Us: The big box store is still ailing

Here’s a recent post from RetailWire about Toys “R” Us, following the release of its (disappointing) holiday sales. The question is whether this is symptomatic of big box stores generally, or issues unique to TRU. Here’s my point of view:

The struggles at Toys “R” Us point out that the big box store concept is not out of the woods yet. (Best Buy’s improving numbers are the exception to the rule.) Many of the “transformational” steps being taken at TRU strike me as “Retail 101”: Managing pricing, costs, inventory and the in-store experience are all fundamental to any successful retailer.

If Toys “R” Us gets these basics right, it is still facing some significant headwinds. The competition isn’t getting any easier, from Amazon to Target, who made toys the centerpiece of its holiday campaign this year. Meanwhile, sales continue to migrate to e-commerce and omnichannel retailers while TRU deals with too many brick-and-mortar locations.

Radio Shack: Tailwinds may not bring a comeback

There is some traction in the consumer electronics business, but RetailWire panelists seem to agree that it may be too late to help Radio Shack. Here’s my recent comment:

Best Buy’s announcement of an upswing in its sales suggests that the consumer electronics business is not dead after all, and the big box store might also be showing a pulse. It becomes more difficult for a company like Radio Shack — saddled with an image that it tries to embrace one day and mock the next — to compete against the brick-and-mortar or e-commerce giants in its segment.

It’s probably too late in Radio Shack’s history to consider a complete rebranding — including a new name — but it’s worth remembering that Best Buy originated many years ago as a Twin Cities-based audiophile store called “Sound of Music” and decided to walk away from its original brand identity.

Merger speculation hits the office supply segment

A financial analyst who covers the specialty retail industry is talking up the benefits of an acquisition of Office Depot by Staples. (This follows the recent merger of Office Depot and Office Max.) There are arguments to be made for and against, and I discuss the issue in a recent RetailWire comment:

A merger of Staples and Office Depot would provide economies of scale in a mature business, although it would be under the same regulatory microscope as any pending merger of dollar stores. The bigger issue for Staples — whether or not it acquires its top competitor — is the rapid change in big box specialty stores, driven by more online competition like Amazon.

But the office supply store has unique challenges as a result of technology. Consumers simply aren’t using PC’s and laptops as much, and likewise the market for printers, paper and ink is shrinking. Staples (and Office Depot) ought to be accelerating its small-format and cloud service businesses, because the decline of the big box format is tough to reverse.

Staples tests omnichannel stores

From today’s RetailWire panel discussion comes news that Staples is testing small-format stores with a limited assortment of best-selling SKU’s but also more in-store linkage to the company’s broad e-commerce selection. It’s only a test, but it feels like a winning idea to me:

Staples will learn a lot from this test, and a lot of other big-box retailers may learn valuable lessons, too. It’s an issue of how to leverage the convenience of brick-and-mortar locations in a more productive footprint, while finding ways to compete more effectively against web-only retailers like Amazon.

I would still like to see the big box office supply stores leverage their brand equity more successfully to offer virtual business services — not just paper, printers, ink and related merchandise. Staples and OfficeMax offer links to cloud storage and web domain suppliers on its websites, but have more opportunity than they have exploited so far.

OfficeMax opens “shops within stores”

From a recent RetailWire discussion: Panelists argued the merits of OfficeMax “managing” the office supply section within other retailers, such as grocers. I think it’s a smart move in light of the mature “big box” model that OfficeMax and others are dealing with right now:

This idea takes category management to a new level by putting it in the hands of a second retailer. But in a sense, it’s not a big leap from the OfficeMax strategy to the “shop-within-a-shop” concept from brands like Apple (inside Best Buy) or Coach (inside Macy’s). There is some risk of cannibalization for OfficeMax but in total it’s a winning strategy to gain share. Given the big box stores’ problems squeezing productivity out of their “category killer” real estate, this is a good move.

Cutting hours at the mall?

I’m sure mall developers have studied the economics of this move, and they probably find that the first and last 30 to 60 minutes the doors are open are relatively unproductive in terms of foot traffic vs. the costs of payroll, utilities, and so on. However, there are a couple of strategic costs associated with these moves:

1. How important is that first and last half-hour to the maintenance, restocking and recovery of store shelves? Will some retailers maintain a staff outside of “open hours” to help execute properly?

2. Will the reduction in hours contribute to the long-term decline of the mall? Big-box retailers (think Target and Kohl’s, for example) figured out some time ago that the convenience of longer hours provides a distinct competitive advantage.

These decisions may make short-term economic sense but help contribute to the long-term irrelevance of the regional mall.