No one seems to have the answer for the malaise at the big box stores — least of all Best Buy’s CEO, who turned in his resignation on Tuesday. But even assuming someone somewhere were to discover the answer, is it possible to launch a new big box store chain at this point?
There are plenty of empty stores, obviously, but once a store is set up, what will make people come in? Who will be the core customers at the new store? Older shoppers are the first to discover a new big box store, and are happy enough to visit, and they may have money to spend, but they are not so likely to buy anything. The store will get foot traffic, but no revenue. Younger shoppers, by contrast, have little interest in big box stores and often have little money to spend. They may need to hear a series of personal success stories with a new store before they will think about going inside — and where will those stories come from? Then, once inside, they will buy a product only if it is really the right thing, at the prevailing market price. On the surface, this sounds like a crazy challenge for a new retailer to take on.
It is a challenge faced by H.H. Gregg as it tries to be the next big box home appliance store, picking up, in many locations, where Circuit City failed. It may be a bigger challenge than the retail chain planned on. “I don’t get the point of that store,” is the assessment I heard this week from one shopper, a woman near the middle of the 32-to-49 age group that big box stores hope to target. She had been inside the store, once, for five minutes. It didn’t have the product she needed, though it had no end of low-end products in the same category. The prices were unimpressive and the layout confusing. What will it take to get a shopper like this to enter the store a second time? Obviously, traditional strategies like newspaper inserts will not be much help. As television falters, particularly among viewers under 40 years old, there may no longer be a simple way to reach a broad local audience with an advertising message.
The only answer I can think of is that a retailer may need to prove itself and establish its name in a small-format store first before it can consider making the jump to the big-box format. This is, after all, what Sears did, and Lowes, and Kmart, and Circuit City — and the people at Circuit City probably wish, now, that they had not attempted that jump.
In other words, it may take a decade or longer to establish a retailer before it can open its first big box store. If this seems unfairly indirect and roundabout, look at it from the other side. A big box store, by nature, needs roughly 100 paying customers per day to make a profit. Where do you expect these 100 people to come from? The current theory is that they will materialize as a result of the clarity and persistence of the retailer’s advertising concept. But as consumers become more resistant to advertising messages, it may be a strategy that no longer works well enough to launch a big box store from out of the blue.
