Attributing Large Footprints to Brick-and-Mortar’s Massive Decline
April 25, 2017
Though small sales numbers are a natural part of the pattern, retailers can’t rest on their (admittedly wilting) laurels and continue to move forward in the same passive, cyclical models. Nearly 5,000 stores have announced closures, and more are sure to come. Sales are slipping from the tight grip of brick & mortar, and falling right into Amazon’s lap. Along with declining sales, productivity in retail is taking a big hit.
Productivity per square foot is the most transparent and most utilized metric for determining the successes or failures of a footprint. Massive storefronts were once intended to create opportunity for retailers. The size allowed for more inventory, more signage, and more shoppers. However, as sales decline and overhead continues to rise, owners can no longer justify their gargantuan spaces.
Executives plan and budget for an increase in sales for a very simple reason: increase or die. Operating costs are guaranteed to go up until the end of time, leaving operators with little choice but to sell more. When that doesn’t happen leverage declines and operators are left with fewer resources to generate more revenue. Not a good combination.
Brick-and-mortar, in a general sense, isn’t in danger. There is still a market for in-store shopping for everything from grocery to luxury apparel. The problem is that retailers bet on demand, and lost. Suburban America is so over-saturated with retail, the markets simply can’t sustain those resource-sucking monsters. So, leaders are shifting towards lean operations with small footprints. It seems that may be the only way retail tenants will be able to recoup their costs, and possibly keep a little profit along the way.
Because of lower productivity, stores are unable to cover their expenses, resulting in massive closures of low-performing locations. But what if there was a better option? What if you could test your market before ever investing in a large storefront? What if you didn’t have to acquire a storefront at all? For more information about how we transform shipping containers for nimble and accessible retail spaces, fill out our contact form below.