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Are there too many retail stores?

Written by: Will Atkinson

Article Overview: In the past several years, due to the abundance of cheap credit and excess spending, we've seen a massive growth in the size and number of retail outlets. Some say that we are now "over-stored." What does this mean, and how will it affect small retailers?

Are there too many retail stores?

In the years leading up to our current economic crisis, we essentially created wealth out of nothing. As a result, everyone had more money to spend than they could afford in the long run, and it has all come crashing down around us. One of the chief symptoms of the craze was the run up in retail construction.

We have myriad retail outlets, to the point that in an urban or suburban setting a shopper can get nearly any product without traveling any significant distance. The upside to this is a wealth of convenience and choice. The downside is that we are most likely "over-stored."

This means that assuming the current level of consumer spending, or even an increased, but sustainable level, we have too many stores. The level of spending won't support all of these retail stores and some of them need to fail in order for the market to stabilize. We've already seen this with the Home Depot Design stores, and Circuit City. We didn't really need competing electronics super stores in every strip mall, and we didn't need high end home furnishings in a huge format.

It's ironic that the big box stores are some of the first to fail as a result of the crisis, when we usually blame them for putting pressure on small businesses. However, it's telling that they are the first to go, as it indicates that consumers are cutting back on luxuries and unnecessary gadgets and toys to the point that a large format store cannot survive.

What does this mean for the small retailer? I think it's actually a positive thing. Sure, the recession will be hard, and some small stores will falter, but well-run businesses will emerge from this recession in a better competitive position than ever.

A small retailer has lots of advantages in this situation. First, it's simply cheaper to keep a small store running than a huge one with tons of inventory and employee costs. Smart business owners are reducing costs and cutting back on unnecessary expenses, while focusing on customer service and product alignment.

Second, it's easier for a small store to be nimble. Adjust your inventory to suit the needs of customers in a recession. Carry some more affordable options that are complementary to your normal lines of products. Give your customers choices that make them want to shop at your store. Maybe you can carry locally produced options that are Earth-friendly and trendy too.

Third, you can leverage your local presence to your advantage. Large corporations have gotten a bad name as a result of the irresponsible lending and insurance practices that led to this recession, and many individuals would prefer to spend their money with local businesses in this downturn, especially since that means that more of their money is staying in the local market.

As we see large stores failing, and small ones too, make sure you're positioned to differentiate your store in this market. If you can reduce costs, increase the appeal and relevance of your store, and provide a great local shopping experience, then you stand to benefit from the recession, and well into the future.

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Article Tags: chief symptoms, circuit city, consumer spending, consumers, convenience, downside, economic crisis, gadgets, home depot, home furnishings, luxuries, recession, retail construction, retail outlets, retail stores, small businesses, smart business owners, strip mall, sustainable level, unnecessary expenses



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