Not that long ago, Strategy+Business ran a very thought-provoking article entitled Big Impact in a Small Format that noted that small format retail stores are gaining popularity and traction in Europe and Latin America where the popularity of the big-box store may actually be on the decline.
According to the article, smaller stores that cater to the needs of local consumers, such as Beaumont in the U.K.’s East Midlands that offers takeout meals as well as traditional grocery and sundries in small(er) sizes and Oxxo’s in Mexico that caters to the local neighborhoods, are gaining popularity. This may be due to the fact that the consumer experience in massive retail establishments is becoming increasingly unattractive. The amount of time it takes to negotiate the seemingly endless aisles is a drawback to harried shoppers – a drawback only made worse by the checkout lines where line-ups are often long and slow.
Consider Chris J. Abraham’s recent post over on @ Supply Chain Management about why he will not shop at Walmart anymore. He’s fed up of Walmart not because he’s a fan of small business, not because Walmart treats their employees “poorly”, and not because Walmart imports most of its stuff from China and other oversees locations, but because a weekly trip now takes almost two hours (60 minutes to find everything and 45 minutes to check out), employees are scarce and not very knowledgeable when you can find one for a question, and customer responsiveness is downright poor.
I see his points – and I think a lot of people do. I dread going to Walmart when I only need two or three things – since they are usually located at three opposite corners and it takes me fifteen minutes at a very brisk walk to collect them if I know where they are, and double that if I don’t. And then there’s the wait – the self-checkout lines that rarely work, or the too few lanes always filled with customers who have a full cart. Convenience isn’t just about size and selection – it’s about the speed at which you can find what you are looking for. Maybe if Walmart divided up it’s store into multiple stores – one per item type – such as clothing, media, electronics, furniture, bed and bath, etc. Oh wait, someone already did that – it’s called a mall! And, unlike a Walmart, they often exist in urban areas – and you only need to go into the stores that have what you need. Furthermore, each store has it’s own checkout and, much more often than not, the staff will actually help you.
Now I know this isn’t a retail blog, and that I shouldn’t dwell on good retail store design, but the article is very relevant to supply chain, and sourcing. It contains a number of lessons that your sourcing team should take to heart. First of all, if you’re sourcing everything under the sun, you’re likely not doing anyone a favor. Besides the fact that you could be sourcing products that no one is going to use, you should probably be looking for ways to reduce SKUs, identify standard components, and reuse these components across product lines. Secondly, you should be identifying the differences in needs between the different groups you serve, and cater your strategies appropriately if your success is tied to their success. Thirdly, don’t be afraid to innovate – it just might be what you need to take your sourcing to the next level.