Retail competition is intense and home shopping is gaining momentum, but the allure of adding more stores is hard to resist.
That’s why unit and geographic expansion is still a front-burner strategy for many retail CEOs, an important takeaway from this year’s SN Power 50 roster of the most influential people in the industry (see SN's 2014 Power 50 Headquarters for the story and more).
Here’s a sampling of some high-profile store expansion programs outlined in this year’s Power 50 profiles:
• Costco is adding to its base more aggressively than in recent years with expectations of 30 new locations this year.
• Publix entered North Carolina earlier this year and plans additional units there this year.
• Meijer, Inc., is expanding into Wisconsin while continuing to grow in Chicago.
• Dollar General reached 11,000 stores last fall and plans to open 700 units in 2014, including upcoming openings in three new states.
• WinCo Foods moved into Texas and may consider expansion into Colorado and New Mexico.
All this activity brings to mind another list SN published just two months ago: the fastest-growing food retailers in terms of store count (among companies on SN’s Top 75 retailers and wholesalers roster). As it turns out, almost all the companies on that growth list have top executives represented on this year’s Power 50. That means nothing signifies executive power like the ability to grow the store base.
It’s a bit hard to generalize about these trends because each company has specific initiatives, which in some cases include closing some stores. However, it’s logical to wonder if this level of growth can continue at a time when competition, home shopping and other factors have the potential to alter bricks and mortar strategies.
One of the industry’s shrewdest observers, Jim Hertel, managing partner at Willard Bishop, told me that for now unit expansion remains a core approach to growing top lines. For example, a 1,000 store chain opening 50 to 100 units a year can fairly reliably predict the benefit to sales, he said.
“It’s fairly tried and true,” he said. “There aren’t that many things in food retail today that are as reliable in terms of producing overall growth.”
In fact, he continued, there are probably fewer reliable growth avenues than before, partly because much of the expansion and development of the supermarket box has already taken place over many years, in everything from service departments to GM/HBC, and store sizes today are flattening out or even falling.
That puts more pressure on unit expansion as a growth strategy and likely heats up competition for real estate, Hertel said. Even if new stores continue to roll out, the resulting boxes may look very different in the future. As click and collect takes hold, outlets may become smaller and some square footage may be redirected to warehousing, drive-through lanes and other purposes, he explained.
“People may still focus on expanding units, but these may be different kinds of units than what’s been historically looked at.”
So my takeaway is CEOs won’t be able to rely on proven expansion strategies as much in the future. Power will be about the ability to adapt, all of which will be reflected on our Power 50 rosters before too long.
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