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  The Herman Trend Alert

August 21, 2002

Big Boxes or Little Boxes?

In retailing, the term "big box" refers to the very large retailers in very large box-like buildings. Big box retailers include Wal-Mart, K-Mart, Home Depot, and others. When the big-box retailers began to expand, smaller retailers shuddered. Small chains and locally owned businesses felt threatened by the invasion of the Big Boxes. Many smaller companies, attacked by their own fear, went out of business. Others have done remarkably well.

Where's the difference? We would suggest the smaller companies that have done well have stronger positive attitudes and sensible business strategies. It is not possible to beat the Big Boxes at their game of attracting large numbers of shoppers searching for low prices and broad selection. Different approaches have been successful for the thriving smaller businesses: Competitive, but fair pricing. A warm atmosphere, that's homier, where people can feel more comfortable shopping. Employees who know their field, their merchandise, and their customers. The approach is "neighbors serving neighbors."

A shift in values is underway. The threat of terrorism has focused people on family, home, and neighborhood. Wishing to avoid the risk of being in crowded places that may be targets for terrorists, many people are shifting their shopping to their friendly local merchants. Even if the risk of terrorist action is minimal, the perception of potential exposure is influencing behavior and habits. As an example, we're watching an increase in remodeling as people focus more towards home and family.

This shift will pull more shoppers away from the big box retailers and from the huge shopping malls. Those retailers who concentrate on personal service, good merchandising, fair prices, and strong relationships with customers will compete very favorably with the big box retailers who are perceived as being more impersonal.

Is there a risk for the big box retailers in this scenario? Yes. And they know it. Big boxes are working to strengthen service and build more ties to local communities where they do business. Observers suggest that the big box picture is not as rosy as it has been. As shoppers build local loyalty, the big boys may be in trouble.

Comments from our readers:

As someone who owns Lowes and Home Depot stock I hope you are wrong. As someone who is the son of a former small-town hardware store owner (in which I grew up) I hope you're right.

It's odd. I was brought up with an instilled dislike for/mistrust of the big box stores, which at that time were the Sears of the world. Today, I find myself always hesitating a bit before going into a Home Depot, almost seeing my father's head shaking. But the truth is, in his later years when he used to go to Home Depot he was fascinated by them. However, there are times when I still seek out one of the (dwindling number of) local small hardware stores.

Good column!

Gil Gordon
Author of Turn It Off!


I agree with this assessment. Using the big box example of Home Depot, et al, I would also add the comment that many of us consumers are so pragmatic that we would prefer NOT to spend time walking the length of two football fields just to get a particular screw! This is one of the largest drivers of my household's consumer behavior - CONVENIENCE! I, for one, would pay, say, maybe 10-15% more for it, depending on the item. So therein lies a marketing opportunity.

Regards,
Ken Vogel
Waukesha, WI


Thank you.We are a home furnishing retailer in Toronto who has tries to differentiate from big boxes,and so far we have been very successful.We will keep at it.

Ken Metrick
ELTE
Toronto, Canada


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