Go Small or Go Home: Global Grocers Betting Big on Small Format Stores
The last few decades have seen worldwide expansion of Western-style supermarkets and hypermarkets—bringing large stores with 40,000 to 100,000 square feet or more of seemingly endless variety to all areas of the globe. But some leading grocery retailers are now changing course, bringing smaller neighborhood markets back into urban centers in Europe and Asia.
One prime example is Carrefour, the world’s second largest retailer, who opened new convenience store-sized markets in Shanghai and Luxembourg City in late 2014, with plans to acquire and rebrand several similarly-sized stores in Greece in the coming year.
Though they might look similar from the outside, these new small-format stores aren’t your typical convenience store. Instead, they are essentially hybrids of convenience stores and hypermarkets. For example, the new Carrefour Easy store in Shanghai is just over 1,600 square feet, yet it still manages to offer over 8,000 different items. In addition to pantry staples, Carrefour Easy offers prepared meals and an in-store seating area, an LED display featuring QR codes that allow shoppers to order items not available in the store (such as small household appliances) via their mobile devices, free Wi-Fi, an ATM and a photo booth. Retailers such as Metro and RT-Mart are exploring similar convenience store models in Asia.
According to Danny Chen, Vice President of International for Interactions, the smaller store trend is being driven largely by the need to differentiate in order to compete with other channels, both traditional and e-commerce. “The majority of retailers are trying different things to drive total revenue and find ways to leverage existing resources and strength to create differentiation and add values to the consumer,” Chen explains. “The annual growth rate in traditional channels of trade has been continuously decreasing. However, the convenience store format has been the growing star… Traditional retailers have the advantage of existing infrastructure and supply chains from their hypermarkets to help them extend their business [via the convenience channel].”
“The convenience model allows hypermarkets to compete in another way,” adds Chen. “It brings traditional retailers closer to the consumer, where they can provide more targeted, relevant information and services. Since e-commerce enables consumers to get what they want 24 hours a day, as a traditional retailer, you must have a better reason to get consumers to leave their home. The convenience model is just one part of this overall move to more consumer-centric operations.”
To learn more about international business opportunities with Interactions, contact Danny Chen, Vice President of International, at hchen@daymon.com.