There are only a handful of factors people consider when shopping. These are price, quality, convenience, selection, and experience. Retailers will usually focus on a subset of these. In the case of general merchandise stores like Wal-Mart, this usually means price, selection, and convenience. Of these, I think it is selection that is the most important, especially in rural areas. In all categories of retail, the trend has been to ever larger stores with a greater number of SKUs.
Smaller markets are generally not going to have a large variety of goods available. It is not uncommon for people to make shopping trips of twenty, fifty, or even a hundred miles to the nearest Wal-Mart. Sometimes the products they seek are simply not available anywhere closer to home. In other cases, the selection may be too limited. Retail trends and stores like Wal-Mart are partly to blame for this. Small market towns often once had a local variety store that stocked the items carried by the few large chains, though not nearly the same quantity or variety (or price). These are the local stores that have closed over the last thirty years. It is only right that they did. They did not meet the needs or desires of their customers.
As I mentioned, the trend has been to locate very large stores in larger communities, serving a large market area. North Dakota would be an excellent example. There are eight Wal-Marts spaced at regular intervals along Interstate 94 and US Highway 2 across the state. Population from a very large hinterland comes to shop at these stores. It is very difficult to find other general merchandise stores outside of these communities.
Let's assume gas becomes even more expensive, to the point where people are reluctant to drive. What are the implications for retail? Here are some possibiities:
1) Increased use of the internets for shopping. This may fill the gap to an extent, but it is not practical to think that people will not leave home. Remember that one reason people shop is for the experience. People want to leave home. At other times, they simply have to see the product to make the purchase. The internets will take up some of the slack, but not all.
2) Re-localization of retailing. Chains like Alco and Pamida are already filling a niche, locating in small towns without competition from the large discount retailers. At the same time, chains like Wal-Mart, Sears, and Kohls have launched new smaller prototype stores for smaller markets. Will these begin creeping into small markets? Possibly to some extent, but it is unlikely that we will soon find a Sears Essentials or Wal-Mart Neighborhood Market in many rural communities.
3) Grocery stores broadening their selection. This is another trend. As discounters carry more food items, grocers are carrying more general merchandise. It is another reason grocery stores now can be 50-60,000 square feet. Winn-Dixie's failure to follow this trend is one reason it is having so much trouble. While this possibility may have some merit, size limitations, inexperience, and lack of capital are going to hold back many of the independents and small chains serving small communities.
4) Consumers change their habits. We have to admit the possibility that consumers will shop the market centers just as they have been doing, only perhaps more infrequently. They will make fewer trips and make bigger purchases as they stock up for the month instead of the week.
So what other possibilities may there be? If you were a retailer, where would you bet your money?
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Originally posted by mike gurnee
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