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PC Costly for Big Boxes

Mar 1, 2007

Political correctness at some of the country's big box chains may explain why Best Buy and others underperformed over the 2006 holidays, and why some independents thrived. This analysis appears in a Consumer Mind Reader report, conducted by America's Research Group and authored by C. Britt Beemer, founder and CEO of ARG.

Although total retail sales rose, retail chain stores were on the losing end of the spectrum, according to the study of 1,000 shoppers nationwide. It found that just five of the 25 retail categories ARG covers showed increases in both the number of shoppers and the amount of their purchases, in comparison with the previous holiday season.

The report indicates that more consumers said they shopped sporting goods stores, furniture stores, musical instrument stores, jewelry stores and outlet mall/factory outlet stores in the most recent holiday season. Consumer spending levels in these types of stores also rose this season versus last. "I believe, and our research confirms, that the reason consumers abandoned the big box stores in favor of independent retailers is that many of the chains adopted policies of not decorating their stores for the Christmas holidays and would not allow employees to wish shoppers a Merry Christmas," Beemer says in the report.

In a study ARG conducted over the December 16th and 17th weekend, 38.8 percent of shoppers complained that stores they visited were not decorated for the holiday as they had been in prior years. Beemer says this was an obvious major concern among shoppers. One in five said they wouldn't again shop the stores that refused to acknowledge Christmas.

Best Buy was among the chains that did not provide outward signs of Christmas. When ARG's Consumer Mind Reader asked if consumers would have shopped Best Buy had they known the store didn't decorate or allow employees to say Merry Christmas, just four in nine said they would have shopped there anyway.

Nearly as many, 39 percent, said they would not have made the effort to shop at Best Buy if they had known in advance that the store would not be decorated for the holiday. "Political correctness can be costly, and the cost will almost certainly come in the form of lost sales," Beemer concludes.

While he urges chain stores to heed this lesson in planning for holiday 2007, he also provides independent retailers with a tip. "Consumers still want to shop in stores brightly decorated to reflect the season, and they want to hear Merry Christmas when they hand over their shopping dollars."

More Ways to Win
Independent merchants were handed another boost of confidence during a panel discussion at the January annual convention of the National Retail Federation in New York. Just because a retailer is a smaller operator compared with today's mega chains doesn't mean they are doomed, panelists concluded.

There are plenty of straightforward strategies those businesses can put in place to compete with the Wal-Marts of the world, said one presenter. One thing that smaller chains can do to strengthen their market presence is affiliate with other companies in trade organizations, suggested Harold Lloyd, a retail consultant based in Virginia. "You can take the biggest dog down when you get together," he said.

Store renovations, something smaller operators might tend to shy away from, are also important. Face lifting a store every four to five years carries an average cost of $7 per square foot, Lloyd said.

Waiting to do so every eight to 10 years can skyrocket the cost to about $42 per square foot, he added, because more work is needed to bring a store up to date, and labor and materials costs have continued to rise. He also advised smaller independents to not build a new store, "Until all of your stores are an eight on a scale of 10," he said.

Meanwhile, a combative relationship with vendors, which retailers often have, is going to get a store owner nowhere, Lloyd said. The reason many larger outfits prevail is as a result of good vendor relationships. Vendors are "The people who bring a retailer to the dance," he said. "These are the people who bring stores stuff to sell. Whining about vendors is silly."

Topic: Business Strategies

Related Articles: retail sales 

Article ID: 95

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