Business Unusual

Are retail shops only going to get smaller now?

Retailers would love to sell every item they carry at full profit from every shop they have. It is unlikely though because they can’t be sure if every shop will have the demand to do so.

There are two significant elements every retailer needs to manage regarding their inventory. How many items of each type to hold in each shop and how best to spread the total number of items among all the shops.

It is an old problem.

Catalogues

Solutions came as advances were made in the services around retail. Those options may not have been created specifically as solutions but allowed for it. They were the adjacent possible (as described by authors Stuart Kaufman and Stephen Johnson.

An early alternative was the catalogue. Post thousands to potential customers and arrange for delivery or collection of only the items that were ordered and paid for. It works well if printing is cheap and there is a trustworthy and reliable delivery system.

The catalogue was joined by the website allowing access for an ever greater number of people and a huge amount of products to be made available.

As online purchasing options have increased and willingness to use them improved the sale of digital items has soared, but the challenge remained with physical products. You may either want to see them first or you would need to arrange a time and a place to have them delivered.

The delivery option has seen the next wave of advance which may mark the tipping point for physical shop sizes.

Delivery options that deliver

Before Amazon there were stores like Argos in the UK that were distribution centres with a small ordering, payment and collection area. You either chose your product online or out of a catalogue in the store and paid, with someone fetching it from the warehouse for you while you waited. Amazon went further in delivering everything and doing so faster than ever before.

It still required you to be at a certain place at a certain time to receive the delivery which can still be a challenge, but some evolving options may make that even easier.

Simply collecting your item from a designated shop close to you is an option but retailers like Makro in SA have added the option for some smaller items to be delivered to a locker and send you the pin to collect it when you can.

Placing those lockers in parking lots of shopping centres is cheaper than keeping them in store and more convenient that requiring you to collect at distribution centre which are often placed far from retail and residential areas.

Amazon’s Treasure Truck goes one step further in creating an option for the impulse shopping and sale item equivalent by loading a truck with sale items that are bought online and taken to a point for collection by truck to people that were willing to go there to fetch it.

It would be a great option to copy, but it has been patented.

Smarter delivery options

Volvo has a service that directs deliveries to your car based on its location and provides for one time access to the boot to have the item left in your car.

Online sales in SA still only represent a fraction of the total sales, but as things improve and get cheaper for online purchasing and delivery you can expect retailers to want to shift towards it.

Not only to reduce costs, but for some businesses like Takealot it represents a new segment of the market who are more willing to buy online than in store.

It may sound like bad news for shopping centres but it need not be, if individual shops can be smaller you could accommodate a greater variety of shops.

The lower rental may make it affordable for small businesses to get access to the greater customer traffic.

Shoppers will have more choice, while mall owners will have more tenants to lower the impact of a store closing on their income.

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