The Street has an article with examples of how big box stores are shrinking.
Which raises the same question I always have to this supposed solution: isn't a smaller big box store just another store?
If the advantages of a big box store aren't advantages, why go there in the first place?
I know people think I'm exaggerating by calling the big box model a Ponzi scheme, but think about it.
How can you turn a profit? By selling more and keeping your overhead low.
Building a big box store only accomplishes the first of those goals, at the cost of the second of those goals.
If you truly wanted a big profit in the face of an expanding economy, you would squeeze more sales out of a smaller space.
But if your goal is to have constantly expanding sales, the building big box stores makes sense.
Why would you build constantly expanding stores instead of making more profit out of existing stores?
I can think of one legitimate reason and one reason that is illegitimate. And I suspect the illegitimate reason is the real reason: Stock prices.
Constantly increasing sales helps sell stock, creating bonuses for executives. The idea that sometime in the future you might have decreasing sales -- and way too much capacity, never enters into such short term thinking. But I would submit that planning for such a future is prudent and wise.
Oh, no! Sales are decreasing? Close the stores! Make them smaller!!!
The second reason I can see for pursuing ever expanding sales level is to increase or protect market share.
Everyone else is doing it, so we have to do it too.
Of course, this is assuming that nothing else will come along to eat into your market share. Oh, something strange -- something called the internet.
In this case, it was the internet. But not planning for an unexpected competitor is as stupid as thinking that sales would increase forever as long as you keep building stores.
After 30 years, I've come to the conclusion that corporate America is fad driven; big box stores were the last fad.
1 week ago