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Rise of the Small Store

When supermarkets failed to respond to the needs of half their shopping trips, others stepped into the vacuum. This led to the creation of the entire convenience store industry and encouraged the growth of competitors with small-store formats. In 2007, for the first time in two decades of expanding superstores, the average size of a grocery store fell slightly. It appears that large retailers are finally waking up to the power of the quick trip.

Many of these smaller stores such as Lidl and Aldi attribute their success to their low pricing. But in addition to offering discounts, they have created streamlined stores that reduce navigational and choice angst. Many consumer studies show that pricing is not the primary factor that drives retail. Giving people money to buy things has to be the least creative way of selling something. As with Stew Leonard attributing his success to superior customer service, the success of retailers might not be for the reason they think. In the case of Lidl, Aldi, and others, our studies indicate that the reduction in SKUs and simpler navigation may play as great a role as pricing in their success.

At the same time that supermarkets were being attacked by the small stores from below, the big box outlets were taking a large slice of the stock-up shoppers. Winning retailers of the future will earn their top-tier status through clearly distinguishing shoppers into quick/fill-in versus stock-up, and serving the two groups distinctly, rather than dumping the whole store together and expecting the shoppers to sort it out. This does not mean, however, that it cannot all be done in the same building.

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