Right-Size Retail


How big is too big?

Officials at Walgreens, the ubiquitous drug store chain, may have the answer for you. The company announced in April that it is closing about 200 stores this year, part of a $1-billion, cost-saving initiative. It will still leave the Deerfield, Ill.-based company with about 8,000 units scattered around the country, many of them on a street corner near you.

For those of you who do not follow the drug store industry, Walgreens and its two major competitors, Rite-Aid and CVS, each embarked on major expansion programs around the turn of the century. The goal, it appeared, was to saturate the country with so many drug stores that consumers would not have to travel very far to get their prescriptions filled, not to mention purchase a whole bevy of products. The story goes that things have gotten so far out of hand that there are intersections in Florida and Arizona with all three chains operating a store on three of the four corners. Walmart is probably on the fourth corner.

But something had to give. The nation does not need that many drug stores, especially since consumers can get many of the same products at their favorite supermarket or discount store. There had to be a saturation point.

Welcome to the saturation point. The days of overwhelming consumers with stores in the hopes of getting them to make an extra stop or two on their way home from work appear to be over. Now retailers are looking for less overhead, fewer units and smaller stores to reach their goal of strong sales, but stronger profits. Besides Walgreens and its sister drug store chains, retailers from Staples to Kmart to even the giant pet retail chains are re-examining whether having more stores is the right strategy anymore.

Instead, many are saying that the right approach is to condense the number of units and place a greater emphasis on each one, through unique merchandising and marketing. The lesson here is that bigger—or simply more—is not always better. In fact, it may be safe to say that paying attention to detail, one store at a time, could be the best way to go.

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