Yahoo Finance How Multichannel Retailing Can Impact Store Productivity Metrics
Home Improvement and Furnishing Chains Go Multichannel in 2015
West Coast urban push by Lowe’s
Lowe’s (LOW) is also expanding its smaller store format footprint. These stores will be 35,000–40,000 square feet, according to Bob Hull, CFO (chief financial officer) of Lowes, speaking at the Piper Jaffray Consumer Conference this month. The company is looking to open 40 new stores on the West Coast over the next three years.
Lowe’s will roll out these stores under the Orchard Supply Hardware banner. The stores will carry limited merchandise, primarily paint, repair items, and backyard merchandise. Lowe’s purchased Orchard Supply Hardware in 2013.
Urban economics
The smaller stores will also serve as important points of sale for metropolitan markets like Seattle and San Diego. Earlier, Lowe’s announced it was opening two city center stores in New York in 2H15.
A number of big box retailers like Walmart (WMT) and Target (TGT) are also going after the urban market through smaller stores. Sales per square foot may potentially be higher due to higher volumes and lower square footage.
Walmart’s (WMT) neighborhood format stores, which average ~37,000 square feet, have reported much higher store comparables compared to the retailer’s big box stores. They’re also a potentially faster way to fulfill online orders in metropolitan areas. Target’s (TGT) Target Express stores are also targeting urban areas.
WMT, TGT, The Home Depot (HD), and LOW together constitute 26.7% of the portfolio holdings of the Market Vectors Retail ETF (RTH).
Store productivity
Previously, The Home Depot (HD) announced it wasn’t looking to open any new stores in the United States. Instead, it would leverage its existing store network and distribution centers to fulfill customer (XLY) orders. HD’s investments in multichannel retailing and its existing retail footprint have enabled the retailer to improve store productivity metrics.
Sales per square foot for HD and peer Pier 1 Imports (PIR) has been rising. The metric, however, hasn’t shown as much traction at archrival Lowe’s (LOW), which is still below prerecession levels.
In the next part, we’ll take a look at Pier 1 Import’s (PIR) multichannel strategies.
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