The retail world is in for some big changes. Due to market saturation, many retail giants are abandoning their big-box roots in favor of smaller outlets. But not every retailer believes that small stores lead to big growth. So what are the retailers up to, and what does that mean for investors?
During the 1990s, Wal-Mart
A Wal-Mart Express can be as small as a 7-11. It targets previously untapped rural locations with markets that can't support a supercenter-size store, as well as urban areas in which there are land constraints.
The new store model aims to reignite growth for the retail giant by reaching a new customer base. Wal-Mart plans to construct hundreds of these stores over the next few years in order to test the market. In addition to its own construction efforts, some observers believe Wal-Mart might acquire a company such as Rite Aid
At its peak, Wal-Mart built around 350 supercenters a year. If this new model is successful, management expects express stores to arrive at a much faster rate.
Rivals have begun to follow suit. Target
The mini-Target store will be roughly half the size of the typical full-size store, and will mainly offer the daily essentials. Like Wal-Mart, the smaller store format gives Target better access to urban shoppers.
In addition, the company plans to open 600 to 800 smaller stores over the next five years, focused on serving the rapidly growing mobile device market. The move could mean trouble for Radio Shack
Rumors have also surfaced again recently about Best Buy acquiring GameStop
In contrast, Big Lots
Where to invest?
Whatever you decide, remember to research these stocks for yourself before pulling the trigger. And keep an eye on the rapidly changing retail world.
Fool contributor Adam J. Crawford does not own shares of any company mentioned in this article. The Motley Fool owns shares of Wal-Mart, GameStop, RadioShack, and Best Buy. Motley Fool newsletter services have recommended buying shares of Wal-Mart and Best Buy. Motley Fool newsletter services have recommended writing covered calls in GameStop. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.