Companies find bigger returns in smaller spaces

Kansas City Star: Companies find bigger returns in smaller spaces

They cost less to build and operate, and businesses can operate in more locations.

… Bigger is not always better. Just ask the biggest retailers in the country — and their customers.

The recession and the growth of online shopping have conspired to cut chains down to size. One strategy they’ve employed has been to close underperforming stores. But Best Buy and an increasing number of companies are trying another strategy, too — going smaller.

Among the retailers testing smaller concepts are Blockbuster, Ann Taylor, the Gap, Kohl’s, Lowe’s and Sports Authority. RadioShack is trying a “store within a store” format in several OfficeMax stores in California.

Restaurants are also thinking small, including Leawood-based Houlihan’s Restaurants Inc.

Lower square footage makes for lower construction and remodeling costs, and that also tends to make them easier to finance. The smaller locations have less overhead costs and can be staffed by fewer employees.

The small size also gives the chains more flexibility in locations, allowing them to squeeze into heavily developed urban centers, and compact spaces in airports, college campuses and strip centers. If the location isn’t successful, the chains can close the sites with less financial fallout.

“For a decade it was ‘Build it, and they will come,’ ” said Candace Corlett, president of WSL Strategic Retail in New York. “It’s definitely a correction for retailers as well as restaurants, a direct result of consumers not having as much to spend on the extras. The strategy has to be to reduce your costs to offset less traffic. Usually that means less rent, shrinking retail and restaurants.”

Jeff Green, president of Jeff Green Partners, Phoenix-based real estate consultants, has long criticized the “bigger is better” movement.

“They think the bigger they are, the more exciting they are, and that’s not necessarily the case, as Apple has proven,” Green said. “Consumers like the smaller stores, like to be part of a ‘happening,’ and smaller stores have that feel.” …