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Cabela’s Smaller Stores – The Next Generation of Big Box

11/02/2012

Unless you’ve been living under a rock you are likely aware that the past 3 years have been tough on “big box” retailers.

Best Buy, Staples, and Barnes & Noble face some serious problems that are specific to each one. But all are straining to manage millions of square feet of retail space in giant stores while more customers than ever buy online.

Most are trying to adapt by shrinking their outsize physical presence — an important but slow process. They are moving to smaller locations and subletting some of their big-box space to other retailers when possible.

Big box retailers won’t be able to survive in their big boxes. Standing still and waiting for the economy to improve is not a viable strategy.

One retailer is adapting its retail strategy and already has positive results to point to. Cabela’s “the world’s foremost outfitter” has begun opening two smaller-store formats this year. The Outpost format runs about 40,000 sq. ft. and the “next generation” footprint is in the 80,000 sq. ft. to 120,000 sq ft range. While the size of the next generation stores may sound large it is dwarfed when compared with the chain’s standard 250,000 sq. ft. model.

Outposts are being opened in small town markets and are somewhat reminiscent of the Sears catalog stores. Outposts offer a limited inventory of products on hand but also offer kiosks for online ordering, order pick-up and returns.  A perfect strategy for rural towns.

The next-gen stores are delivering outstanding results for the company. Cabela’s said Thursday that its net income rose 28% in the third quarter, in line with expectations, as the retailer’s smaller store format outperformed its larger, standard format.

Tommy Millner, Cabela’s CEO said in a release “The eight next-generation stores open for the full quarter outperformed our existing legacy store base in sales and profit per square foot by a wide margin. Additionally, same store sales from our next-generation stores exceeded the performance of our existing stores by several hundred basis points.”

Cabela’s said that it plans to accelerate expansion of its smaller format, as a result of the strong performance of its new stores. It also noted that all new locations going forward will follow the smaller, “next generation” format. The chain now expects to open eight of the smaller stores in 2014.

They appear to be targeting markets that have not had large stores. For example, the company is starting construction on two next-gen stores this fall in Denver. Both have a 2013 planned opening.

Going small alone is not the cure-all for anemic retailing performance. But clearly Cabela’s results point to the upside of this strategy and illustrate one solution to the big box blues.

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