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Article Excerpt
Introduction
Over the last decade 'big box stores' have transformed Canada's retail landscape. Much of the new construction and the growth in retail sales have been diverted into big box chains and stores, along with the power centres and power nodes that house these stores. These innovations have been jointly labelled as 'power retail' and they involve much more than a simple increase in store size. They have brought new retailers into Canada, supported new development firms, and introduced new forms of retail clusters in new kinds of locations, with different architectures and retail landscapes, inevitably, the patterns of competition and consumer behaviour have been modified. Traditional (non-big box) stores in the retail sectors that attract big box stores face heightened competition, sometimes from stores 50 or 100 km away. The reductions in costs achieved through innovations in logistics and operations within big box stores put pressures on the retail margins throughout the retail system. The consumers, in return for the savings and selection that are promised by power retailers, drive longer distances and forego the comfort and competition provided by traditional shopping venues (malls and retail strips). Urban planners have been unable to enforce retail planning restrictions as huge power retail concentrations have emerged in unexpected locations across Canada. Many municipalities have found that their goals of controlled commercial competition within a commercial hierarchy have been outflanked by new retail developments in distant municipalities and unconventional locations, such as redeveloped industrial sites or areas zoned for warehouses. The ultimate size of the power retail concentrations and therefore the trade areas and markets that they serve are unpredictable, a priori.
This article defines, measures, and evaluates the impact of power retail in Canada, and then speculates about the ultimate importance of the innovation. Is there a limit to the share of retail activity that can be converted to power retail? And what are the implications of the innovation for older retail forms such as downtowns, malls or neighbourhood pedestrian retail strips? How are planners handling power retail? After a brief discussion of urban retail structure to provide a context, the article is divided into three sections. First, a series of definitions of the various elements of power retail are provided, together with some estimates of the numbers of big box stores, the floor space and the share of retail sales. A number of the retail chains that are leading these innovations, such as Wal-Mart, Home Depot and Costco, are identified and their collective impact on the Canadian retail industry discussed. The second section describes the spatial distribution of these activities both nationally and within the metropolitan region. Regional variations in power retail development are examined. The final section discusses the implications of these innovations--for consumers, other retailers, and policy makers. The key trends that have shaped the power retail landscape are identified and potential future directions for growth suggested.
The Evolution of Urban Retail Structure
Berry's classic study of Commercial Structure and Commercial Blight (1963) initiated the systematic study of retail structure within the North American city. Drawing on central place theory, he was able to demonstrate the close relationship between the amount and the variety of local commercial shopping facilities and the population and income of the trade area that they served. Berry's study was quickly followed by another one that described how these relationships evolve over time as the city changes, or retail innovations are introduced (Simmons 1964). Rapid urban growth or a change in accessibility within the urban market provides the opportunity for a new retail form. For example, the huge downtown department store emerged over a century ago to serve the entire city, once the mass transit systems were in place to deliver the customers to the store. Now the department stores are gradually disappearing. And during the 1960s, traditional shopping streets were losing customers to the new planned shopping centres that were constructed around the edge of the city, once automobile ownership became universal. Simmons shows how the shopping centres were designed for a market of a specific size, with location, parking, floor area, store size and tenants carefully chosen to serve a neighbourhood, community or regional scale trade area. The malls, in turn, have proven to be vulnerable to big box retailers that have dramatically reduced the profit margins throughout the retail sector.
Urban planners seized on the concept of the retail hierarchy, as demonstrated by the shopping centre, as a means to control excessive commercial construction (and competition). For decades Canadian planners have restricted the entry of new retail facilities into urban markets in order to avoid excessive competition that threatens the existing retail structure (Jones and Simmons 1993; Government of Ontario 1994). As a result very few of Canada's shopping centres have ever gone broke or closed down--unlike in the U.S. Large mails have enjoyed substantial oligopoly profits as market income in local markets increased, and with it retail sales. It is this accumulated stream of profit that has opened the door for power retail: new stores in new locations with lower prices. As well, the continuing improvements in urban highways that contributed to the earlier success of the shopping centre now permit customers from all over the metropolitan region to seek out the bargains offered by their competitors--the power centres.
In Canada, we trace the big box store and power retail back to the tacky discount department stores of the 1960s, such as Sayvette and Woolco, but power retail is a worldwide phenomenon. A comparative study of retail structure (Yeates 1998) identified superstores or hypermarches, as combined grocery and department stores, as significant elements in retail structure within several European countries, the U.S. and Mexico. Certain firms have played a significant role in developing and exporting the power retail concept. Graff (2006) has tracked the explosive growth of Wal-Mart, K-mart and Target in the U.S., and Hahn (2000) looks at the associated emergence of power centres. Fishman (2006) explores one of the key contributions of power retail as the brutal efficiency of the logistics system--including purchasing (helped by the rise of Chinese exports), location, store organization and staffing--to bring down costs. The department store offered greater variety, the shopping centre provided all the predictable goods that the family required, but the big box store displays bargains that you did not think you could afford.
The Elements of Power Retail
This section of the article describes and evaluates power retail in Canada from four different approaches: (1) the 'big box' store--large format retailers; (2) the big box chain--retailers that predominantly operate big box stores; (3) the power centre--planned clusters of big box stores; and (4) the power node--unplanned clusters of power centres plus existing retail locations (e.g., shopping malls). While there is considerable over-lap in these four approaches, each one includes a slightly different set of stores, and provides different estimates of big box floor space and sales (see Table 1). For example, not all big box stores belong to big box chains, and not all big box stores or big box chains locate within power centres or nodes. Conversely, not all stores within the power centres or nodes are big boxes.
There are practical constraints to the application of each of these four approaches as well. Even though it might be preferable to include the totality of large-size stores within a city, it would require considerable fieldwork and endless debate. How big is a big box store? Is 'big' relative to the retail sector, or to the retail cluster in which it is located? Should traditional department stores or supermarkets be included as big boxes? Instead, it is easier to take another approach and identify big box stores as 'all stores belonging to big box chain x', even though these stores may vary in size and type of operation. As well, the 'brand management' of the big box retailers is an important aspect of their success and competitive impact. Similarly, while we have been able to define and identify power centres as distinct physical entities with some precision, the broader concept of the power node as an informal grouping of big box stores introduces the same difficulties as the original big box store definition: extensive fieldwork and endless debate. With these caveats noted, this section outlines the four approaches.
Big Box Stores
The Centre for the Study of Commercial Activity (CSCA) defines big box stores as retail outlets that are several times larger than the average store in the same retail sector. These stores became known as 'destination' or 'category killer' retailers because customers were attracted to the prices or selection at a particular store, instead of comparison shopping among the cluster of similar stores within a regional shopping centre or downtown. The large store retailer is not a new phenomenon. The retail concept of size and selection dates back to the great department stores developed more than a century ago when compact cities and public transit made it possible for customers to shop downtown. The major attraction was the variety of goods sold, but auxiliary services such as credit, delivery and clean washrooms became part of the package. The suburban regional mall was the direct descendant of this concept. Today's big box stores are more like the supermarkets and discount department stores of the postwar period (e.g., Sayvette, Towers, K-Mart) that focused on price, and advertised widely in order to attract their customers. In that era increasing automobile ownership permitted a wider range of retail locations, including free-standing stores and small shopping centres on arterial streets, with lower rents than locations downtown or in larger malls. They were not fashionable places to shop, and they had few of the amenities and attractions of the regional malls.
The big box stores of the 1990s simply extended the 1960s discount concept into a variety of other retail sectors, so that they directly challenge the stores in the big regional shopping malls. Many of the big box chains, in fact, began in exactly this fashion in the U.S. (Hernandez 2005). Retailers found that by building a large, but inexpensive, store--with a big sign--across the street from a regional mall they could offer lower prices for the same goods that were found in the mall (note that land use zoning in the U.S. tends to be more permissive than in Canada). As well, the widespread popularity of the outlet malls in the U.S., with their discounted name brands, confirmed the idea that customers would travel miles out of their way for better prices.
The success of these innovations--and the firms that owned the stores--combined with the Free Trade Agreement of 1989, NAFTA in 1994, and the decline of the Canadian dollar (1992-2004) brought power retail into Canada. Canadians could no longer afford to shop across the border, and Canadian real estate and retailers became relatively inexpensive. Figure 1 shows the shift that took place in the type of retail investment during the 1990s, using a Toronto example. As investment in regional shopping centres declined during the recession of 1990-1992, investment in big box stores accelerated, and by 1997 the pattern was clear: power retail was absorbing most of the retail expansion within the Toronto region.
[FIGURE 1 OMITTED]
The Toronto area is one of the few cities for which a comprehensive list of big box stores is available over time (Jones and Doucet 2000). Other useful case studies include Winnipeg (Lorch 2004) and St. John's (Collins 2004). A...
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