Is a Bigger Store Footprint Better?
By Jamie Hartford
Some things, like computers and personal space on airplanes, keep getting smaller, while others, like the national debt and the grass in your yard, do nothing but grow. Convenience stores, it seem, also fall in the latter category. Last year, the average convenience store ballooned to its largest size ever — 2,776 square feet — according to NACS State of the Industry data, and this year boundaries could expand even further. At least four brands — QuikTrip, Kwik Shop, Kum & Go and Sheetz — have opened or are planning stores of 5,000 square feet or larger. But what are convenience stores doing with the extra space, and is bigger really better?
In 2009, store size grew nearly 3 percent, adding 80 square feet over 2008. The jump reversed a two-year span during which average c-store size shrunk, but Jerry Hoffman, an architect with Muncie, Indiana-based US Architects, which designs convenience stores for operators in Ohio, West Virginia and Indiana, says the long-term trend has been one of growth.
When Hoffman began designing stores in the early 1980s, they averaged around 1,800 square feet, since many were converted from old gas stations. By the late '80s and early '90s, he says, 3,000 square feet was the norm. Today, his firm typically designs units around 4,400 square feet, and he’s noticed that recently the pace of store-size expansion has picked up.
"In the last five years they’ve gotten bigger," Hoffman stated. He credits the Americans with Disabilities Act, passed in 1990, as an early impetus for bigger stores. To ensure access for all customers, newer stores feature wider doors, aisles and hallways, along with bigger bathrooms.
More recently, the real estate climate has become favorable for stores seeking bigger digs, says John Sechser, senior vice president and co-director of the retail division for global real estate company Colliers International in Walnut Creek, California. Construction costs have come down, making it cheaper to build bigger stores, and in many parts of the country rents are 15 to 40 percent lower than two years ago, he says. Thanks to downsizing by retailers, such as Hollywood Video and Blockbuster, there are also a host of new end-cap vacancies in the 4,500- to 6,000-square-foot range.
"Those would make great sites for convenience stores," Sechser said.
Changes in the convenience store business itself are also behind stores’ growing footprints. As gasoline and cigarette profit margins have shrunk, operators have turned to other sources inside the store for revenue, and those offerings require more space, says Eric Daniel, executive creative director with Columbus, Ohio-based WD Partners, which designs and develops locations for foodservice and retail brands, including convenience stores. "Your typical c-store is jam-packed," Daniel said. "If [retailers] want to highlight or expand an offer, they actually have to get additional space."
Daniel and other experts say a primary reason for the increase in c-store size is stores’ expansion into foodservice, and indeed some chains are using the extra space they’re adding for that purpose.
A 5,700-square-foot prototype QuikTrip in the Tulsa, Oklahoma, area, features space for new grab-and-go products, such as take-home pizzas and lasagna and a full-service specialty drinks area.
"A foodservice offering requires more space," said Joseph Bona, retail division president at CBX, a New York-, San Francisco- and Minneapolis-based branding ï¬?rm that has created retail environments for convenience stores. "There are bigger storage requirements, equipment that needs to be placed in the front of the house, and you need space to accommodate bigger queue lines."
That’s especially true if the store is trying to offer food prepared onsite, as opposed to items brought in from a commissary, says Jim Fisher, CEO of IMST Corp., a Houston-based retail sales and fuel forecasting firm. "Fresh is becoming very dominant, and when you start offering more in the way of freshness, store size tends to grow," Fisher said.
The need for more space for fresh food offerings drove Maryland-based High’s Dairy Stores to develop an expanded prototype, said Briana N. Darnell, the company’s real estate director. At 3,500 square feet, the ï¬?rst of the new stores (eight more are slated for completion by 2013), which opened in St. Michaels, Maryland, in 2008, is more than 20 percent bigger than the company’s previous prototype and 1,000 square feet larger than the majority of its stores. It features a more spacious deli area, a 4- by 6-foot three-tiered merchandiser for grab-and-go foods and cafÃ© seating for 16.
"The cafÃ© seating was really the greatest improvement," Darnell said. "Instead of forcing our customers to dashboard dine, they now have place to sit and enjoy their cup of coffee."
As c-stores increasingly enter the competitive arena of foodservice, bigger stores could be one way to help them compete against QSRs and grocery stores that tend to have a better reputation for quality, Daniel said.
Seven years ago, during the development of a prototype for Sheetz, the team determined that to attract more female customers — a notoriously tough demographic for c-stores — they needed to establish a separation between foodservice and retail operations. Doing so drove the size of the store to around 10,000 square feet.
"To the extent that you can separate your foodservice from your retail, you’re increasing the conï¬?dence in your offering and your eligibility to be selected by the customer," Daniel said.
Bigger stores can improve the in-store experience for customers in other ways, too. A bigger frontage with more glass provides greater visibility into the store and can help deter crime, and wider aisles — a feature High’s incorporated into its larger prototype design — encourage customers to shop more of the store, Bona said.
"It allows people to interact through the space more effectively," he said. "It has a more open feeling and consumers react more favorably to those type of spaces."
Larger locations, when done right, project cleanliness and brightness, Daniel said. They can also, by virtue of their size, attract more customers.
"'Eye appeal is buy appeal’ is an old adage in retail," said Steven J. Montgomery, president of b2b Solutions, a c-store consultancy in Illinois. "In order to attract and maintain customers today, stores need to have curb appeal, and the larger formats allow bigger street presence."
Bigger stores also raise the bar for the competition. "With a 5,000-square-foot store€¦you have a major presence in the market just physically, and that’s a strong competitive position," Fisher said. "You’re raising the threshold of market entry or trade area strategy for anybody else that wants to successfully compete in that market."
On occasion, bigger stores have an easier time getting zoning approval than a smaller, more traditional c-store in some markets.
"Convenience stores have a black eye in the retail community because of their hours of business and the fact that many sell beer and wine," Sechser said. "Some communities are really doing everything they can not to attract a c-store component€¦The larger the store gets, the more it starts to ï¬? t into the specialty category, and that tends to erode those [negative] perceptions."
While bigger stores do have their beneï¬?ts, increasing square footage does come with costs. Bigger stores are generally more expensive to build and run.
For starters, a bigger store will likely require a bigger piece of property, not only to accommodate the larger store, but also to adhere to zoning codes for setbacks, says Jack Aldworth, general manager of the William J. Scown Building Co., based in Wheeling, Illinois.
"Many towns have large setback requirements, and to comply with those you’re going to need two acres [for a 5,000-square-foot store], as opposed to 1.2 or 1.3 [acres for a store in the 3,000-square-foot range]," Aldworth advised.
The lot size also has to be big enough to provide convenient access for customers.
"You need plenty of parking and very generous circulation to make it convenient," Hoffman said. "If you put something on a tight lot that people can’t get in and out of, pretty soon they won’t stop there."
Just to build the store itself will be more expensive, too, said Don Rothey, president and CEO of McRo Construction Inc., in Elizabeth, Pennsylvania. At construction costs of $140 per square foot, a 5,500 square foot store would cost $280,000 more to build than a 3,500 square foot store.
Once they are built, bigger stores can also be more expensive to run.
Despite incorporating energy-saving elements, such as LED lighting and an economizer, Darnell estimates that utility bills at High’s bigger store are a couple of hundred dollars a month more than its smaller locations, though she attributes the difference to new equipment rather than just the additional square footage.
Depending on the concept, it might also be necessary to hire additional staff. According to Urban Tulsa Weekly, average QuikTrip locations have 12 to 15 employees, whereas the new, larger stores will employ teams of 18 to 20.
To justify the additional costs associated with building and running bigger stores, operators need to have an increased number of revenue streams inside the store, says Mark Radosevich, president and CEO of PetroProperties & Finance, business specialists focused on the downstream petroleum industry.
Most experts agree that the best way to utilize the extra space is with a food-service offering. If the brand hasn’t developed a proprietary food program, its best bet is to partner with an established QSR brand that can take up space in the store and provide a destination stop for consumers.
"A 5,000-square-foot store without foodservice is not something we’re promoting," said Michael Zielinski, president and CEO of Royal Buying Group Inc., a national retail merchandising and marketing company.
But beyond foodservice, operators of big stores also need to be smart about their merchandising. While wider aisles and more open space can be attractive to customers, there’s a ï¬? ne line between an open concept and an empty one. However, stocking products that don’t move just to ï¬?ll the store is also a mistake. More SKUs won’t necessarily translate to higher sales.
"You have to do the proper amount of research and analysis," Fisher said. "Is it applicable to have more categories or more depth in select categories?"
Although each store is different and depends on local demographics, Fisher recommends using extra space to expand packaged beverage offerings, hot and cold dispensed beverage stations and other self-service offerings.
Another option, Zielinski said, is to compartmentalize a larger store and offer space for shipping companies, dry cleaners or other businesses frequented by consumers, something Kwik Shop is trying by adding pharmacies to some of its larger locations.
In the end, experts say building bigger stores isn’t for every brand or every market.
For starters, it helps if a larger store sells unbranded fuel, allowing it to lure in customers with cheaper per-gallon prices, Radosevich said. Larger locations requiring bigger plots of land are also tougher to build in urban settings.
"It might not be a problem in less developed areas, but for something downtown, you’re looking at combining properties," Rothey said.
Aldworth said in the Chicago markets where his company builds, most sites are not issued beer and wine licenses. As a result, he says it doesn’t make sense to build huge stores. "We believe that the strong cost of the extra square footage of the convenience store would not be properly utilized," he said.
A hyper-sized store is also not a good solution for locations that tend to be peak oriented, seeing most of their trafï¬?c at speciï¬?c times of the day, Fisher said. Instead, they work better for trade areas with consistent traffic. Building a big store before there’s a market to support it can be a recipe for disaster, too. A bigger store needs to be backed by a clear strategic vision, a sound site study and market research, Radosevich says.
"If you build a big store in the wrong place, you’re going to struggle forever," Radosevich said.
The bottom line: Unless you do your research, building a big store can be a big mistake. As the saying goes, the bigger they are, the harder they fall.
Jamie Hartford is a freelance writer based in Hood River, Oregon. You can see more of her work at jlhartford.com.