Expert: Forget big-box

Technology will allow national chains to better compete with small businesses

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The chances that true big-box retailers will come to Routt County are zip, zilch, nada, Carl Steidtmann said at last week's 2004 Economic Summit.

However, that doesn't mean area retailers won't be greatly affected in the years to come by Wal-Mart, Target, The Home Depot and others.

Steidtmann, chief economist for Deloitte Research, spoke to more than 180 people at the summit in the Steamboat Grand Resort Hotel on Thursday. He works with large international clients in retailing, but manages to divide his personal and working life between homes in Brooklyn, N.Y., and Steamboat Springs.

"The chances of true big-box coming here in their current configuration is essentially zero," Steidtmann said. "There's not enough population density."

When Steidtmann refers to big-box retailing, he is describing a stand-alone store of more than 100,000 square feet that depends on its customers arriving by automobile. Big-box retailers carry a dominant selection of merchandise in their categories and define the low prices in the market.

That kind of store won't make sense in Routt County any time soon, Steidtmann said. However, he said nationally branded retailers are poised to put technological developments to use in ways that will allow them to redefine their business models. Those refinements, in turn, could allow traditional big-box retailers to offer the same range of products in smaller stores.

The developing technology of radio frequency identification chips is just around the corner, Steidtmann said, and in a matter of months, larger retailers will be putting them in the hangtags of all their products. The economical chips will allow retailers to monitor inventories closely, a critical factor in profitability. The trend is referred to as "data synchronization" in the retailing industry.

Wal-Mart is known for excelling at managing its inventory costs, but the new chips will make them, and other national brands, even more effective. By providing instantaneous updates on changes in inventory, stores will be able to stock just the right amount of each item in their stores. Warehouses quickly will know what merchandise is selling in a particular store.

"There isn't a consumer business I work with that doesn't take Wal-Mart into account in their business plans," Steidtmann said.

The ability to closely track inventory will allow retailers to double their sales from the same amount of inventory, Steidtmann predicted. Conversely, they could achieve consistent sales from half the inventory. That means they can occupy smaller spaces and redesign every aspect of how they display merchandise.

"The real drive in big-box is to smaller boxes, closer to the customer and in places they haven't had stores before," Steidtmann said.

National retailers are unable to offer shopping that differentiates one town from another, Steidtmann said.

Steamboat's independent retailers play an essential role in creating a sense of place in the community as well as defining public spaces, Steidtmann added.

Based on employment statistics that show retail stores and restaurants account for only about 11.6 percent of total employment here, Steidtmann has concluded that Steamboat can handle more retail.

"I really expected to see retail employment in Steamboat to be higher than the national average," Steidtmann said. "I was quite surprised. Retail in Steamboat is probably underserved. We will see more -- the important thing is the quality and nature of development and that (new) retail reflects the place Steamboat really is."

Independent businesses here need to collaborate to create customer networks based on the common denominator of the "Steamboat experience," Steidtmann said.

Ebay is an example of a company that has grown dramatically because it has a strong customer network based on its customers' ability to share feedback and experiences through online bulletin boards.

The answer to how Steamboat retailers collectively can build customer networks lies in understanding the Steamboat experience and building on it, Steidtmann said.

If the number of national brands here increases, Steidtmann said, it would become increasingly important for independent retailers to have a good grasp of the Steamboat brand and to work together to consistently reflect that brand. He feels Steamboat's brand may need updating to reflect the growing number of residents working in location-neutral businesses such as his, as well as the growing number of second-home owners and retirees.

During the portions of the year that Steidtmann works out of a home office here, he is constantly bemused at colleagues who think that if he is calling from Steamboat, he must be on a ski vacation, even in June.

The new brand for the community may be something closer to, "Steamboat Really Does Work," Steidtmann said.

-- To reach Tom Ross call 871-4205

or e-mail tross@steamboatpilot.com

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