Without the correct execution plan in place, expanding into even the most lucrative categories can be unsuccessful.
Sometimes even the best-performing retailers have bad ideas. And for the retailers that can't afford to make a mistake, missteps can be devastating.
On the surface some ideas appear to be good — expanding into growing categories, rolling out smaller stores with less expensive rent, etc. — but success boils down to execution and whether venturing beyond the core model is worth the risk.
According to Nick Egelanian, president of retail consultants firm SiteWorks, retailers that "get out of their lane have a very high failure rate when they try to get into another lane."
Experimentation and innovation are crucial to survival in the current retail landscape. However, if those experiments aren't strategic they could burn the retailer and wind up being worse than not doing anything at all.
"First the parent brand needs to have good equity and be seen as a place that has a quality product," Lauren Bitar, head of retail consulting at RetailNext told Retail Dive in an email. "Second, the offshoot needs to be perceived as different enough from the parent that it can reach a different audience.
The mass merchant in 2011 unveiled a smaller store concept dubbed "Walmart Express." Walmart hoped the stores, which were a fraction of the size of its Supercenters, would complement its other banners. However, instead of implementing a strategy unique to Express stores, the mass merchant shrank its Supercenters into a smaller format.
The stores stocked essential products like toilet paper, toys and some food products, but not enough to fulfill consumers' needs in grocery, Egelanian said. At the time, grocery was a growth category for the retailer, according to media reports. Express stores, which were located in rural and suburban areas not far from the mass merchant's Supercenters, may have been better suited to an urban setting.
In early 2016, Walmart said it would end its Express pilot and shutter all 102 stores and announced plans to boost its Supercenters, fine-tune its Neighborhood Markets and place a greater focus on its e-commerce and fulfillment operations. At the time Walmart closed its smaller experiment, Target announced it was expanding its smaller format "CityTarget" stores.