If I asked you what is the type of shop par excellence nowadays, what would you answer? The online shop or e-commerce, right? According to the ‘Estudio E-commerce 2021’ by IAB Spain, 25.8 million people in Spain shop online. Covid has also been one of the main causes that have contributed to the increase of this shop format; however, we cannot forget about the types of physical shops we have.
We can distinguish between three types of shops:
- Doomed to reinvent themselves
- Sufferers
- Winners
Types of shops doomed to reinvent themselves
Neighbourhood trade
Our neighbourhood shops consist of grocery, hardware and haberdashery shops. These shops are usually owned by a private individual, offer a limited assortment and, normally, their prices are not the best as their owners have little bargaining power. Nor can they compete in terms of opening hours with convenience stores or those owned by large chains.
Given that, in general, they are also unable to provide their customers with a great shopping experience, their future is complicated. Many of them are being integrated into horizontal chains such as Covirán, so that they can access the distributor’s brand and take advantage of the brand image and commercial campaigns of the brand.
Multibrand shops
Think of the typical independent shop selling clothes, shoes and accessories from the best-known brands. When was the last time you saw one of them?
They are suffering from fierce competition from e-commerce. Consumers are starting to do what is called showrooming, which consists of going to the shop, trying on the product and then buying online at a better price.
Also with the rise of the chains, their number has been reduced. Some are being able to compete by developing their own brand or even reaching exclusivity agreements with certain brands.
Department Stores
The big problem with this type of format comes from its own value proposition. Department stores offer their customers a wide and deep assortment. Having a lot of references means having a lot of stock. And a lot of stock means a lot of financial and operational costs, which makes it difficult to maintain the prices that customers demand.
In addition, the customer who values assortment has the possibility of accessing a virtually infinite range of references in e-commerce.
If we add showrooming to this, it is only natural that department stores are reinventing their business and are increasingly becoming real estate businesses that make their significant traffic available to brands.
Types of shops suffering
Hypermarkets
These are shops with a sales area of more than 2,500 square metres. They are usually located on the outskirts of cities and have parking facilities. They have a wide range of products, as they are not content to offer only food and drugstores, but also other sections such as bazaar, electronics and textiles.
Today, it is a format that is losing customers to smaller shops. Monthly shopping is no longer a pleasurable act for families and customers prefer shops that are closer and have a shorter assortment to facilitate the shopping process.
In addition, hypermarkets have suffered from competition from another format discussed below, the Category Killers.
Category Killers
They were so called because they are located next to a large hypermarket and offer, in a large shop, a very complete offer in a single category: toys, sports, electronics, furniture…
They offer customers a much deeper assortment in their category. And, in addition, prices are usually very good, as they have more bargaining power in their category than the hypermarket.
Today, some category killers are struggling because their customer, motivated by low prices and wide assortment, is migrating to the online channel.
Their response is to differentiate themselves through their own brands and through a customer experience based on advice and personalisation.
In addition, both category killers and hypermarkets are moving into the centre with smaller, urban shops that seek to be closer to the customer and to enhance omnichannel shopping.
We have looked at the formats that are currently struggling the most, so what are the winning formats?
Winning types of shops
Supermarkets
They operate on a self-service basis. They are smaller in size as they focus on food, drugstore, perfumery and hygiene products.
They have between 400 and 2,400 square metres of floor space and an average depth of assortment. There are many types of supermarket. Supermarkets with parking, such as Mercadona, and proximity supermarkets, such as Carrefour Market, which aim to be the supermarket of the neighbourhood, giving priority to the shopping experience and fresh products.
Regional brands are very important in this segment, seeking an emotional connection with the shopper and differentiating themselves by their locally sourced assortment.
Also noteworthy are the discount supermarkets, such as Aldi, which, in addition to the typical supermarket products, offer other products for everyday use, with a high turnover and widespread consumption. They are different from other supermarkets because of their very low prices, which they achieve by rationalising their assortment and costs.
Convenience stores
They are usually not very large, with a relatively wide but shallow assortment, i.e. they satisfy multiple needs with little product variety.
They are open 365 days a year, have opening hours of at least 18 hours and the price of their products is significantly higher than in a supermarket.
Customers tend to make small purchases, for immediate consumption products: soft drinks, sweets, snacks and ready-to-eat food. They usually have an in-store consumption area.
In Spain, most convenience stores are located in service stations.
Specialised shops
These are small shops, specialised in one product category, offering a not very wide, but very deep assortment.
Employees and shopkeepers are very knowledgeable about the product, providing the customer with quality advice. Examples are gourmet or organic shops. At present, we can differentiate between formats that are doomed to reinvent themselves, formats that are suffering and formats that are winners. However, with the great arrival and accelerated expansion of online commerce, shop formats are evolving faster, do you need help to reinvent yourself?
