Fastest Growing Retail Formats Series: North America

A question we at RetailNet Group often get asked is, “What store formats are opening the most stores?” In order to answer this question, we decided to provide a series of articles looking at high growth formats across the globe. We will do this in each of our major geographies: North America, Latin America, Europe, Africa, Middle East and Asia. The answer to this question, of course, varies greatly by geography. In developed markets like North America, big box stores have largely run their course, and the majority of unit growth is coming through small stores.

Source: RNG Database; excludes Target & Walmart Supercenter conversions

While store growth in North America will be essentially flat, with about 1% annual growth, there are a few formats that are growing 2-4X this. The trend is obvious: small box and discount formats are growing rapidly. All four of RNG’s discount formats, Single Price Point, Ltd Asst Grocery, Ltd Asst Mass, and Discount Grocery are in the top 5 in unit growth in North America. (For definitions on these and other terms visit the In-Store Trends Glossary.)

Discount formats are still winning in North America, with the weak economic recovery playing a part in addition to discounters cleaning up their stores and adding food to create more of a one-stop shop. Dollar stores’ small format and tight economic model made them ideal for rapid expansion. Express/Superette is a smaller format in terms of scale, but is high growth as retailers are seeking to reach urban markets and “food desserts” with fresh food options.  Kroger is the latest to announce an interest in this concept.

The discounter trend holds true when looking at the top North American chains in store openings over the next 5 years. The top 9 banners fall into 4 major categories:

  • Discounters: Dollar stores will continue to lead in unit growth. Dollar General and Family Dollar are already #1 and #5 in North American store count, and will be #1 and #2 in new stores over the next 5 years.
  • Drug stores: CVS and Walgreens will continue their march toward every corner in the US. With both organic growth and acquisition, the world’s largest drug store chains will open north of 100 stores a year.
  • Automotive specialists: The growth of automotive specialist retailers has been a little-talked-about retail trend over the last couple years. There are a few reasons for this:
    • Due to the recession, people held on to their cars longer. This resulted in a higher percentage of car owners outside of their warranties and in need of repairs.
    • Most repairs are performed by independent garages, which tend to purchase parts wholesale from auto specialists.
    • Also as a result of the recession, people saved money by working on their cars themselves instead of paying for labor. While this was a factor of their success in the recession, it is unlikely to be a growth driver going forward as younger generations are much less inclined to perform their own repairs.
    • The “do-it-for-me” (DIFM) automotive repair market has remained unconsolidated in North America, much like retail was in the early 20th century. Automotive specialist retailers are using their service models as a growth platform, taking share from mom-and-pops.
  • Best Buy Mobile: A new growth format for the world’s biggest consumer electronics retailer. While Best Buy starts shuttering big box stores, its unit growth will be solely in these smaller mall-based stores focused on mobile technology.

Source: RNG Database; excludes Target & Walmart Supercenter conversions

Stay tuned next week when we look at top growth formats in Latin America. RNG subscribers can access our look at the top North American players in winning formats, as well as dozens of other reports on the North American retail industry, here.

About Nate Holmes

Nate is a Research Analyst with RNG, and he’s responsible for the forecasting work and analysis covering Ecommerce as well as the global Big-Box retailers such as Hypermarkets and Warehouse Clubs. His area of specialization is in the Digital / Innovators space. Nate’s geographic focus under the STEIP market analysis framework is North America.

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