Do smaller living spaces mean smaller retail opportunities?

Discussion
Sep 25, 2015

Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine

A lot has been written about the urbanization trend in countries around the globe.

The number of people living in rural areas has been on the decline for many years as populations shift to urban areas in support of jobs outside of agriculture. With urban areas come smaller living spaces. And while McMansions still represent a sizeable portion of new home construction in the U.S., urbanization and an aging population will likely lead to smaller living spaces over the decades to come.

Check out all the television shows and websites featuring tiny homes with less than 1,000 square feet — many in the 300- to 600-square-foot range. With tiny homes come tiny kitchens, oftentimes sharing space with a home office or representing a major portion of a home’s main living space. With tiny kitchens come fewer and smaller kitchen appliances, and one has to wonder how this will impact the frequency with which we shop for food as well as future demand for certain foods.

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Smaller housing units will likely lead to an increase in small shopping trips as consumers match shopping behaviors with daily product demand. With limited storage capacity in many urban housing units on the East Coast, there is a reason why one-roll toilet tissue sales have thrived. In large metro areas in countries like Japan, small food trips are the norm as shoppers buy just what they need for that day’s meals.

Other important questions to ask: Will smaller housing units with limited space for perishable food storage translate into lower demand for grocery, frozen and refrigerated foods and other non-perishable items? Will the trend toward smaller homes have a negative impact on ownership of some kitchen appliances over others, thereby affecting demand for categories? If consumers go without microwaves, for example, will longer heating times for frozen and refrigerated foods prepared in conventional ovens hinder future sales?

From a retail format perspective, many small formats can thrive better in urban locations than they might in suburban or rural locations, but small trips and small packages don’t mean that big formats can’t win, too. Urbanization enables both big and small stores to flourish in support of higher demand created by population density.

Convenient meal preparation combined with the health and wellness promise opportunities for vendors to come up with an array of smaller packages at a premium price. Or just maybe we will see collaboration with an appliance manufacturer to create on-demand meals just like the Jetsons did in the futuristic ‘60s cartoon.

Do you agree that urbanization will affect food and other forms of retailing in the years ahead? What is being underestimated in how the urbanization trends will affect food retailing? What is being over-estimated?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Urbanization and the decline of family size appear to be working in tandem to create more frequent, but less voluminous basket sizes. Retailers should plan on seeing their shoppers more frequently for their daily needs, but less frequently in the form of a stock-up shopper."
"If we look at the underlying causes of urbanization we might not be quite as optimistic as the article’s author. Older and/or poorer people on fixed incomes aren’t building those cute little "tiny houses" we see on cable channels, they are struggling to survive."

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10 Comments on "Do smaller living spaces mean smaller retail opportunities?"


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Mark Heckman
Guest
6 years 7 months ago
Urbanization and the decline of family size appear to be working in tandem to create more frequent, but less voluminous basket sizes. Consequently retailers are smart to hedge their bets with new, smaller formats bent on providing meal solutions and more shopper-friendly store designs. Retailers should plan on seeing their shoppers more frequently for their daily needs, but less frequently in the form of a stock-up shopper. I am not writing off the mega-store format or big basket sizes, but the amount of square footage in most marketplaces allotted to big footprint stores is very close to a saturation point. The future for larger formats is selling what fellow BrainTrust panelist Dr. Herb Sorensen calls the “Big Head” — said another way, those items and categories that are in demand. Changing demographics in the U.S. along with the ability for more affluent shoppers to purchase staple items online (on a consumption schedule), is another factor favoring these smaller, fresh-oriented formats, as opposed to continued growth for larger footprints. Each, however, will play a role in… Read more »
Ryan Mathews
Guest
6 years 7 months ago
There are issues, like urbanization, and then there are other issues, like the root causes of urbanization. So the easy answer is to say that, globally, urbanization is increasing, therefore stores will be smaller, average rings will decline, or — as this article seems to suggest — retailers will maintain some variation on the status quo with some big stores winning and other small formats winning. But let’s look at why urbanization is on the increase. In the U.S., Japan and Western Europe the population is aging and is therefore increasingly living in empty nests, is less mobile, is in more need of close medical care and is less likely to be engaged in agricultural work. In other parts of the planet the number of jobs and/or the amount of arable land — or, as in the case of Bangladesh the amount of land that isn’t under water — is rapidly declining, essentially forcing people to migrate to cities. True this forced migration does increase urban populations, but it is an unnatural and under-capitalized population trend, which isn’t… Read more »
Roger Saunders
Guest
6 years 7 months ago

In a free market scenario, retailers and manufacturers will adapt to meet the consumer’s needs. The e-commerce as well as smaller retail units that merchants have constructed have built already have the tests in play — think Walmart’s Neighborhood Markets, Target’s move into smaller boxes, Macy’s Backstage, or anyone of the 16,000+ bodegas in New York City.

In a similar fashion, manufacturers have developed small packages as well as new storage container items to meet the needs of these urban consumers. Further, those CPG firms will bring ideas that are succeeding in China home to the U.S.

If government — local and federal — remain out of the way in terms of over-regulation and policy, the retail, manufacturing and logistics communities will innovate and bring on promising ideas that will cascade to stores in the suburban and ex-urban areas of the country.

Chris Petersen, PhD
Guest
6 years 7 months ago

What is interesting about the “tiny house” trend is that most of the houses are much smaller than a NYC apartment! The true tiny house on wheels will definitely involve compromises … especially on appliances and food prep. Most tiny houses compromise on no oven, but I haven’t seen many without a tiny microwave.

The more likely urban trend is more people moving into apartments. Scaling down from a house to apartment definitely affects lifestyle and furnishings. I have not visited a NYC apartment where the owners didn’t store sweaters or something in their oven when not using it!

Smaller living space should create interesting opportunities to design compact multi-function appliances and furnishings. It should also create a unique opportunity for small format specialty retailers. Those living in small spaces will most definitely want a show room and experts to show them how to make the most out of “living small.”

Ben Ball
Guest
6 years 7 months ago

Studied this one pretty hard for BBY a decade ago. Two major drivers of what folks buy are urban (small space) vs suburban and income.

High income buys the high-end big and small stuff — just depends on what fits. Folks with lower incomes follow the same pattern in terms of fitting into their space — it’s just cheaper versions of the same stuff.

Yep, rocket science!

Gene Detroyer
Guest
6 years 7 months ago
There are really two stories here. The first is relative to “other retailers.” in 1950, the average home size was less than 1,000 square feet. By 2006 it was almost 2,500 square feet. Since 2010 the size has started to shrink slightly. When your home grows, you fill it with stuff. When you have many closets, you fill them with clothes. When you have big, or multiple refrigerators, you fill it or them with food. A good portion of retailer’s success for the 50 years prior to 2000 had everything to do with filling up larger and large homes. Once upon a time my wife and I filled up a 13-room house in Wilton, CT. Today we live in a one-bedroom apartment in NYC. The one-bedroom apartment was not only easier to fill, it certainly kept us from buying more. For the food retailer, the urbanization will generate more and more home delivery. The food stores will act as fill-ins. The weekly-or-so shopping for the bulk of staples will be ordered online and delivered. No… Read more »
Ralph Jacobson
Guest
6 years 7 months ago

With the migration of populations moving into cities around the world, (now becoming more than 50% of the world’s people living in cities), this is nothing but incremental opportunity for retailers and CPG brands of all categories, beyond food. Insights can be derived on trends by looking into social channels and other outlets to see where the demand is headed. I’m not certain much of anything is being overestimated.

Although there are still some large homes being built in the U.S., I see far more rental properties going up and fewer Millennials are seeing the need to own real estate than we boomers did.

Gordon Arnold
Guest
6 years 7 months ago

We may be seeing consumers buying less more often as a result of the great migration from a middle class society heading closer to an existence much like our third world neighbors. I say this to stimulate an interest and investigation into the marketplace and how it is capable of supporting a business(s). With the massive economic shrinkage now taking place in Asia, we must concede that serious declines in jobs, income and the entire world economy simply aren’t what we thought they were as in a recovery. This is not a message of doom and gloom it is an invitation to look at our options for what we are offering to. Great discussion with plenty of food for thought and planning for the present.

Joan Treistman
Guest
6 years 7 months ago

I’m surprised that no one mentioned the everyday food shopping that I believe (correct me if I’m wrong) in Europe where apartments and houses tend to be smaller than what I’m used to seeing here. I think that this frequency dovetails the idea of farm to table consumption.

Personally I take pride in the efficiencies I am able to manage in my one bedroom NYC apartment. I compare my kitchen to the galley on an airplane.

So I think retailers will adjust inventory and real estate. But I think this may be an opportunity to enhance profitability as they trim waste.

And I look forward to the social media sites where I will get helpful hints on how to maximize the use of square footage in my apartment and optimize food shopping for the smaller space and sporadic cooking schedule. Well, maybe they are already available and I just like complaining about the small space from time to time.

Matt Talbot
Guest
6 years 7 months ago

I think that urbanization will absolutely affect the grocery and retail industry. I think the key change in both these areas is the amount of space that consumers have for storage and other purchases.

Another under-estimated, or perhaps under-analyzed element of urbanization is transportation method(s). In urban environments, many people take the bus/subway/metro to go shopping—in that case, consumers can only carry so much. This differs from a more “suburb” lifestyle where almost all shoppers drive a vehicle to the grocery store or commercial shopping center.

In cities where most people use public transportation, and living quarters are smaller—like New York City—retailers should expect to have smaller stores. However, since most consumers in that area will probably be more frequent shoppers, and buy less at one time, the store layout will suit the customer experience.

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Braintrust
"Urbanization and the decline of family size appear to be working in tandem to create more frequent, but less voluminous basket sizes. Retailers should plan on seeing their shoppers more frequently for their daily needs, but less frequently in the form of a stock-up shopper."
"If we look at the underlying causes of urbanization we might not be quite as optimistic as the article’s author. Older and/or poorer people on fixed incomes aren’t building those cute little "tiny houses" we see on cable channels, they are struggling to survive."

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