Big Box Retailer - Explained
What is a Big Box Retailer?
Written by Jason Gordon
Updated at September 5th, 2021
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Table of Contents
What is a Big-Box Store?What qualifies as a Big Box Retailer?Academics Research on Big Box RetailerWhat is a Big-Box Store?
This is a type of retail store which occupies a large amount of physical space and offers a wide range of products to its customers. By focusing on large sales volumes, these stores manage to achieve economies of scale. They stores offer competitively priced goods since the profit margin for each product can be lowered due to high volumes. The physical appearance of the stores gave rise the term big-box since they are built like a box. These stores are set up in large buildings with more than 50,000 square feet of space and are often plainly designed. Examples include Walmart, Home Depot, Ikea and many others.
What qualifies as a Big Box Retailer?
In big box retailers, consumers can find every type of consumer goods since they are designed to be a one-stop shop for customers. Of all the big box retailers, Walmart has the broadest product mixes. However, Home depot and Ikea are more focused versions of this concept. The success of the big box retailers has led to the whole segmentation of retail. Some niche or bespoke retailers have emerged which focus on a few high end products that the big box retailers don't bother with. When a big box is set up in a town, it squeezes anything in the middle. The big box retailers have a negative reputation. They are seen as bullies when dealing with suppliers. Because they do massive purchasing to fill the shelves of their network, they tend to force supplies to exclusively supply to the big box chain. This is risky to the suppliers because all their revenues depend on one company. Also the suppliers cannot push back on price squeezes since they can be dropped from the product line. When a big box retailer moves into an area, the local businesses are concerned because they cannot compete with the logistic advantages and purchasing power for lower pricing. Eventually these local businesses start to fail since customers migrate to the big box retailer. Because the customers want the best value for their dollars, they lead to the closure of local businesses. However, the big box retailers have also started to experience the effects they have on the small businesses as many people have been migrating from the physical stores and into online shopping.
Academics Research on Big Box Retailer
- A distribution services approach for developing effective competitive strategies against big box retailers, Barber, C. S., & Tietje, B. C. (2004). A distribution services approach for developing effective competitive strategies against big box retailers.Journal of Retailing and Consumer Services,11(2), 95-107. According to one theoretical approach, the primary economic function of retailers is to deliver products together with distribution services. We use this framework to identify competitive niches for smaller retailers competing against big box stores. We compare the distribution services offered by the Home Depot versus smaller retailers using both in-store measures and consumer perception data, and the relative importance of distribution services as determinants of store choice. The results show that the Home Depot's superiority in pricing and assortment attracts a significant market, but smaller retailers can secure niche markets by delivering higher levels of ambiance and information.
- Category killers and big-box retailing: their historical impact on retailing in the USA, Sampson, S. D. (2008). Category killers and big-box retailing: their historical impact on retailing in the USA.International Journal of Retail & Distribution Management,36(1), 17-31.
- Small retailer strategies for battling the big boxes: a Goliath victory?, Armstrong, C. E. (2012). Small retailer strategies for battling the big boxes: a Goliath victory?.Journal of Strategy and Management,5(1), 41-56.
- Supersizing Small Town America: Using regionalism to right-size big box retail, Salkin, P. E. (2004). Supersizing Small Town America: Using regionalism to right-size big box retail.Vt. J. Envtl. L.,6, 48.
- Thinking outside the big box: municipal and retailer innovations in large-scale retail, Evans-Cowley, J. S. (2008). Thinking outside the big box: municipal and retailer innovations in large-scale retail.Journal of Urban Design,13(3), 329-344. This study explores innovations in big-box retail development driven by both public and private sector initiatives. It includes a survey of planners in US cities asking about the presence and extent of big-box developments, how the cities approached regulating them, and innovations that retailers are undertaking. The results revealed that many cities have big-box retail, and they have typically adopted various regulations (such as limiting design standards, design review and size caps) to control it. Some cities reported that they were utilizing innovative techniques, such as dark-box ordinances, to ensure that big boxes will make positive contributions to their communities. Respondents reported that these regulations had only moderate success. Respondents also reported on innovations undertaken by retailers. As big-box retail continues to spread, communities will need to develop more effective mechanisms to ensure that big box retail is appropriately integrated.
- Big-box retailing and the urban retail structure: the case of the Toronto area1, Jones, K., & Doucet, M. (2000). Journal of Retailing and Consumer Services, 7(4), 233-247. This paper presents an examination of the growth and impact of power centers and big-box retailers in the 1990s in the Greater Toronto Area.
- Localization--the revolution in consumer markets., Rigby, D. K., & Vishwanath, V. (2006). Harvard business review, 84(4), 82-92. This paper explains that although standardization is a powerful strategy, it has reached the point of diminishing returns. The world is advancing to time where the strategies of the most successful businesses will be customized to the communities they serve.
- The impact of big box internationalization on a national market: a case study of Home Depot Inc. in Canada, Hernandez, T. (2003). The International Review of Retail, Distribution and Consumer Research, 13(1), 77-98. This paper investigates the impacts brought about by the US-owned Home Depot Inc. on the improvement of the landscape of Canada.
- The future of abandoned big box stores: Legal solutions to the legacies of poor planning decisions, Schindler, S. B. (2011). U. Colo. L. Rev., 83, 471. This article argues that local governments have a responsibility and economic incentive of finding alterternative uses for the abandoned big boxes because they control land use decisions and allowed the development of big boxes.
- Supersize it: The growth of retail chains and the rise of the BigBox store, Basker, E., Klimek, S., & Hoang Van, P. (2012). Journal of Economics & Management Strategy, 21(3), 541-582. This paper uses data collected from the Census of Retail Trade between 1977 and 2007 to document and explain the recent rise of big-box general merchandisers.
- Category killers and big-box retailing: their historical impact on retailing in the USA, Sampson, S. D. (2008). International Journal of Retail & Distribution Management, 36(1), 17-31. This is a longitudinal study which demonstrates that evolving to big-box formats presented a positive impact on the sales revenue and per capita spending in each of the retail sectors.
- Mom-and-pop meet big-box: complements or substitutes?, Haltiwanger, J., Jarmin, R., & Krizan, C. J. (2010). Journal of Urban Economics, 67(1), 116-134. This paper employs the use of establishment-level data detailed location information from one metropolitan area in order to quantify the impact that the entry and growth of Big-Box stores have one the nearby single unit and local chain stores.
- Competitive analyses between regional malls and big-box retailers: a correspondence analysis for segmentation and positioning, Lee, M. Y., Atkins, K. G., Kim, Y. K., & Park, S. H. (2006). Journal of Shopping Center Research, 13(1), 81-98. This paper uses a sample of 569 consumers to compare the demographic composition and retail attributes for four competing retailer formats which are regional malls, supercenters, category killers and warehouse clubs.
- A distribution services approach for developing effective competitive strategies against big box retailers, Barber, C. S., & Tietje, B. C. (2004). Journal of Retailing and Consumer Services, 11(2), 95-107. This article uses a theoretical approach, which states that the main function of retailers is delivering products together with distribution services, to identify the competitive niches for smaller retailers which compete against big box stores.
- Optimizing inventory and store results in big box retail environment, Ayad, A. (2008). International Journal of Retail & Distribution Management, 36(3), 180-191. This study emphasizes on the role of people even though it confirms theories which link inventory to sales, merchandise selection and technology.
- Productivity Dynamics and the Role of 'BigBox'Entrants in Retailing, Maican, F., & Orth, M. (2017). The Journal of Industrial Economics, 65(2), 397-438. By using a dynamic model, this paper measures the impacts that the entry of large stores has on the productivity of the existing businesses separate from demand while accounting for the local markets and the endogeneity of entry.