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Is bigger better for super stores?

With Mitre 10 Mega stores reaching 14,000sqm, the new Nido store covering 27,000sqm and Ikea stores averaging 30,000sqm – or three hectares – will we see a rise of ever-increasing super-sized stores? Both retailers and experts agree that is unlikely given New Zealand’s size.

While Nido managing director Vinod Kumar is looking forward to opening his 27,000sqm furniture store, he does not believe even Mitre 10 Mega stores will get as big. The 14,000sqm Mitre 10 Mega in Auckland’s Henderson is about optimum size, he says. 

“If we built a hardware store twice the size, it’s not going to work.”   

Greg Harford from Retail NZ says while there is a clear trend for the establishment of larger-format stores, New Zealand’s relatively small population density means there is a limit to how big the stores can get. Larger stores are more expensive, he says. 

“Different models have different costs associated with them but large-format retail typically will have substantial overhead costs because of the size of their footprints, the volumes of stock they hold, and compliance requirements.”

The costs of compliance requirements have already been felt during Ikea’s first foray into New Zealand. In 2008, the company lost a lengthy battle to set up in Auckland, with the Environment Court ruling its popularity would cause traffic chaos if it was a tenant in Mt Wellington’s Redwoods retail centre. Ikea was asked to comment on this story, including what would need to change for New Zealand to accommodate its large stores, but the company did not respond.

Bigger is not necessarily bigger, according to Chris Wilesmith from SuperCheap Auto: “I don’t necessarily think that the future of retail is who has the biggest box will win. I think who has the most-relevance-to-the-consumer ‘box’ will win,” he says.

While Australia, on average, has larger stores than in New Zealand, Wilesmith says there is not a big difference between each country, but there are geographical differences from region to region. “It wouldn’t matter what type of retail business you’re in, the question is, how are you optimising the space that is available, relative to consumer needs?”’

Explore the issue further in our feature, ‘Ticking the customer-experience box with big-box retail’.

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