What 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.