Sometimes even the best-performing retailers have bad ideas. And for the retailers that can't afford to make a mistake, missteps can be devastating.
On the surface some ideas appear to be good — expanding into growing categories, rolling out smaller stores with less expensive rent, etc. — but success boils down to execution and whether venturing beyond the core model is worth the risk.
According to Nick Egelanian, president of retail consultants firm SiteWorks, retailers that "get out of their lane have a very high failure rate when they try to get into another lane."
Experimentation and innovation are crucial to survival in the current retail landscape. However, if those experiments aren't strategic they could burn the retailer and wind up being worse than not doing anything at all.
"First the parent brand needs to have good equity and be seen as a place that has a quality product," Lauren Bitar, head of retail consulting at RetailNext told Retail Dive in an email. "Second, the offshoot needs to be perceived as different enough from the parent that it can reach a different audience.
Walmart's 'Express' convenience stores
The mass merchant in 2011 unveiled a smaller store concept dubbed "Walmart Express." Walmart hoped the stores, which were a fraction of the size of its Supercenters, would complement its other banners. However, instead of implementing a strategy unique to Express stores, the mass merchant shrank its Supercenters into a smaller format.
The stores stocked essential products like toilet paper, toys and some food products, but not enough to fulfill consumers' needs in grocery, Egelanian said. At the time, grocery was a growth category for the retailer, according to media reports. Express stores, which were located in rural and suburban areas not far from the mass merchant's Supercenters, may have been better suited to an urban setting.
In early 2016, Walmart said it would end its Express pilot and shutter all 102 stores and announced plans to boost its Supercenters, fine-tune its Neighborhood Markets and place a greater focus on its e-commerce and fulfillment operations. At the time Walmart closed its smaller experiment, Target announced it was expanding its smaller format "CityTarget" stores.
Kohl's in 2015 announced it would venture into off-price retail with a banner called "Off/Aisle." The announcement came weeks after fellow department store Macy's announced its own Backstage off-price store.
Off-price is generally a bright spot in the industry, led by players like TJX and Ross, which signals why some retailers have attempted to move into the space. Nordstrom's Rack stores, for example, have performed well quarter after quarter, though some analysts question whether the success of the off-price banner has cannibalized sales at full-price stores. Unlike Nordstrom and its Rack counterpart, which have different price points, Kohl's itself is already a discount department store.
"What does the discount brand of the already discount brand mean?" Bitar said.
Kohl's in June said it would end its Off/Aisle experiment due to an inability to stock stores successfully.
"We appreciate all we've learned during the Off/Aisle test about inventory management, operational efficiency, store experience and nimble, empowered store leadership," Jen Johnson, Kohl's senior vice president for communications, said in a statement at the time. "We also learned that our strength and ongoing improvements in inventory management across the company does not allow us to appropriately stock Off/Aisle stores at scale."
Whole Foods' 365 concept
Whole Foods opened its first 365 location in Los Angeles in 2016, and eventually expanded to add locations in California, Oregon, New York, Texas, Connecticut, Georgia and Ohio.
The stores were smaller and lower-priced than traditional Whole Foods Markets, but after Amazon acquired the grocer in 2017 with a promise to lower prices across the chain, 365's necessity became less apparent. The grocer announced in early 2019 that it would shutter all 12 of the 365 locations.
"As we have been consistently lowering prices in our core Whole Foods Market stores over the past year, the price distinction between the two brands has become less relevant," Whole Foods founder and CEO John Mackey noted at the time. "As the company continues to focus on lowering prices over time, we believe that the price gap will further diminish."
Amazon slashed prices and offered special discounts to its Prime members, though analysts question whether Whole Foods has completely rid itself of the "Whole Paycheck" title that many consumers gave it.
"Personally when it comes to perishable items I would also be a little apprehensive of concepts that appear to be the off-price offering of a main branch: It's one thing to buy last season's jacket from leftover inventory, but any perception of 'last week's food' (even though that wasn't the offering in truth) would make me nervous," Bitar said.
Radio Shack-Sprint co-branded stores
In 2015, more than 1,700 RadioShack stores were sold to hedge fund Standard General in bankruptcy court. Plans to turnaround the retailer included forging a partnership with Sprint to create co-branded stores. RadioShack saw it as a way to keep its doors open through bankruptcy and Sprint saw it as a way to quickly scale its brick-and-mortar presence.
However, the stores launched as Amazon began to gain more market share in the space, especially in peripherals and batteries. And in 2017, RadioShack creditors sued Sprint alleging the mobile provider used confidential information from the partnership to open its own mobile stores.
The co-branded experiment, which was supposed to provide a lifeline to RadioShack, ended in August 2017. Several hundred RadioShack stores were converted into Sprint corporate-owned stores as a result.
Best Buy Mobile stores
The electronics retailer opened its first mobile-only store in 2006 — one year prior to the release of Apple's first iPhone. The stores were much smaller than the big-box stores Best Buy is known for, spanning 1,000 square feet on average compared to about 40,000 square feet.
The Mobile stores, which were primarily located in malls, accounted for approximately 1% of Best Buy's total sales, according to a company email from then-CEO Hubert Joly, the Star Tribune reported.
In February 2018, the company announced it would close all 257 Mobile stores as a result of "changing economics in the mobile industry" and its operations would be integrated into larger stores and the website "which are today more economically compelling."