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Looking at the Wal-Mart of the Future

During Wal-Mart's (WMT) annual shareholder meeting this past summer, CEO Mike Duke stressed the challenges and opportunities presented by "the next-generation customer."

"They're connected to the world through smartphones and social media," he said. "They're in charge of when they shop and how they shop, and they know who has the lowest prices."

Smaller stores such as Wal-Mart Expresses are just the beginning of what retailers are doing to adapt to the future of shopping.

Given the pep rally nature of shareholder meetings, it should come as no surprise Duke trumpeted Wal-Mart's advantages in meeting the needs of these customers. Nevertheless, the landscape of "big box" stores and category-killing retailers is evolving constantly to meet the needs of a more demanding, tech-savvy customer base.

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What will the future Wal-Mart and its big box peers look like amid the increasing demands of their customers? We took a look at the changes afoot, which range from the mundane to the futuristic.

It's a smaller world
The mantra of retailers such as Wal-Mart has traditionally been "Bigger is better." More space means more merchandise, one-stop shopping and the ability to offer up loss leaders in some product lines to ensure profitability for other merchandise. In terms of inventory and price, the bigger the store the more successful it was.

Now Wal-Mart is among the retailers starting to question the continued viability of shopping behemoths.

While size may not be a hindrance in rural areas -- in fact, it can be a positive -- the footprint needed for traditional big box stores means limited penetration into jam-packed urban areas and suburbs with restrictive zoning.

This has led to an ongoing push by bricks-and-mortar retailers to contract and downsize.

For example, at Best Buy's (BBY) annual shareholder meeting, CEO Brian Dunn said the chain will continue to increase the number of its smaller Best Buy Mobile stores focused on smartphones and tablets. The company will also reduce its retail space by 10% over the next three to five years from a chainwide average of about 45,000 square feet. The footprint of Best Buy Mobile stores, in comparison, is only about 3,000 square feet.

In addition to downsizing, retailers such as Staples (SPLS), Office Depot (ODP) and Sears (SHLD) have been experimenting with subdividing their existing big stores and leasing space to other companies. In California, Sears is sharing space with clothing chain Forever 21 and electronics specialty store Paul's TV.

Wal-Mart is also looking to slim down. It recently began launching "express" stores of less than 15,000 square feet, as well as continuing the concept of new "neighborhood markets" of between 30,000 and 60,000 square feet. The traditional Wal-Mart "supercenters," which account for about 75% of its locations, average about 185,000 square feet, according to a company fact sheet.

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