After consolidating their real estate empires during the 20th century, big box retailers are shifting their focus to smaller spaces to meet the demands of 21st century shoppers. Early results show promise—the shrunken formats are boosting brick and mortar retail by catering to young, city-dwelling shoppers while cutting costs—and these pilots may prove instructive to retailers interested in slimming down.
Find out how four brands made the decision to shrink and what this means for brick-and-mortar retailers at large.
Macy’s Aims for Convenience
After 160 years in business, retail behemoth Macy’s is opening smaller neighborhood stores and “magnet” sites carrying heavily curated merchandise and welcoming Starbucks shops. Macy’s growing online sales called for the company to cull square footage devoted to physical retail space.
The brick and mortar retail legend is hoping the smaller footprint improves the customer experience and boosts sales. Macy’s plans to test technology that allows customers to skip lines and virtual reality features in its furniture and cosmetics departments.
Other retailers saddled with too much real estate and high overhead may follow Macy’s lead in filling the extra space. The department store has leased some of its square footage to retail chains including LensCrafters and Sunglass Hut, while others are sharing their space with supermarkets and health clubs.
Ikea Lures Urban Shoppers
Long synonymous with massive brick and mortar retail, Ikea has begun testing smaller format stores designed to address changing consumer habits. The Swedish retailing giant known for its 300,000 square-foot warehouses colored blue and yellow plans to open its first store in Manhattan, a 17,530 square-foot showroom on the Upper East Side. Meanwhile, it’s building another 30 or so smaller stores in major cities worldwide to offer the speed and convenience customers expect after using services such as Amazon and Uber.
The smaller stores help the home furnishings juggernaut cash in on another growing trend in brick-and-mortar retail: home deliveries. Compared with a decade ago, Ikea’s target customers likely live in cities without easy access to a car large enough to carry purchases home and prefer to touch and feel merchandise before ordering online.
Ikea, which bought the TaskRabbit gig economy app last year, is also investing in digital fulfillment centers and online pickup services. It’s part of Ikea’s approach to keep up with the changing consumer mentality and bring its stores closer to its customers, while advancing its infrastructure to prepare for the future.
Kohl’s Flexes for Efficiency
Kohl’s has opened a dozen locations measuring close to 35,000 square feet, less than half of its typical store’s 80,000-square-foot footprint, to adjust to the changing marketplace. The new strategy sees Kohl’s matching its inventory to its smaller footprint by opening stores with 60% less space and 60% less merchandise than usual.
The new format eschews dividing walls and in-aisle displays to create the open space modern consumers prefer. Locating the cash registers and fitting rooms near the entrance facilitate the checkout process. Meanwhile, Kohl’s is also piloting technology such as mobile checkout, iPads, and portable scanners to improve the customer experience at nearly 60 stores.
Kohl’s is also eliminating or slimming certain departments, such as fine jewelry, toys, and electronics and editing inventory to cater to local markets. The “bare bones” aesthetic keeps decors, fixtures and signage to a minimum to cut costs and clutter while affording the retailer flexibility in its merchandising.
Target Eyes Young Families
Target is slated to open 130 stores in urban, suburban and college markets by the end of the year. The smaller stores will compete with Amazon Prime by catering to busy, young professionals and families making quick trips to pick up essentials including groceries, beauty products and baby supplies.
The brick and mortar retailer will continue to rely upon its brand partnerships, category expertise, and popular private label items but plans to also focus on the urban customer’s needs, such as grab-and-go groceries. It’s also investing in same-day delivery service in certain markets, allowing customers can pay a $7 flat fee for a third party to deliver their purchases to their home.
The Big Picture on Smaller Stores
In the modern age of brick and mortar retail, bigger is not necessarily better. As the industry buzzes with the idea that smaller stores represent the future, it’s critical for 20th century’s retail giants to rethink their approach to their stores’ layout, merchandising and location. Today’s young, urban shopper is willing to spend but likelier to open his or her wallet for a seamless and convenient retail experience.
However, downsizing doesn’t work for everyone. Whole Foods, Lowe’s and Best Buy recently jettisoned their smaller sites. But the opportunity to trim operating costs, remain nimble and improve the shopping experience is one worth watching in 2019.
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