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Store Planning: The Changing Face of Retail Store Formats

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Experimenting with store formats is one of the primary ways retailers are trying to connect with customers, maximize their shelf space and reposition themselves. While their efforts often involve in-store technology, a growing number of stores are changing their store formats, building more intimate small-format stores. The new store formats have emerged as testing grounds for digital initiatives and are being curated with products to improve a customers’ experience with a brand.

 

Bigger Isn’t Always Better

For years, the superstore was the way of retail. Each store opened by retailers seemed to be bigger and bigger, living up to the nickname “big box store.” Walmart was one of the leaders, opening multiple Supercenters with an average size of 190,000 square feet. Then there was a shift, and retailers thought small. Retailers may still open so-called “superstores,” but today the industry has also focused on smaller store formats.

Small worked better in urban spaces, cost less to build, reduced inventory needs and could be managed with fewer workers. In 1998, Walmart opened the brand’s Neighborhood Market stores, small grocery stores a quarter of the size of Supercenter stores. Target opened its first small-format store in 2014 and has continued the process of opening stores tailored to the size of the intended location. The stores range from 12,000 square feet to 40,000 square feet, or one-third the size of a full-size Target store. The small-format stores are geared to fit into urban neighborhoods and college campuses with products curated to match the local needs of the community.

The smaller store wave hasn’t captured just the attention of general merchandise retailers. Department store behemoths like Kohl’s have adopted smaller stores, choosing to open 35,000 square feet locations as a departure from its 60,000 to 90,000 square foot stores. The retailer has opened 12 of their 35,000 square foot stores in the United States and plans to open more. Kohl’s has localized the inventory, using analytics to tailor their merchandise to shoppers of each particular store. Customers shopping in the smaller locations can use in-store kiosks to buy online and pick up-in-store. Their approach is working, as reports show their small stores are more profitable.

The idea of smaller stores is going global. Even Ikea, a long-time fan of the large warehouse-like stores, is adopting a smaller mindset. The brand saw a 40 percent drop in their UK profits and decided to opt for a smaller store similar to Target’s strategy. Ikea has plans to establish smaller urban area stores and will open the first in London this fall. The stores won’t feature Ikea’s familiar cafe or have endless aisles full of unpronounceable yet affordable home decor items. Instead, the smaller stores will function as a sort of showroom for customers who can see the Ikea furniture up close then order it to be picked up or delivered to their home.

 

Custom Stores, Exclusive Experiences

Clothing retailer Abercrombie & Fitch has announced plans to open two new stores on the campuses of universities located in California and Ohio. The stores will be designed to target college students and will feature a smaller footprint, nearly half the size of the average Abercrombie store. Instead of cramming every inch of the store with Abercrombie clothing and accessories, the company will offer select merchandise. They will also feature special on-campus events, experiential retail and will cultivate local brand ambassadors. Omnichannel is in the game too, as 30-inch screen will let customers shop the entire Abercrombie website then ship their purchase to home or to the store. The campus stores will be “Learning Labs” designed to test smaller stores and the brand’s digital initiatives. Both stores will open in August.

This June, Joann Fabrics opened a new prototype store in Columbus, Ohio not far from the retailer’s headquarters. The new store focuses on combining technology with learning spaces and community with the emphasis on keeping shoppers around to craft. The brand conducted 18 months worth of research to figure out what today’s consumer wanted in a craft and fabric store. By partnering with Pinterest, the retailer has pinpointed the most popular trends in crafting and DIY, and will offer classes based on the projects plus an interactive kiosk showing projects.

The trend for personalization and exclusive experiences doesn’t escape the apparel world. In an attempt to reposition it’s business, Lids recently opened a new concept store in Times Square. The new store will deliver customers personalization right in-store as they can browse a digital library to create their own unique hat within minutes. Lids kickstarted a roll-out of this new concept, that’s planned across the country.

Of course, some stores aren’t really stores in that they let you buy something and take it home the same day: they’re showrooms or as Bonobos calls them, “guideshops.” Bonobos features guideshops where customers can’t actually buy anything but instead can try on items. A personal shopper, or guide, helps men try on Bonobos products, and the store can hold a wide range of inventory to be tried on, not sold. Customers then can place an order with Bonobos and have the very items they tried on sent right to their home. Bonobos currently has 51 guideshops and plans to open even more, and says the model is working.

 

Older Brands Dive into Brick & Mortar

We’re seeing many established brands open up their first brick and mortar locations as the face of retail changes. Familiar names are opening their first stores across the country, showing that retail is still of interest to many. CoverGirl has plans to open their first store ever and it will be located in Times Square. The brand has dubbed their store a “beauty play room,” and will let customers play with makeup to become “whoever they want to be at that moment.” While no concrete details about an opening date are official, CoverGirl has promised digital experiences, full-service makeup application and plenty of ways for customers to test new makeup.

Today’s retailers don’t have to stick to dated store formats when establishing a store, and luckily, even the most seasoned brands are seeing the value of small or personalized shopping experiences.

Explore our blog to read more about things like Blockchain in Retail and How to Sell Absurd Amounts of Designer Denim. If you’re curious about how machine learning can help improve store operations, read more here and here.

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