Are bigger and better really the best? The answer to the question of your retail footprint is becoming increasingly no. Market-friendly, efficient solutions are offered by smaller stores.
Brands are moving away from the tried and true suburban strategy of big-box stores to focus on smaller, more carefully designed spaces in cities and college towns.
Brands are trying to find a multi-billion dollar answer to the question of how to retain customer loyalty and keep brick-and mortar relevant while ensuring that it is a vital part of an omnichannel, retail mix.
The December U.S Census Retail Report shows that department store sales are falling. Even with the Black Friday boost sales in December 2018 were 2.8% lower than 2017. The December closing of Lord & Taylor’s 104 year-old NYC flagship store is a sign of this decline. However, sales of C-stores and small format stores continue to rise, exceeding their larger counterparts by almost 400%.
Scaling down has its risks, however. It is important for brands to make sure their brand’s look and feel don’t get lost in the process of shrinking floor space. There is greater pressure to choose and display the best inventory for each location, considering how important it is to make the in-store experience seamless and memorable.
Target’s city store hits the bullseye
Take a look at Target’s strategy. Target opened its first small-format store at Seattle’s Pike Place Market in 2012. Target has refined its model and Target is now preparing to open 130 small stores in the U.S.
What is the limit of small? These retail spaces are smaller than the average Target store which can cover 135,000 to 175,000 square feet. However, they can take up approximately 40,000 square footage (but can also be as small as 15,000).
Target sees smaller spaces as a game-changer. This format allows Target to show off its best assets, low-cost and interesting products, based on their location. You can say goodbye to large floor plans and an overwhelming amount of merchandise.
The small-format design has the added benefit of a seamless transition between Target’s brick-and-mortar and digital operations. Online shoppers can choose to pick up their items in-store (BOPUS), and they can also return the items using a drop-and go bin. Target’s three-quarters of online sales were supported by Target’s stores, according to Charlie O’Shea (Moody’s Lead Target Analyst). For a moment, think about this: Three-quarters (75%) of online sales were influenced by stores. This doesn’t sound like a retail disaster.
Target has been successful in going small so far. The brand reported its highest sales since 2005 in March. This is a remarkable feat considering the stock price plummeting just two years prior.
IKEA is working to make your home decor easier, one step at a.
IKEA, like Target, hopes that a smaller retail footprint will help customers have a better shopping experience. New Yorkers have relied on the store’s Red Hook, Brooklyn location for furniture needs for years. However, the Brooklyn address made it difficult to shop. Long lines and travel on mass transit can make a sofa purchase a tedious task. Bringing that sectional back to Manhattan might be more expensive than it is worth.
IKEA is hoping to change that this year when it opens its “Planning Studio” in Manhattan’s Upper East Side. Manhattanites will be able to view IKEA’s staged showrooms, and receive design advice from IKEA professionals prior to placing an order online.
As part of an overall strategy to be competitive against e-commerce, the city-center store will be the first of five stores to open across the U.S. over the next few years. The smaller footprint of IKEA couldn’t have come at a better time for the company. Sites like Amazon and Wayfair have been bringing much-needed innovation into the furniture retail sector for years. It’s now time for IKEA and Wayfair to catch up.
Angele Robinson Gaylord, president, U.S. Property at IKEA, said, “It’s an illustration of how we reach our customers in new ways so it will more accessible and more personal.”
Nordstrom capitalizes on the experience
The showroom trend does not stop at furniture. Nordstrom has also chosen to show its unique selling point: its signature style services. The Nordstrom Local small-store branch offers shoppers a unique fashion experience. How does it work? First, there is no inventory. This would have seemed impossible just a few decades ago. The retail space is modeled after Bonobos’s success and serves as a showroom for fashion. Shoppers can meet stylists, try on outfits, have their clothes tailored, and place orders online.
Nordstrom Local offers a more luxurious experience than the Bonobos-style experience. There’s a manicurist and barista on-site and long marble tables for shoppers to work or answer emails. Each Nordstrom Local store lives up to its name. The interior decor is tailored to the local look and feel, which gives visitors a more personal, community-focused experience.
It is worth noting Nordstrom’s showcase concept, a small-store store, is still in beta. There are currently three locations in Los Angeles. However, plans are to open another location in New York City. This move is deliberate. Nordstrom Local brings these customers closer to Nordstrom.
Jamie Nordstrom, president and CEO of Nordstrom Local, stated that customers tell him they want to shop wherever, when, and how they like. Nordstrom Local aims to provide customers with a seamless, convenient experience…right in their own neighborhood.
C-stores are a fuel for Walmart’s fire.
Walmart is launching a new convenience store option, which will be appealing to people who live in urban areas. The Walmart Fuel Station in Texas, which was opened last summer, was the first c-store that the mega-retailer had ever opened.
Walmart’s move to cstores was relatively easy. A (now expired partnership) with Murphy USA fuel supplier has resulted in some Walmarts having gas stations on-site. Walmart Fuel Stations is a retailer that just brings those operations in-house.
C-stores offer a great opportunity to attract new customers, while maintaining existing store operations. This is a brilliant idea: Walmart Fuel Stations attract all types of customers, even those who don’t normally shop at the retailer. This is where in-store signage can be a big help. Attractive digital and traditional signage, as well as displays at the stations, can grab drivers’ attention and encourage them to visit the store to view the specials.
Amazon reduces its small losses
However, not all small stores are equal. Amazon announced in March that it would close all 87 pop up stores in the U.S. The pop-up kiosks were first launched in 2016 as part of a pilot program that allowed Amazon-branded tech products to be tested in suburban malls.
Although it is not clear what customer barriers existed in Amazon’s first venture into brick-and mortar, the answer could be found in merchandise. Amazon is not content to limit itself to technology. Instead, it plans to expand its small-store offerings, such as Amazon Go and Amazon 4 Star. Signage is the key to both stores. Both tables of inventory are marked with signs that announce the products as “Trending Around NYC” and “Items Frequently Purchased Together.” Just like they do on Amazon’s e-commerce site.
Small can have big benefits
This could be a win-win situation for both shoppers and brands, as it will provide added value through convenience and experience. For retailers who want to remain big? They could be forced to downsize in a different manner.