Saturday, December 7

For big-box retailers, one of the longest-running experiments is shrinking

More Americans may discover that the square footage they visit in stores aligns with this reduction philosophy as they hunt for bargains over the Christmas season in a market where many consumers believe that less is more.

Ikea is well-known for its enormous, blue and yellow big box stores, which frequently occupy 300,000 square feet in suburban areas. However, they became the most recent in a long line of merchants to adopt a smaller-is-bigger approach when they launched an 8,800-square-foot store in Gaithersburg, Maryland, earlier this year. Over the past ten years, Target, Macy’s, Nordstrom, and other companies have experimented with small size stores. Kmart’s Miami location, the only one left in the United States, is only one-third the size of its once-dominant large boxes.

At least since 2011, chain stores have experimented with smaller formats. To compete with dollar stores, Walmart launched the Walmart Express idea in 2011, but it was discontinued five years later. Walmart has kept opening Neighbor Market concepts in smaller formats.

More from CNBC

  • In the new space race, hackers are hitching a ride into orbit

  • As retailers enter the holiday shopping season, the winners are pulling away from the pack

  • The 10 most expensive ZIP codes in the U.S.

Ikea sees its smaller format stores as a means of reaching its target audience. This autumn, two additional smaller-format Ikea stores opened, bringing the total to eleven: one in South Charlotte, North Carolina, and another in Alpharetta, Georgia.

A point of plan and order with According to an Ikea spokesman, the smaller stores provide a more individualized experience. Pick-up is one of several new format stores that are part of Ikea U.S.’s growth strategy, which aims to increase brand accessibility and ensure that there are more ways to meet customers where they are and how they like to shop.

According to the spokesman, it differs from the conventional large-format Ikea shops in that it allows consumers to schedule meetings with the store team to plan and buy home furnishings that need a little extra assistance, such as kitchens and bathrooms.

See also  9+ Black Friday deals to shop at Costco right now

Target, which is facing significant challenges in the discretionary consumer market, is expanding and contracting at the same time. Last year, it opened a few stores that were 135,000 square feet larger than its usual footprint of 125,000 square feet, while it also kept opening smaller stores, a strategy that began in 2016. Ten stores with 20,000 square feet or less were opened in 2024; these were mostly located in cities or in the residential regions surrounding college campuses.

According to a Target representative, they will keep opening stores of both sizes since their adaptable business strategy enables them to create the Target experience in any size or format.

Maximizing revenue per square foot of store

Roger McMahon, a retail expert and marketing professor at Pepperdine University’s Graziadio Business School, is not surprised by shrinking stores. He claims that although the current trend of closing stores has been going on for decades, it is accelerating. The transition to online buying started in the 2010s, and the pandemic hastened it.

Retailers have been frantically trying to figure out what to do. It’s interesting to note that studies reveal that the majority of in-store shopping excursions start online and frequently end there. It is not an either/or situation as a result. According to McMahon, brands must permit this behavior while also figuring out how to do it in a way that maximizes their metrics.

The amount of money made per square foot is one of those crucial indicators. To make money per foot, a huge space has to put in a lot more effort.

Given the design of the large-format stores, the shift to smaller outlets makes sense. In the hopes that more time spent in the store will result in more purchases, the large format features expansive aisles, displays that are widely spaced, and sections intended to invite customers to sit and unwind. According to McMahon, this indicates that a sizable portion of square footage does not immediately provide any income.

See also  Lawsuit against former Marvel actor Jonathan Majors dropped by ex-girlfriend who accused him of assault, defamation

Smaller stores, however, can also make customers feel more at ease while providing the merchant with what they desire: higher foot traffic.

Smaller format businesses can increase sales per square foot and provide a more personal shopping experience if they are appropriately merchandised, according to McMahon. This benefits both the business and the customer. “Ideally, that relationship will lead to more sales for the brand both online and in physical stores, as well as a more devoted clientele,” he continued.

However, customers have differing opinions about whether less is truly more.

The Walmart community markets, which are small, are excellent! Excellent for picking up a few things and doing a fast run-in. “I never go to the smaller Targets anymore because they just don’t have everything I need,” says Mary Rhodes, a native of Texas.

Barbara Snedegar, a resident of Cincinnati’s eastern suburbs, on the other hand, favors the assortment of bigger retailers.

One-stop shopping has my full support. the smaller shops. “I’m unsure,” Snedegar remarked.

Since malls have become earnings anchors, Macy’s modest anchor stores have failed. The chain demanded earlier this year that 30% of its failing locations be shuttered. With smaller format locations for their Macy’s and Bloomingdale’s brands, Macy’s has been attempting to break away from the mall.Macy’s and Bloomie’s markets are smaller, more intimate versions of their classic department store designs.

Placer.ai data demonstrates the appeal of decreasing to grow.

Retailers frequently discover they don’t require the same capacity to serve these clients as a result of consumers moving to smaller suburban and rural areas across the United States in recent years, according to R.J. Hottovy, head of analytical research at Placer.ai.

See also  Black Friday Apple deals: Get discounted AirPods, MacBooks and more

According to Placer.ai’s analysis of traffic to the Bloomie’s store in Skokie, Illinois, its customers are more likely to be from metropolitan regions than those served by regular Bloomingdales.

According to Hottovy, this suggests that Bloomie’s appeals to city people, which is consistent with Bloomingdale’s mission to offer a modern, easily accessible, and convenient shopping experience in metropolitan locations.

According to Michael Zakkour, CEO of retail consultant 5 New Digital, it’s all about being everything to everyone while retailers grow and shrink simultaneously.

According to Zakkour, there is only one major need from consumers nowadays. Don’t spoil me. If not, he continued, they would look for the brand, store, and service provider that will spoil them. He went on to say that spoiling the customer requires careful consideration of the format.

However, that spoil factor doesn’t necessarily imply luxury and doesn’t even necessitate physical presence.

“Intelligent retailers must provide a variety of options and choices in physical retail, just as the options for where and how to buy online have grown exponentially,” Zakkour added, noting examples like Walmart’s expansion of commerce into Roblox and into livestream purchasing with REALM.

The smaller storefronts are an opportunity for companies like Ikea, who usually construct expensive huge boxes, to set up shop for a fraction of the price.

According to Zakkour, these stores serve as mini-flagships and forward operating bases for local delivery, demonstrating the retailer’s commitment to the customer’s demands.

Note: Every piece of content is rigorously reviewed by our team of experienced writers and editors to ensure its accuracy. Our writers use credible sources and adhere to strict fact-checking protocols to verify all claims and data before publication. If an error is identified, we promptly correct it and strive for transparency in all updates, feel free to reach out to us via email. We appreciate your trust and support!

Leave a Reply

Your email address will not be published. Required fields are marked *