Retailers embrace small-format stores to drive growth

Major retailers are increasingly turning to small-format stores to meet evolving consumer preferences for convenience and localised shopping experiences. This trend, accelerated by the pandemic, is reshaping the retail landscape across various sectors.

Department store group Macy's has been adapting to this shift, announcing plans to close 30 percent of its traditional department stores while expanding its small-format "Bloomie's" concept. These highly curated neighbourhood stores are attracting urban demographics, aligning with the company's goal of offering a more contemporary and accessible shopping experience in city centres, says Placer.ai, who published an insights report into smaller format retailers.

In the wholesale arena, BJ's Wholesale Club has been testing a small-format store in Warwick, Rhode Island, since April 2022. The location has consistently outperformed the chain's state and nationwide averages in year-over-year visit growth. Notably, customers tend to visit this smaller store more frequently and spend less time per visit, indicating a demand for efficiency in the wholesale space.

As retailers across categories continue to experiment with small-format stores, the trend appears to be gaining momentum. The success of these initiatives suggests a shift in consumer preferences towards quick, efficient, and curated shopping experiences. However, the long-term impact on the retail sector remains to be seen as companies continue to refine their strategies in response to changing market dynamics.

The rise of e-commerce has also prompted traditional retailers to reassess their physical store strategies, especially since the pandemic. Despite online competition leading to store closures for many, a majority of retailers have actually increased their total store count, according to research from Mastercard. This paradoxical trend reflects a shift in priorities, with many retailers focusing on higher-value markets and moving away from prime locations.

The move towards secondary sites suggests that as digital channels become the primary means of customer engagement, the importance of high-street presence is diminishing. This strategic realignment indicates that retailers are adapting their physical footprints to complement their online operations, rather than competing directly with e-commerce.