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In Major Retail Shift, Stores Begin to Shrink

After years of supersizing, retailers are reshaping stores to keep up with an evolving consumer.

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Better edited, more intimate stores might just be in step with the current thrust of society and consumers.

Smaller stores are perceived as more local and authentic, and a narrower assortment can also be more enticing, said Martin Lindstrom, a consultant who has studied the intersection of biology and commerce and wrote “Buy-ology: Truth and Lies About What We Buy” (Doubleday).

In one of Lindstrom’s experiments, consumers were offered their pick from a box of chocolates. When the box had 32 pieces, only 6 percent of consumers took a piece. When the box had eight pieces, 26 percent decided to indulge their sweet tooth.

“The fewer options we have, the more likely we are to buy,” said Lindstrom, noting the brain is simply not hardwired to multitask in that way. “Big retailers have realized this and are thus narrowing down the options.”

The big-box store will no doubt remain a part of the retail landscape, but the shift to smaller stores marks the passing of an age.

“We invented the all-you-can-eat buffet and we stuffed ourselves,” said Steven Greenberg, founder and president of real estate advisory firm The Greenberg Group Inc., who attributed the explosion of big-box stores to “American greed.”

“Give a developer money and he’ll develop a shopping center; give a retailer financing and he’ll open more stores,” he said.

Greenberg cautions clients against growth for growth’s sake, noting that bigger stores lead to higher occupancy costs that can pressure chains to keep driving their business forward to keep up.

In many instances, the large-scale retail space created for an earlier generation will have to be rejiggered.

“This is one of the big questions that the retailer is going to face over the next decade,” said Leon Nicholas, director of retail insights at Kantar Retail. “What do you do with all of this space? Who wants it?”

Big-box stores could become supplemental distribution centers, he said. Macy’s is doing something like this, arranging a small number of stores so they pack and ship goods to fulfill Web orders.

Even if large suburban stores have fallen out of step with their customers, many are in prime locations and have plenty of opportunity, and space, to reinvent.

“When you’re that big, 100,000 square feet, it’s a public space. You should think of it not as a big store, but a small village,” said Ron Pompei, ceo of branding and store design firm Pompei A.D.

The current retail landscape was developed with a close eye to sales per square foot. But Pompei said that lens is limiting and led to spaces that were built for product in mind rather than people. Think of the Apple stores, in many ways the brainchild of incoming Penney’s ceo Ron Johnson, that offer only a few different products, but have lots of open space for people to linger and test new gadgets.

Big-box stores made up of rows of aisles and right angles are predicated on convenience and price, but often appeal to people as consumers only and they don’t engage the imagination, Pompei said.

“We have to recalibrate that and understand that we’re actually more complex,” he said.

Certain growing chains, such as Forever 21, are using their retail momentum to move into bigger stores. However, by and large there is a resizing that might be driven by economics but is leading to a conceptual shift for retailers.
“It used to be a world where the store was in the center much more and people would go to the store,” said Michael Dart, senior partner at consultancy Kurt Salmon. “Right now you have the consumer in the middle and you have retailers, wholesalers, technologies all trying to reach that consumer.”

 

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