The Latest Trend in Retail: Shrinking Spaces

August 9th, 2022 Insights

Yesterday’s anchors and large retailers are getting a new look—and a new size. It’s nothing new. Driven in part by the rise in ecommerce in the past decade, 2020 accelerated this push. Now, halfway through 2022, the new look retail environments are starting to pop up.

Who’s Shrinking? A Whole Lot of Places

Bloomingdale’s recently opened Bloomie’s. Sephora has opened up some locations with half the square footage. Traditionally-massive Ikea has supplemented its arsenal of 300,000 square foot spaces. Same goes for Sam’s Club and Walmart. Even Aldi is testing out smaller stores with an Aldi Corner Store concept in Australia.

Here are just some of the places you might see opening a smaller store:

Target: Opening a variety of 20,000-40,000 square foot urban format stores. Additionally pursuing shop-in-shop partnerships in current locations.
Bloomingdales: Launching concept called Bloomie’s, focused on increasing convenience and better interacting with customers.
Ikea: Supplementing traditional stores with 8,000-9,000 square foot studios.
Macy’s: Launched 20,000 square foot locations called Market by Macys.
Sephora: Opening shop-in-shops, as well as smaller 2,000 square foot locations.
Sam’s Club: Recently opened 32,000 square foot club store featuring easier pickup, fewer SKUs, and more.

Not Simply Smaller, Smarter

Now, it’s worth noting that few if any of these are simply smaller versions of their current stores. The smaller Sam’s Club will focus specifically on catering items to the community it serves. The smaller Bloomingdale’s will be personalized. Many of these stores will work better as a beginning or end point for online transactions.

And even for those who aren’t going big on downsizing are looking to make more from their spaces. In fact, if you haven’t seen the cool things happening at Walmart, get ready. In short, the company is seeing some high praise for its new and signature experience. Instead of the norm, the new format is built on discovery, digital touchpoints, and an elevated shop-in-shop experience.

As we’ll discuss below, these stores aren’t shrinking just to shrink. They’re improving the experience. Even if the smaller footprint results in smaller real estate bills, these new stores are going to cater to the way visitors want to shop. What’s inside will be more profitable. And the designs will be memorable.

Five Things Small-Format Stores Aim to Offer

The next store, whether smaller or similar, is in response to the new way of shopping. The pandemic drove many of us online. It also drove shoppers to expect more when they did walk into a store. As retailers work to reinvent their in-store experience, here are just some of the things customers will come to see.

More Meaningful Shopping Trips—In Less Time

Throughout the pandemic, the thought of masking up for an hour-plus shopping trip was dreadful to some. Trips became tactical. For example, in the grocery and food world, convenience stores saw an 18.4% increase in basket size in 2020 compared to 2019. Time in store was minimized—both out of pandemic concerns and increased demand for the right products at the right time.

In many other industries, curbside pickup or BOPIS became the norm. And if someone was to go in, often knew what they were there for. In 2022, the mentality remains. Retailers understand this.

Smaller stores will cater to the quick trip mentality—but will also aim to make the most out of every minute. Ultimately, the smaller store will still provide the benefits of in-store shopping for both customer and retailer.

New Products, Categories, & Partnerships

The smaller store will give operators more opportunities. Less inventory, better presentation, and improved sales tactics will allow retailers to fail fast—or decide that maybe a specific product category would be good for the big stores.

Think of it this way. A traditional home goods or bedding section might require significant investment. Now, it could simply be a corner—with the best possible products in the category. Add this to a potential for shop-in-shop partnerships, and smaller stores could offer both a testing ground and profit center.

Smarter Interactions with Employees

Layout, product offerings, and speed will be part of the equation. Employees will be another. A smaller store footprint will require fewer people to staff it. But those people will be better equipped to help. Instead of simply pointing someone to the right aisle, employees will be around to add value to interactions, recommend products, and facilitate endless aisle transactions.

In these new stores, much more of the shopping will be curated—and employees will be stylists. As Forbes author Sharon Edelson discusses in her article on the future of Bloomie’s, staff at this concept will be experts.

“What’s different about Bloomie’s is that every associate on the sales floor will be a stylist, expert in all categories of the store, to provide a level of service enabled by technology, whether it’s finding the best denim fit or recommending the perfect pair of shoes to match an outfit.

Bloomie’s stylists will provide expertise, delivering personalized guidance to shoppers. Each stylist will be equipped with digital selling capabilities, allowing them to access special finds for customers outside of Bloomie’s, from nearby Bloomingdale’s stores to the 59^th Street flagship, as well as enabling them to work with Bloomingdales.com customers digitally.

The tech-enabled experience continues in the fitting rooms, where customers can request assistance with the push of a button.”

Like the fitting room technology discussed below, these empowered workers will be able to make recommendations or offer alternatives.

Better BOPIS

Omnichannel is here to stay. The omnichannel approach is multi-pronged, however. As we’ll discuss below, in-store shopping for delivery is a huge opportunity for stores. However, the pandemic-fueled buy-online-pick-up-in-store (BOPIS) trend is here to stay. After all, this is something that combines the instant gratification of in-store shopping with the minimal interactions of going online.

The smaller, improved stores will play along. Instead of a combined path to pickup, stores will facilitate BOPIS with dedicated spaces.

Technology-Enhanced Shopping

Some shoppers may have already made their purchases to pick up in store. Others may have done the research. Others still may have come into the store to launch the beginning of their shopping journey.

The last of these three is going to be a market these smaller stores can connect with. Without the traditional inventory levels of a traditional store footprint, smaller stores need to make the most of the technology offered to them.

And this is a multi-pronged approach. From enhanced displays to technologically enhanced fitting rooms to endless aisle tech—to better equipped salespeople, smaller stores will make the most of their space. Here are just some of the ways technology will affect the shopping experience:

Enhanced Displays: Displays in these stores won’t simply be better—they’ll be connected. From low-energy Bluetooth able to enable retargeting to custom displays, retailers can better target shoppers in store and create memorable shopping experiences.
Better Fitting Rooms: The fitting room is the heart of the store. It’s the place where a customer decides to make a purchase. The next generation fitting room could improve the browsing experience with touchscreens, offer suggestions, and expand the cart—even if the store doesn’t carry a specific item.
Endless Aisle Technology: Smaller stores, less inventory. However, more opportunity. Whether through employee recommendations or presenting related items in fitting rooms, stores can present their entire brand inventory—ready to ship.

Make the Most of Your Space—and Create an Unforgettable Experience

Smaller stores are going to offer a lighter real estate cost—but higher-ups can’t treat these as simply miniaturized versions of the initial store.

These stores need to think differently, treat shoppers differently, and operate differently.

What does this mean? Design needs to be on point. Everything from the entrance display to the fitting room to the cashwrap needs to work together to create an unforgettable experience. Simply put—blandness won’t work.

At Morgan Li, we’ve helped everyone from boutiques to big box stores create spaces that leave a lasting impression. From technologically-integrated fixtures to specialty cashwraps to fitting rooms, we have the skill and scale to get the job done.

Get to know some of the companies we’ve helped—and drop us a line when you’re ready to talk.