Big boxes are building small stores – How small is too small?

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As retail transforms, even the largest retailers are “right sizing” stores

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In the heyday of mass merchants and hypermarkets, the philosophy was “bigger was better”. Walmart, Target, Kmart and the clubs were in a race to build ever-larger footprints to hold increasingly larger assortments. Before the age of Amazon, “Big Box” stores were the category killers that created the destination locations to draw the masses. Today, the big retailers are now focusing on ever-smaller stores. Why? Will store downsizing continue? The current downsizing trend begs the question: how small is too small for a store?

Why this is important: The retail transformation to omnichannel challenges the basic concept of a store as a destination to purchase. The consumer quite literally has become the POS, which requires retailers to reexamine right sizing stores.

The Big Box Era – When Sam Walton was the curse of main street retail

No one epitomizes “big box retail” better than the legendary Sam Walton, founder of Walmart. In the not so distant past, there was genuine fear that Walton’s big Walmart supercenters would be the end of small town retail and main street shops. Some communities even created zoning and legislation banning large superstores like Walmart.

Before the era of Amazon and ecommerce, Walmart created destination locations over 200,000 square feet, stocking hundreds of thousands of SKUs. In order to compete, Kmart and Target also built supercenters in an effort to draw customers to a one stop shopping destination. As it turned out, these big box retailers did not kill retail or main street shops. In the new era of Amazon when consumers have millions of product choices, the big box retailers must now scramble to adapt to new consumer expectations.

Big retailers opening smaller stores to compete in changed landscape

In today’s omnichannel environment it is the consumer who controls when, where and how they shop. In order to compete, the industry is seeing a big shift in brick and mortar strategies. The very largest big box retailers are developing much smaller store concepts in order to stay relevant and grow in the changing retail landscape.


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Future growth lies not in the size of stores but finding formats that connect with today’s customers and meet their rising expectations.


National Real Estate Investor highlighted some of the trends toward small store footprints:

  • Walmart is building 3,000 sq. ft. convenience stores called Walmart Fuel Stations. Walmart has also tested 4,000 sq. ft. Walmart Pickup with Fuel formats. In addition to convenience items, these stores serve as drive-throughs for picking up online orders.
  • Other Big Box retailers like Target are building smaller, more streamlined urban-format stores. Target plans to have 130 small format stores ranging in size from 20,000 to 40,000 sq. ft. by 2019.
  • Kohl’s is not only downsizing real estate footprints, but also teaming up with grocery or convenience retailers in order to optimize excess store space to drive more traffic.
  • IKEA may well be the giant of Big Box stores, with typical stores running 300,000 sq. ft. As IKEA competes directly with Amazon, it is boosting online presence and reducing store sizes substantially to focus on urban environments.
  • Nordstrom’s has piloted the ultimate small store called Nordstrom Local. It is only 3,000 sq. ft. It essentially carries no inventory for sale. Very different in size and concept from Nordstrom’s typical 140,000 sq. ft. “department” stores.

Large retailers are aggressively experimenting with smaller stores that are less expensive to open, fit in more neighborhoods, and can be more adaptive to customer’s expectations, particularly in the area of click and collect.

Right sizing retail stores – why going smaller could be a continuing trend

Retailers who are not nimble in adapting to customer behaviors and expectations are the ones in trouble. Successful retailers now understand that consumers are situational shoppers depending upon the category and the context of their customer journey. When consumers know exactly what they want, they are quite happy to shop online and avoid the commute. A majority of customers still prefer store experience for considered purchases. Many prefer click and collect convenience, particularly for commodities and food categories

Several key factors that make smaller stores possible and potentially more profitable:

  • Virtual shelf technology reduces the need for large inventory in store
  • Click and collect also enables small stores to offer “unlimited” choices
  • Convenient local locations foster click and collect customer traffic
  • Small footprints reduce rents and enable more locations, particularly urban
  • Small stores enable curating assortments to local consumers tastes and needs

How small is too small?

While some of the former Big Box like Sears and Kmart are in trouble, Walmart continues to operate its Supercenters and is now achieving comp store growth by leveraging strategies such as click and collect. The hypermarket superstore is not dead yet. Yet, there are many advantages of going local with a small footprint carrying a lot less inventory.

How can a tiny store of only 3,000 sq. ft. compete? When does a store become too small? It depends upon many factors. Smaller stores must excel at engaging customers, personalizing service, offering convenience online, or click and collect. In fact, smaller stores must do all of them well. As the retail store shrinks in size, it must increase relevance and value beyond the products it sells.


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Future brick and mortar success is not dependent upon store size, but the ability to create value and relevance beyond the products sold.


So, what is the right size for retail stores? The answer will depend upon the retailer’s core customer expectations, not the products it sells. The most important trend in bricks and mortar retail right now is that even Walmart is experimenting with many formats to “right size” the store platform to fit customer needs.

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Sources: National Real Estate Investor: Big-Box Retailers Come Up with Small Concepts to Grow in a Changed Landscape, by Liz Wolf; August 9, 2018

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