Big retailers like Macy’s, Kohl’s and Target are all rolling out new, smaller footprint formats which represent significant challenges for suppliers and competitors alike.
For much of the history of retailing, bigger was always better. The quest to build ever larger stores was the holy grail for national chains across the retail spectrum and the result were maga-monster locations as larger as 500,000 square feet in some cases.
But more recently, retailers have decided that more compact footprints can also be part of their physical strategies and so we are seeing many big operations downsizing and testing various smaller-size locations.
As with many things in the retail business, the twin giants of mass merchandising – Walmart and Target – were early adapters of smaller stores. For Walmart it has mostly been on the grocery side of its operations but Target has fully embraced small stores for general merchandise. It now operates about 180 small-format stores, almost 10% of its total fleet. While the typical Target averages about 135,000 square feet and can be even larger with full grocery components, the small stores measure out at about 80,000 square feet. Still big compared to many specialty stores but significantly smaller than their full-size counterparts.
More recently, downsizing has hit the department store channel. Macy’s began its Market by Macy’s program several years ago in the Dallas metroplex and now has had eight such locations. They are usually located in neighborhood strip centers and run in the 30,000 to 50,000-square-foot range. Earlier this month the company announced it would open as many as 30 new stores by the fall of 2025. These new locations would just be called Macy’s, indicating it plans to present a more unified message to shoppers. And sister-company Bloomingdales is also rolling out smaller footprint locations under the Bloomies name as well.
Kohl’s has even more ambitious plans for the small-store front. It operates about 20 such locations – averaging 35,000-square-feet --- but said it expects to open as many as 100 additional small-format stores by 2026. Again, these are primarily located in neighborhood shopping areas.
Of course, big stores having smaller stores is not exactly a new concept. Belk has operated several different-size locations for years, many that fit the neighborhood store footprint. JCPenney also has had small-format stores throughout its history.
For retailers competing against these big nameplates, it now means that they could often be down the block – or down the strip center – from your store versus miles aways in a big mall or regional shopping district.
And for suppliers, the very nature of these more compact locations means they simply need less inventory and will be carrying smaller assortments, often excluding the depth and breadth of merchandise they might carry in their full-size stores.
It’s a new dynamic that everyone on all sides of the retail picture will need to adjust to as this trend accelerates. Then again, big retailers have been known to change direction unexpectedly and the small store rage may be just a passing fad.
For those with longer memories, the idea of shrunken versions of big stores – particularly department stores – recalls a format that has pretty much disappeared but was once quite popular. They were called junior department stores, proving that once again in the business of retail everything that’s old is new again.