The recent trend toward smaller-footprint stores is about something more fundamental than simply reducing square footage. It’s ultimately about creating smarter, more innovative branded environments that better serve today’s omnichannel customers, and smaller is often an important part of that.
Scaling down to smaller footprints — or “micro-retailing” — also means different things for different types of branded environments, whether it’s Walmart testing small general stores in vacation spots; banks consolidating, rebranding and renovating into smaller branch footprints; grocery testing smaller but certainly not small footprints; or DTC brands experimenting with a range of footprints, from simple pop-ups to innovative tech-centric stores focused on customer engagement rather than sales.
Still, there is no question store sizes are shrinking, as the average new lease in 2021 was 3,000 square feet, the lowest in a decade, according to CoStar.
What should retailers focus on when they consider smaller-footprint stores? Here are four points to consider.
Photo by Walmart
Define your purpose
Walmart didn’t just decide to open smaller stores versus another “Supercenter” to save money. It envisioned mutually beneficial partnerships with hospitality spaces that could create new revenue streams. It planned strategically and focused its merchandising on items such as vacation necessities and local products.
It also created a specific rebranding, “The General Store by Walmart,” with a cozy feel that connected with its corporate partner in the venture, Getaway, which offers stays in tiny houses within beautiful, natural surroundings.
And, yes, partnerships, whether as a store-within-a-store or as a standalone within a connected commercial space, should be strategically considered for targeting likely customers. A small-footprint store within a larger retailer should be complementary in a purposeful way, such as a Starbucks inside a Target, just as targeted customers in a small college town would be different than in a larger urban center.
The offerings of smaller spaces, in fact, can be diverse. Some serve not only as stores with a focused lineup of products but also as mini-distribution hubs for delivery or to serve BOPIS clients.
Further, serving today’s omnichannel customers means paying particular attention to integrating your app into store development, knowing that one-third of your customers are using their smartphones while shopping, and that number is sure to rise over the next few years.
Smaller doesn’t necessarily mean less — particularly less innovative.
Elevate the customer experience
Along the lines of smartphones, apps and innovation, make detailed plans for your data collection strategy to develop a more granular understanding of your customers, their behaviors and wants and needs. This will improve the personalization of the shopping experience and will build brand loyalty, though it’s also wise to be transparent with your data collection and provide customers an opportunity to opt in or out.
Smaller spaces also offer opportunities to lean into technology that fosters a more immersive experience. While DTC retailers are opening brick-and-mortar stores because customer acquisition costs have dramatically grown online, traditional retailers can engage customers with interactive experiences that seamlessly alternate between store and online.
Curated smaller spaces also can offer testing opportunities, as design, displays and technology can seek to lure customers out of autopilot shopping routines to engage something new.
All that noted, while you try to slow down and engage your customers, make sure the smaller space doesn’t cramp your convenience shoppers, particularly at checkout. Big or small, 77 percent of shoppers are less likely to return to your store if they feel they spent too much time waiting in the checkout line.
Localize, inside and out
Smaller footprints will feel more personal to customers, so blending in with the local community matters even more. A starting point is design. Ensure your space fits in with its surroundings — urban, rural, artsy, modern, college, historical, etc. — standing out as a distinct brand while also embracing and supporting its general environment.
This includes what’s inside your store, such as stocking and celebrating local products, and outside, such as community outreach, volunteering and special programs to attract people to your space.
Customers care about sustainability and corporate responsibility. They care about businesses that support the community in word and deed. A small footprint doesn’t rule out a big contribution.
It’s possible a small-footprint store is a one-off or programmed as a small number of prototypes for testing. It’s also possible that your smaller-footprint prototypes are intended to eventually roll out at scale, perhaps to hundreds or even thousands of locations nationwide.
In the second case, that informs a critical part of your purpose and planning. It also helps to have an innovative partner throughout your process with experience rolling out stores at scale and doing so efficiently, both on-time and on-budget.
The most obvious benefit of smaller footprints is they cost less to develop. That shouldn’t, however, reduce an attention to detail, a vital part of which is the value engineering of initial designs for rollout at scale and reducing the costs of fixtures and décor.
Further, rolling out smaller-footprint stores at scale still doesn’t mean one size will fit all. A focus on precise kit packing and logistics as well as having knowledgeable installers make sure each store gets what it needs, maintains on-brand standards and is efficiently put together.
Downsizing or micro-retailing is a trend that shows no signs of abating. But smaller doesn’t mean that creating an optimized branded environment becomes easy. As in all things retail, developing great customer experiences requires strategic and innovative design, great planning and great execution.