Do Small-Format Stores Have An Advantage In Retail?

As many retail stores had to shut their doors for good, and many others struggled with lower traffic, reduced sales, and payroll cuts, small-format stores became more popular with retailers.

Micro-businesses have also found a space for their wares through holiday markets and other marketplaces. These smaller retailers are finding a way to thrive amidst the changes brought on by the pandemic and the convenience of online shopping.

Placer, which provides location intelligence and foot traffic insights, published a report about how small-format stores can help retailers target specific audiences, experiment with new brand concepts, and maximize reach while minimizing overhead.

Let’s take a look at retailers who’ve seen success with small-format stores and learnings from the report released by Placer.

Smaller Is Smarter

Smaller store locations means lower rents, fewer employees, and less inventory-on-hand – overall it means lower overhead.

With the right mix of product in-store, a smaller format store can often mean a more efficient sales strategy. Even with a smaller footprint, stores bring the same brand awareness to neighborhoods, offer customers convenience with buy online and pick-up in store, a place to take returns back without the cost of shipping, and offer a personalized in-person shopping experience. And often these stores can open in areas where they wouldn’t otherwise have the ability to do so if it weren’t for the reduced store size.

Retailers Opening Small-Format Stores

DSW typically has stores that are approximately 25,000 square feet, but in May 2022 the retailer opened a small-format 15,000 square foot store in Houston, Texas and found that the new concept store has significantly higher visits per square foot.

Barnes and Noble is also trying out small-format stores and saw similar results. The bookstore opened 16 new stores this year and is planning on opening 30 more in the new year.

Earlier this year retail giant Walmart announced that they are also tapping into the small-format store industry, opening new stores called General Store by Walmart.

Walmart is partnering with Getaway, a cabin retreat company, to add these small general stores at select popular travel spots around the country, starting with the first location near Austin, Texas. The new locations are truly micro stores, with a size of only 75 square feet.

“In partnering with Walmart, we are able to amplify our efforts to a larger audience and provide our guests with more free time, helping them prepare for their stays and enjoy the comforts of nature once they arrive,” said Carlos Becil, Chief Experience Officer of Getaway.

Target has been operating small-format stores for years now, opening stores over the past decade that are as small as 13,000 square feet – a fraction of the size when compared to their typical stores which are approximately 130,000 square feet. Their smaller stores target college students, carrying items that cater to this age group such as dorm room furniture, school supplies, everyday items such as toiletries, and grab-and-go grocery items. Catering to the right target audience has paid off. The smaller Target stores have seen higher year-over-three-year growth in store traffic than their larger locations. This achievement is not an easy feat, with larger Target stores already in the area, seeing growth in their new smaller-format stores says a lot about how well the new store roll-outs were planned and executed.

Key Takeaways

Placer’s report outlines four key takeaways:

1. Smaller stores can increase visitor density, enabling greater efficiency in areas where large format stores don’t fit or are cost prohibitive.
2. Retailers can use smaller stores to cater to key demographic segments.
3. Small-format stores can offer more experiential retail possibilities by focusing on specific audiences.
4. Companies can draw on smaller stores to double down on convenience.

These small-format stores are relocating to residential neighborhoods or occupying smaller vacant storefronts to serve urban areas that couldn’t accommodate traditional-sized stores. And in doing so they are creating a niche market that offers operational efficiencies, convenience for local customers, and it’s also paying off for retailers.