Minimizing Your Retail Space? Here's How to Maximize Your Success
It wasn't long ago that every suburb was chasing the same elite retailers. They would create special zones to give residents all the must-have shopping amenities: big-box outlets, DIY shops, grocery stores, and fashion boutiques to browse at their leisure. Then came the e-commerce explosion. Shoppers’ trips became more calculated, with less time spent browsing purely for fun and making impulse buys. Retailers, seeing the loss of profit from these massive retail zones, had to adapt.
To increase their sales per square foot, they've started ditching big boxes and placing smaller stores in densely populated areas. An analysis from UBS found that as online retail rises to 25 percent from its current 16 percent market share, a massive downsizing in retail space is set to continue through 2026.
Why Retailers Will Downsize Future Stores
Big retailers are, one by one, discovering that downsizing makes them money. For example, Target, one of our clients, said early this year that it would open about 30 scaled-down stores in large cities and on college campuses while opening fewer traditional full-size stores. Although real estate is pricier in urban locations, the small stores are cash cows — Target's Manhattan Herald Square store earns more sales per square foot than any other U.S. Target store. These retailers are creating a fluid shopping experience, whether online or in-store. They offer a physical footprint featuring their most successful items while allowing customers to find the rest online.
Ultimately, this lowers physical store costs and reduces inventory. However, be careful with this curation because if you take it too far, you can say goodbye to your customer base.
4 Ways to Maximize Your Retail Space
You'll run into trouble if your order fulfillment — no matter the pickup or delivery method — falls outside of customers’ expectations or costs more than customers think it should. Also, customers will revolt if your selection of products dwindles too much or if your space is so small that it seems like a reduction in what you can offer. However, there are ways to prove to your customers that bigger isn't always better. Consider these four tips:
1. Start with existing stores and monitor results.
Take existing stores and work on unit reduction while monitoring customer satisfaction. One survey found that nearly half of consumers reacted positively to showroom stores, and results with millennials were even more successful. Retailers are learning that if they can provide an exceptional in-store experience, shoppers won't mind a longer wait for their purchases.
2. Remember that less is more.
Look for ways to increase your product assortment in growing categories. Although you might reduce your selection in some areas, shoppers will have plenty of choices of popular items, and your overall strategy will seem more like optimization than reduction.
3. Take advantage of click-and-collect shopping.
One of the best ways to marry online convenience with the in-store experience is the "buy online, pick up in-store" offering. Customers can make their purchases online and pick them up from a designated locker or space in-store. Although customers could use that option to avoid long checkout lines, some retailers actually retain the benefit of foot traffic — 20 percent of click-and-collect shoppers make additional purchases once they arrive at a store. Furthermore, both sides save on shipping costs.
4. Enhance the experience.
Partner with complementing services that can augment your in-store experience or build your brand. In Target's small-format store at its Falls Church, Virginia location, customers can pop in during their lunch break, shop, and pay a flat fee of $7 to get those items delivered. Target has also acquired same-day delivery startup Shipt, leading to a nationwide program offering free two-day delivery for orders of at least $35.
Sure, downsizing might mean a smaller store space and fewer products for sale, but when you use these smart strategies, you'll focus on quality over quantity, giving customers more of what they want, where they want it. And for you, that can mean big success.
Joe Schultz serves as the vice president of sales at Harbor Retail, which helps retailers and brands activate Harmonic Retail™ along the path to purchase.
In the first phase of his professional life, he spent 22 years learning and growing at Target Corp. During his tenure, he surrounded himself with inspiring mentors who taught him how to adapt quickly to the retail industry. Through his many leadership roles in stores, store operations, merchandising, and marketing, he learned to think nimbly, seek out new knowledge when approaching challenges, and be a champion for continuous improvement.
Joe has led stores with annual sales of more than $500 million and has led innovative marketing and merchandising efforts across new formats. A few years ago, Joe made the leap into the industrial design and build world and was lucky enough to connect with the innovative, multitalented team at Harbor Retail.