7 Reasons Why Small-Format Stores are Trending

It is true that some retail companies are closing stores, but not all of them are choosing a 100% e-commerce store-front. In fact, many brands are opting for small stores in strategic locations to balance their online and offline presence. This includes well-known names like Target, Sephora, Whole Foods and Kohls. As compared to big-box stores, the small store format has advantages for retailers and consumers.

As the size of the store reduces, so does the inventory carried by them. The very purpose of a store has changed. Instead of being merely a place to pick things off the shelf, stores are being designed as pick-up spots for online orders, customization centers and drop-off points for online returns. The idea is to create a seamless online and offline customer shopping experience.

Let us find the top 7 reasons that make brands opt for small format stores:

1. Smaller Stores: Lesser Rent, More Stores
   Rent is one of the major overhead costs of operating a store. A small format Target has an area of typically between 20,000 and 40,000 square feet. On the other hand, the large format stores often had an area of as much as 145,000 square feet. Store sizes have a direct relationship with rent and thus as you would imagine, a smaller store has a lower rental cost. This gives retailers the option of opening multiple stores across different locations instead of one central store.

2. Lower Overheads: Better Pricing
   People generally assume that big-box stores can offer discounts because of their bulk purchases. According to this belief, small stores would typically not be able to match price-points since they offer limited stocks. However, this is not always the case. Along with reducing rentals, operating a small store also needs fewer salespeople and maintenance staff. The amount of electricity consumed is also lower. Thus, the retailer’s outgoing monthly expenses are reduced. This allows them to match the prices being offered by large-format stores and retain customer loyalty.

3. Hyperlocal Marketing
   Having multiple small-format stores in different localities offers brands the opportunity to dive deep into the needs of each market. Thus, they can cater to the specific needs of local clientele. Each store does not need to stock the same products and instead may be stocked as per merchandise that sells well in specific areas. For example, a Target store located close to a college may prioritize stationary and dorm supplies while those in suburban residential areas may choose to stock clothes, cosmetics, and groceries. Thus, brands are able to identify their customer’s core needs and address them.

4. Customized Services
   Many small-format stores operate as franchises run by locals from the area. Thus, the store manager is familiar not only with the products on sale but also the needs of the neighborhood. This allows them to customize their services accordingly. For example, stores in an area where people typically return home late from work may choose to stay open for longer at night. Similarly, stores in affluent neighborhoods may focus on home delivery for the convenience of their customers. When it comes to fashion retailers, small-format stores can even serve as centers for alterations and customizations. This makes these stores popular with the residents of the area and encourages them to make repeat purchases.

5. Convenient Shopping
   Not everyone who shops at a big-box store walks out with trolleys filled with purchases. Many people go to the store with a limited list of things to buy. For them, negotiating through the aisles and long check out queues can be quite frustrating. On the other hand, small-format stores have limited stocks that cater to local needs. This, in turn, means that the shop floor is easier to navigate and checkout queues move faster. For consumers, this translates to convenience while for retailers it means that more people can be serviced at a time.

6. Improved Accessibility
   For office goers, visiting a large format store is often an ordeal as the stores are not usually located around their homes or offices. Thus, they need to take time off work, drive there or take public transportation and dedicate a large portion of their day to the shopping experience. Small format stores are set up in strategic locations around residential areas. This makes it easier for people to stop by at the store on their way back home from work and pick up whatever they need. In terms of costs, even if the big-box store could have offered a discounted price, the cost of going to and from the store would have offset the cost difference. Thus, smaller stores are more popular with most consumers.

7. Omni-Channel Experience
   A smaller store does not mean that the brand reduces its product offerings. Instead, it actually expands on the services it can provide. Rather than stock everything on the shelves, the store work in tandem with the e-commerce website. Small stores function as regular stores as well as pick-up and return points for orders placed online. This gives the brand a competitive edge over retailers who follow a 100% online e-commerce system.

Interestingly, it has been noted that when an offline store is closed, online sales often dip. Having small-format stores lets retailers maintain their geographical presence and thus, keeps the brand visible not just on the web but in real life as well.

The Bottom Line
Small format stores appeal to the modern consumer’s on-the-go shopping habits and a retailer’s ability to change itself to suit consumer needs. This does not mean that all small store formats will be successful. In an age of convenience, stores must go beyond their product range to offer value-added and personalized service to stand out.

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