With the high street becoming a much more difficult landscape to navigate. The state of mind that, ‘the bigger the store the better’, seems to have gone out the window as retailers start to streamline and adapt their operations to stay afloat.
So why has the landscape become so difficult? The reason for this is quite simple, there is a change in attitude from consumers and perhaps companies are not quite quick enough to adapt to these new ways. We have talked previously about the rise in online spending and this seems to be a huge factor in encouraging us not to make the pilgrimage to our local shopping district.
As a result, we have seen the rise in smaller format stores hitting our local retail haunts. Let’s have a look at how smaller sometimes really can be better.
It goes without saying that Consumer behaviour towards online purchasing allows for a much bigger pool of products to be accessed and merchandised more easily. It also allows for a more quick and efficient supply chain. Convenience is going to be the winner against customer interaction in the game of cat and mouse.
We have seen many big-name brands struggle to get people through the doors. Those which have seemed to have struggled is the gargantuan shops which occupy some of the biggest units. House of Fraser has fallen foul of this, and we are starting to see other retailers like Debenhams face similar problems. When consumers are offered the option of a convenient online space with the same products, why would you visit a physical store?!
However, the main challenge for online is sometimes the first-hand experience of a product and a multichannel approach is sometimes the element of a business that clinches a deal. Made.com has been on a mission to become the next mainstream affordable online furniture retailer. It sets itself apart by blending its commerce website with rich content that enthuses its readers. It has also opened a series of stores in the UK, that use technology and clever design to enable customers to browse their entire range in small showroom spaces. It provides the realisation that there is value in bricks and mortar and there is a relationship to be had between the two.
With enterprises becoming more spend savvy, it doesn’t make sense to establish larger than life stores that hold copious amounts of stock. All these products require merchandising and monitoring of SKUs. Instead, having a smaller footprint means companies can select top styles, showcase top models or streamline offerings into good, better, best categories.
It could be argued that the companies that seem to be winning lately are the ones that curate assortments, think Aldi’s Best Buys. We have all been partial to an instant purchase of the new pet range that has just come in, and maybe next week, as it’s spring, they will have a range of garden supplies. This marketing of curated assortments means that customers are encouraged to spend at the right time, and because it changes weekly, the same space will be just as profitable the next time.
Aldi stores are also more streamlined in their standard items compared to other brands. Their stock is entirely own brand with a limited number, sometimes only one option. This means there is no product competition and when coupled with quick service, it’s the destination of choice for consumers.
Being more nimble and able to reinvent and adapt gives retailers a competitive edge. This is something that’s prevalent in the online market and where physical stores struggle. Companies like Zara, who bring out snapshot capsule ranges much more regularly that respond to trends, have the upper hand because they are the retailer of choice for trend-conscious consumers. Smaller format stores find implementing changes to products, convenience and experiences easier and this means they focus more on encouraging spending.
Reduction in operating spaces also means spending less on the cost of renting larger square footage. This is especially apparent as the best spaces are in hubs of human activity and usually command the highest prices. Renting smaller spaces within these areas means you can still benefit from footfall, but you don’t have the hefty rent bill looming overhead.
Space in these areas is also more of a premium. Having the right product located in the right space is something that encourages the spend. The American chain Target is a great example of a company who are keen to jump on this initiative. They have been dropping stores into urban neighbourhoods and near student campuses providing an inventory that is targeted at those consumers. These stores have become the most productive sites across its whole portfolio.
Aldi is also looking to create smaller format stores within more urban areas close to London where a traditional sized store wouldn’t be an option. Aldi Local stores, as they will be known, will be around half the size of its traditional stores and stock around 1,500 products. Aldi has seen this as a significant growth opportunity dictated by consumers who would switch to them but don’t because distances are not convenient.
The below statement sums up perfectly the approach companies are tackling consumer demands.
“Make it easy for your customers to buy from you. Make it easy for them to find your locations. Make it easy for them to fit you into their life. Make it easy for them to get exactly what they need or want and make it easy to get things quickly.” Jason Aten
It’s not all dead in the water when it comes to bricks and mortar. We have also started to see consumers demanding memorable immersive experiences. Brands are looking to provide much more than a simple transactional shopping experience.
In Australia, IKEA has launched its first exploration into small-format concepts. They are responding to the challenges of modern consumer habits by creating stores that offer an improved experience locally but still form part of their wider business model of supplying out of large warehouse stores. These smaller stores aim to integrate into local urban environments where larger store formats are not possible. Placing smaller stores into people’s everyday patterns is a way they believe will contend against the rise in online spending.
There is also a rise in the market in pop-up stands and temporary leases on retail spaces. Brands are using the current social media-focused market and creating hives of activity that are time depended and convenient. More people engage, share and interact driving great brand exposure. This is a great marketing tactic which requires a minimum spend, drives revenue and increases brand identity. It shows how Bricks and mortar can support and drive online sales.
Although tech can support an experience, customer service is always going to be the roots of any successful format. Even shoppers who love high tech still want to talk to knowledgeable associates who make sure you make the right decision. AI may be able to recommend, but it can’t curate a look that suits your unique style as well as a human can.
Nordstrom Local launched last year which aimed to tackle technology-savvy consumers but still provide expert customer service. Their small-format stores contain minimum inventory with dedicated spaces that have several dressing rooms and a ‘styling suite’ for professionals to support customers and curate outfits specifically for them. They also act as a place for customers to pick up online orders, return items and even receive added services like facials while they shop.
These stores are a great example of how retailers are starting to redefine the term ‘retail’, changing it to be more of an experience-based model rather than an inventory based one.
So, with several companies actively pushing back the incoming ‘online monster’, it begs the question, are small store concepts enough to sustain a footing in bricks and mortar? What it probably boils down to is how big the challenge may be to make the changes in time and is there a format for brands to develop in this way.