Retailers Reconsider Store Formats

The newest trend in retail is downsizing… but not the kind you think.

Greater cost pressures and weaker brick-and-mortar sales has many of the big boxes rethinking their store formats. While some, including Old Navy, Sony and Kohl’s, have begun aggressively remodeling, others are pushing through plans to decrease overall store size. Retailers who have announced plans to shed space or open smaller format stores include Best Buy, Staples, Office Depot and WalMart.

This trend was one of the key findings of our recent RiskFactor Report for Retail Businesses. Amid concerns that the big box model is no longer viable, the study found that retailers are returning to store growth plans previously put on hold — many with a focus on updated formats. Two-thirds of retailers noted risks associated with growth and expansion, an 18% increase over 2010.

Retailers are also increasingly worried about their ability to fend off competition and respond to changing consumer trends and habits.  As a hint that big changes were on the way, a vast majority (80%) of retailers reported concern over executing their business strategy in the 10Ks — a whopping 86% increase over 2010 (43%).

According to some analysts, the rise of e-commerce means that big boxes don’t need as much space as they once did. For Best Buy, their strategy includes a greater push around their highly successful small-format mobile stores and sectioning off parts of their large stores to sublet to smaller retailers.

While downsizing carries risks (lease renegotiations, hefty remodeling fees, capital investment), there’s also a great opportunity to trim costs, focus inventory and re-attract shoppers to the store.

Have you considered adjusting your store formats to better fit consumer needs?