Big Retail Problems, Small Format Solution?

With traditional brick-and-mortar retail facing big problems, some chains are addressing them with small solutions. Specifically, with small(er) stores.

While years of generally declining sales have necessitated the closing of a number of its department stores (both its namesake and Kmart locations) recently, Sears has, at the same time, been putting together plans to launch a number of small-format stores that are less than one-tenth the size of its average locations.

If the pilot program is successful, the company has told Reuters, Sears intends to expand those stores sooner rather than later.

Is this a viable answer to the beating that Sears’ bottom line (and that of many other one-time stalwarts of brick-and-mortar retail) have been taking in recent years? More and more consumers have taken (and continue to take) to digital channels, such as eCommerce and mobile commerce, effectively putting up smaller-sized, specialty stores in place (not literally, mind you) of the massive, all-purpose locations that they are closing.

Sears seems to think that’s a possibility, and the company is putting its best foot forward, as it were, from a product standpoint, with its small-format pilot program.

The first of the new locations — which Reuters reports will occupy 10,000 square feet (in stark contrast to the average Sears store size of 138,000 square feet) at a redeveloped mall in Fort Collins, Colorado — will specialize in home appliances, a category that has always been one of Sears’ strengths. More than just selling items like refrigerators, dishwashers and ovens, the Colorado location will additionally feature omnichannel offerings, like an interactive display on which shoppers can view arrangements of the appliances in different layouts, the ability to book an appointment with an appliance expert in-store and a buy online/pickup in-store (more specifically, in-parking lot, as consumers can have their purchases brought out to their cars) option.

As for the potential for expanding the format to other states and cities in the U.S., Leena Munjal, senior vice president of customer experience and integrated retail at Sears, told the outlet: "Obviously, we want to move the needle. This is very much a quick, scalable model.”

While Sears hasn’t stated as much on the record, one thing that might be motivating the retailer (as Fortune and other outlets have surmised) to take a hurry-up approach to rolling out more specialty stores is the fact that a one-time rival in the appliance space, JCPenney, has made a return to that arena after a 32-year absence, following up a successful pilot of an appliance showroom earlier this year with plans to expand it to about half of its locations this summer.

While JCPenney’s appliance offering will differ from Sears’ reboot (of sorts) surrounding the category in that the former’s will exist within larger JCPenney locations rather than occupying standalone stores, the key similarity of both ventures is that they seek to drive consumer focus (and, the companies hope, dollars) to a particular segment of their offerings — taking, essentially, a “here’s what you need; let us guide you” approach rather than the traditional department store business model of “there’s a bunch of different stuff in here; come on in and wander aimlessly” (the latter, catch-all tactic clearly not having caught much in recent years).

Sears, it should be noted, is not the first retail chain to attempt an expansion-via-compression strategy. Back in 2011, Walmart began opening Walmart Express locations that were targeted at shoppers that didn’t necessarily need to buy in bulk at the chain’s supercenters. The offering did not gain traction, however, and Walmart announced at the start of this year that it would be closing all 102 of its small-format stores.

Target, on the other hand, has enjoyed some success with its flexible format, urbanite- and millennial-friendly CityTarget locations that first launched in 2012 and have since expanded to Los Angeles, San Francisco, Chicago, Boston, San Diego and Philadelphia. (Just this week, The Street reported that the newest CityTarget, set to open in New York City in October, will include a Chobani cafe. Successful brick-and-mortar retail strategy = Greek yogurt? Maybe.)

Following Walmart’s abandonment of its small-format plan and in the midst of Target’s forward progress with its own, Kohl’s declared its own intent to move into the smaller-scale space, announcing in February that while it will be closing 18 of its “regular-sized” stores this year, it will, at the same time, be debuting seven smaller-format locations in different parts of the U.S.

The various levels of success (and failure) to date in retailers' attempts to get bigger by going smaller do not provide enough evidence to declare the likelihood of Sears’ planned small-format rollout going one way or the other. If nothing else, though, the woeful state of large brick-and-mortar chains makes it at least worth the company’s while to take a shot.

As Sears Chairman and CEO Edward Lampert told Chicago Tribune: “We have and we will be trying a lot of things.”

Now, that’s what we call thinking small (and vague).



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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