In an era of tiny houses and minimal carbon footprint, some big box stores are pivoting to smaller retailer space in an effort to reach consumers who prefer a smaller venue along with a more personalized shopping experience.
Earlier in the year, home furnishing giant IKEA opened an 8,800 square-foot store in Gaithersburg, Maryland. The new venue is a fraction of the typical 300,000 square-foot space the retailer typically occupies.
IKEA has joined the ranks of Target, Macy's, and Nordstrom who have experimented with small-store formats over the past decade.
An IKEA spokesperson told NBC News smaller stores are designed to give shoppers a more personalized experience, "A Plan and Order point with Pick-up is one of many new format stores that are part of the growth strategy for IKEA U.S., increasing accessibility to the brand and ensuring there are more ways to meet customers where they are and how they like to shop.
"It is different from the traditional large-format Ikea stores as it gives customers the opportunity to meet with the IKEA store team to plan and order home furnishing solutions that require a bit more help," the spokesman said.
Target has experimented with various sizes depending on the location. In 2024, it opened 10 stores at 20,000 square feet or less, usually in urban areas or in neighborhoods near college campuses.
The typical Target store is around 125,000 square-feet, and the retailer plans to experiment with a few stores pushing 135,000 square-feet.
"Our flexible model allows us to bring the Target experience to life in any size or format," a Target spokesperson said.
During an earnings call in March, Target chief operating officer Michael Fiddelke said, "We feel really good about the returns of small stores."
R.J. Hottovy, head of analytical research at Placer.ai, told Yahoo Finance there are several reasons why retailers are pushing a "smaller is better" strategy.
"First, smaller-format stores tend to be less expensive to operate than larger-format stores in terms of rent and labor needed to staff the stores," Hottovy said. "Smaller-format stores [help] retailers to streamline operations and focus its merchandise and staff to its best customers.
"Also, as we've seen many consumers move away from urban areas to more suburban and rural markets, smaller-format stores allow retailers to more efficiently reach these potential customers."
A shrinking customer base is another reason retailers may choose to go small.
Macy's announced earlier this year it would be closing 150 underperforming stores, with 50 of those set to close end by the of 2024. At the same time, Macy's announced it would be opening 30 small-format stores, with the goal of tripling its current number by 2025.
James Morley III ✉
James Morley III is a writer with more than two decades of experience in entertainment, travel, technology, and science and nature.
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