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The Future of Brick-and-Mortar: Smaller Formats & Stores Within Stores

Photo Courtesy of Forbes.

Sometimes Smaller Is Better

A wide variety of retailers are opening up smaller-format stores, and each day a new company seems to be added to that list. For some of them, the forays are an attempt to have a brick-and-mortar presence outside of large malls and get closer to customers efficiently and economically. The small stores allow a retailer to put a stake in an area where large square footage may not be available, such as urban downtown business districts, and without having to fork over rent for a large location.

Macy's has gone small with two of its chains, its flagship brand and Bloomingdale's. The company is continuing to roll out off-mall Market By Macy's stores, in at least one case closing one of its mall anchors and replacing it with the new small-format option at another site. And Macy's this year debuted several Bloomie's, the smaller-format version of its luxury chain.

The roster of retailers launching or piloting smaller-format stores also includes Target, BJ's Wholesale Club, Ulta Beauty, Burlington Stores, Nordstrom, Rite Aid and Kohl's.

Planting Stores Within Stores

Nowadays visitors to malls and shopping centers are sometimes essentially getting two retailers at once when they enter a store: It's the increasingly popular store-in-store concept. Usually a larger chain allows a smaller specialty retailer to have branded area, a little shop, that sells its merchandise within the host's stores.

Macy's has really pushed into this strategy aggressively. Claire's, a chain that sells fashion accessories to tweens and teens, recently announced it was opening outposts at about 20 Macy's flagships. And Macy's has revitalized Toy R Us by opening store-in-store sites for the toy seller across its department store footprint.

Kohl's executives say their Sephora outposts are attracting new customers. (Kohl's)

"There's a lot more optionality to a retailer in the way they want to reach customers, and a lot more channels for them to do so," Chernofsky said during an ICSC panel where store-in-store initiatives were discussed.

Macy's isn't the only one involved in these partnerships with other retailers.

Struggling Kohl's has reported great success with the Sephora beauty shops that have opened in its department stores. The Sephora outposts are bringing new and younger customers to Kohl's, and they often stop to buy items other than makeup before they leave, according to company officials. Retailers such as Sephora benefit from the arrangement because they are able to expand their physical footprint and reach more shoppers without the expense and trouble of leasing their own additional stores.

Another beauty brand, Ulta Beauty, has rolled out store-in-store locations at Target locations.

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