How Retailers Are Exploring the Benefits of Small-Format Stores

January 18

Despite the closing of malls and widespread business downsizing, the brighter side of the retail industry is streamlining toward more economical models, such as small-format stores.

These days, one of the top challenges for all retailers is to minimize costs while maximizing customer experience. One of the more effective ways to do that is to create broader market visibility with smaller, more personalized operations. Amazon, for example, has shown it's not just about online shopping, as it's opening a series of small-format stores. While the company already owns large warehouses around the United States, adding smaller outlets help Amazon specialize in various niches. These smaller storefronts are connected with the company's hub for processing orders.

Large retailers, like Amazon, are in an ideal position to adopt a more flexible business infrastructure that includes remotely connected smaller shops either within a physical establishment or beyond.

Here's a look at the main reasons why retailers are embracing the small store concept.

Most Common Reasons Brands Use Small Outlets

  • Less Square Footage Allows for More Stores - One of the reasons retailers are embracing small shops is to reduce rent cost for store space. A retailer no longer needs to showcase all its products in one big place, nor does it need to rely on square footage to market large products or limit the number of its stores.
  • Lower Costs Allow Better Customer Deals - The more a retailer can offer bargains to customers, the more revenue it can attract. By cutting costs associated with physical store space, businesses are in a better position to focus on customized marketing.
  • Opens Opportunities for Saturated Local Marketing - Placing smaller shops throughout a region raises a brand's profile among the local community. It allows for the brand to be exposed in more neighborhoods where it might not be as top-of-mind due to location. Even so, smaller shops can specialize in products based on location, such as offering limited apparel in residential areas.
  • Allows for More Customized Solutions - Personalization and customization are two of the most important features of modern digital marketing. Placing small stores in communities that bring the store and customer closer together allows a company to gather relevant information about customer needs to formulate custom offerings that suit their preferences.
  • Provides a Convenient Shopping Experience - The more convenience a store brings to its customers, such as opening small stores in relevant locations, the more word-of-mouth promotion is possible among customers themselves. Small store managers can corner geographic markets by learning the needs of a neighborhood.
  • Builds Greater Visibility - The more omnipresent a brand is, the wider the market of individuals it can attract. Strategic placement of small shops in the right neighborhoods allows greater access for customers to tap into customized products. At the same time, it provides greater access for the brand to reach new target customers. For example, mobile food trucks that move from neighborhood to neighborhood are paving the way for similar businesses.
  • Creates a More Diverse Customer Base - Setting up small pop-up shops that move around to different locations is a great way to increase the diversity of your customer base. Plus, as a mobile store isn't bound to showcase the same products day after day, as all products tend to be stored in a central warehouse, the products showcased on the shop floor can be changed often to attract new customers. Additionally, digital catalogs and virtual reality tools can be used at minimalistic, yet futuristic, physical storefronts as a way to present customers with everything in your catalog.

The rise of the small-format stores is in response to the popularity of mobile shopping and the need for retailers to cut high costs on square footage. It also promotes greater shopping convenience for and opens the door to more personalized engagements with customers. Merchandise does not need to be physically available at small shops, but retailers can still showcase their products and take orders using a number of mobile and digital solutions. Essentially, these minimalistic outlets contribute to increased efficiency, better customer interactions and enhanced market visibility.

Johannes Beekman

About the author

After 25 years in engineering, Johannes Beekman founded IoT Marketing with the goal of helping companies bring wide-scale awareness to their inventions. He received a Master of Science in Physics degree from the Eindhoven University of Technology, and a Master in Business Administration degree from the Wharton School of the University of Pennsylvania, and started his career in the semiconductor field. Johannes pioneered two successful wafer fab startups for Philips Electronics; one in Europe and the second one in Asia. And served as Senior Program Manager for Sematech, where he provided solutions for semiconductor industry-wide product improvement and cost reduction challenges. Johannes has also published articles on several trade-focused websites.


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