More retailers are seeking increased geographical reach and market saturation. Nearly half (49%) of retailers plan to expand their footprint over the next five years versus 28.5% looking to reduce space, according to Colliers’ Fall 2023 Retail Report. Compare that to 2016, where the planned expanders edged their reducer counterparts by less than a percentage point, 40.5% to 39.7%.
Expansion also boosts retailers’ omnichannel strategy. Colliers found that opening a physical store led to an average 37% increase in online sales in the respective geographic area.
“Retailers that combine the convenience of online shopping with the personal touch of in-store experiences provide customers with a more comprehensive and engaging shopping experience,” says Nicole Larson, national manager of retail research at Colliers. “Furthermore, one-third of customers do not trust retailers that only operate on one channel, whether online or offline.”
Adds Anjee Solanki, national director of the retail services and practice group at Colliers | US, “The resiliency of retail is how nimble retailers and investors are to pivot quickly based on consumer changes. This is reflective in the current movement with retailers redefining the use of their space, size, and experiences. Growth has not slowed and we anticipate retailers will continue to expand.”
Blend to Win
With most shoppers having multichannel familiarity, retailers now face expectations and preferences they must meet. Larson reports that many shoppers have found in-store experiences lacking the “phygital” elements that blend the convenience of online and offline channels, including user-friendly navigation and diverse inventory options.
“Today’s consumers expect stores to slay the latest trends with access to products, as seen on social media,” she said. “Retailers that adapt their layouts to entertain the consumer in this product discovery will alleviate any possibility of shopping FOMO.”
Retail 101 teaches us that outstanding customer experience (CX) is essential to customer loyalty. New store formats and in-store technologies help turn a customer visit into an engaging and memorable experience. The most common type of new format retailers are testing in-market is an omnichannel store that introduces new features and facilities, such as collection points for online orders, ordering kiosks and drive-up/curbside facilities, Larson asserts.
Small Size, Big Effect
By going small format, retailers can optimize operations, streamline costs and more. IKEA recently announced a new format, adding a “plan and order” store to its portfolio with a footprint less than 5% of the original flagship store size. Maxing out at 8,900 square feet, the new format will be designed to simplify shopping for urban consumers by prioritizing convenience, public transportation and delivery, according to Larson.
Boasting digital sales that now make up half of total system purchases, Panera’s approximately 1,000-square-foot digital-first concept will aim for to-go customers in dense urban areas, as well as campus submarkets such as hospitals and universities. Walgreens’ test concept in Chicago, with its few shelves of merchandise, is ostensibly designed to cater to digitally savvy shoppers, Larson says, but the concept also addresses the growing problem of store theft. And TikTok’s debut pop-up shop on London’s Oxford Street provides diverse creator livestreams, which have achieved 50% sales conversions.
“Shifting consumer behaviors demand convenience, personalization, and seamless experiences,
forcing retailers to adapt quickly to evolving store formats to meet changing expectations,” Larson said. “The rise of e-commerce, social commerce, and digital technologies has accelerated retailers’ need to integrate online and offline channels to provide consumers with a seamless shopping journey.”