IS THE SMALL NEIGHBOURHOOD STORE READY TO BE THE NEXT BIG RETAIL TREND?

Lee Peterson

Last year, a WD Partners’ study, “Retail Supernova,” showed people enjoyed working from home so much that going back to the office five days a week was no longer an option. Being home more often, consumers were found to prefer to shop local more and wanted bigger brands to come to them.

This local shift is in lock step with retailers’ current strategies, mostly caused by macroeconomic forces, to reduce size and change location.

Despite in-store traffic seeing a strong recovery, online sales have continued to rise, albeit not as meteorically as during the pandemic. This factor alone meant that the physical retail footprint had to get smaller, either through closures or actual square footage per unit. By the end of 2022, everyone from Macy’s and Nordstrom to Target, Sephora, Express, Best Buy, Abercrombie, Victoria’s Secret, IKEA and even Starbuck’s announced smaller store models.

Right-sizing helps in the long run: less labour, less inventory (“showroom” stores), less build-out costs, less energy spend, better online fulfilment and return options, as well as the big one since 2020 — better accessibility.

A retail exec we know pointed out at the NRF Show this year, “Malls aren’t dead… meaning good malls aren’t dead.” We agree. Yet our studies show the preferred place to shop is right in consumers’ backyards — a return to neighbourhood retail as in the days before the mall.

In our minds, the future of retail is the idea of the “15 Minute City”, dreamed up by the architect Carlos Moreno years ago. We believe it’s the perfect answer for the collision of the current macro developments: work from home, smaller/better stores and e-commerce. Many neighbourhood’s we see are already halfway there, but the biggest missing component in most cases is retail — modern, big brand retail. Neighbourhood retail doesn’t have to be a “ladies” tennis shop or a candy store for kids. Rather, it can be everything we have in the “good” malls and more. Thanks to all sorts of technology advancements, we can and should have really great, modern retail that we can gladly walk to.

DISCUSSION QUESTIONS:

Do you see a significant opportunity for national retailers to open up smaller stores in local neighbourhoods?

What factors do you see working for and against such expansion into smaller communities?