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Top Reasons Why Small format stores are on the rise

Updated: Jul 22, 2021

reasons why small format stores are on the rise today
Top Reasons Why Small format stores are on the rise

Sometimes less is more. This statement is especially true in the context of retailing. The number of stores that are being shut has increased exponentially owing to the Covid-19 pandemic. But that does not mean that the retailing industry is dying but this is actually a sign of evolution.

The reality is that retail is flourishing through online shopping and specialized small-format stores. Certain segments of the retail market will be impacted more by the changing consumer tastes and behaviors if they don’t evolve.

This evolution started in the USA back when Target and Walmart the juggernauts in the retail space started moving towards smaller stores placed across the country to target their specific needs. But it’s important to note that neither of these companies was in growth mode and both were struggling to stay relevant in an evolving market.

The same will be the case with India given its humongous and diverse consumer needs. Convenience has been the top priority of people in the big metropolitan cities of India, this behavior will gradually trickle down to the smaller cities and towns as well.

Consumer behavior always drives the change within the retail community, this has been the case even before e-commerce took over. Big players are now trying to catch up with the changing customer behaviors by investing more in setting up more small-format stores than big-box retail stores.

Top Reasons Why Small format stores are on the rise:

Impact of online shopping

Stores don’t need a wide range of selection like they once did. Well people already have access to that in the form of online shopping. Having a larger warehouse to stock the inventory makes more sense especially as more and more customers are now placing online orders using their smartphones. Consumers no longer make lists and try their best to avoid in-store shopping, especially since the pandemic outbreak.

People, today, prefer to shop online from the comfort of their homes.

The consumer experience in large-format retailers is becoming increasingly cumbersome. The amount of time it takes to go through the seemingly endless aisles as well as waiting in long queues at the cash counter is a drawback to a majority of shoppers. A smaller store allows the retailers to give personalized service and allows for a product assortment tailored to a particular demographic niche.

Hyperlocal services

The hyperlocal delivery services will provide retailers and customers with a single platform for the complete transaction cycle. With a fully integrated system, retailers can increase the delivery speeds, stay on top of technological developments and ensure the right inventory is in the right place, at the right time, in the right quantity. This helps in substantially optimising the supply chain.

A platform that automates the gathering of information and decision-informing processes also means that retailers will be able to save time for more creative pursuits, using the data to build more accurate orders and offers their customers will love. Retailers will be able to anticipate the shifting consumer behavior which is very important in the current climate. Real-time data and analytics improve communication and convenience across the community.

Department store slim down

After years of hype about “big box” retailing, we now find ourselves in a place where small-format stores catering to specific needs are the need of the hour. There is too much extra useless space in large-format stores. The shop’s rents are a big determining factor to consider while running a business. Small-format stores help in cutting down on rents. This lets the retailer be more flexible with their profit margins and experiment more with the stocks equipped in each store and discounts offered.

One size does not fit all

But the thing to note is that shifting to smaller stores does not automatically guarantee success. Let’s look at one of the previous cases to prove this point. In 2016, Walmart closed all of its 102 Walmart Express stores which were Walmart’s version of a small-format store. Walmart could not nail down the catalog, plus keeping the same prices did not help either. The Walmart Express stores became the small neighborhood stores that players like Walmart itself put out of business.

The retailers who are looking to shift to a small-format store model must understand the implications. They need to understand the target audience and cater to them accordingly. Instead of becoming a big store fit into a small space, they have to evolve these small stores into more than one thing. They must become online pick-up and return spots as well, which can happen with the help of hyperlocal delivery applications.

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While the giant players in retail aren’t going to go away, hyperlocal services will definitely be a game changer for the local stores. Small format stores with specialized services will be the norm in the coming future. Where do you shop from - big retail marketplace or small stores?

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