April 17, 2024

In These Lean Days, Even Stores Shrink

Tom Shaw, the head of Anchor Blue, a clothing chain for teenagers, looked with approval at the 2,500 square feet of empty space that his company still rents. Foot traffic is up more than 7 percent, the chain says, and sales have increased nearly 23 percent since the trial remodeling last year.

“We don’t want a department-store feel,” Mr. Shaw said. “With that much product in that much space you can get lost, not know where to go.”

Anchor Blue is among a growing number of retailers thinking small — chopping off big chunks of stores or moving to more efficient spaces. The change reflects two trends in the retail world: Chains looking for new ways to cut costs in the sour economy, and consumers demanding a less sprawling shopping experience as they spend with greater purpose.

“The customer walks in the door, and often sees a huge selection of stuff in a multibrand store, and can’t figure out what to buy and ends up buying nothing,” said Paco Underhill, founder and chief executive of Envirosell, a Manhattan-based company that advises stores on shoppers’ behavior. “We have reached the apogee of the big box, meaning that we can’t grow the store or the shopping mall any bigger, or get any more time or money out of somebody’s pockets.”

Big chains like Bloomingdale’s and Nike are trying smaller stores, as are specialty retailers like Charlotte Russe. Mr. Underhill said most of his clients are exploring the idea, which can require creative thinking.

The new Bloomingdale’s in Santa Monica, Calif., for example, saves space with dressing rooms that retract into the ceiling. Charlotte Russe uses free-standing glass walls that can be rearranged. At Nike, the cash registers are wired into movable counters.

The smaller stores help clean retailers’ balance sheets. Rents drop, and smaller amounts of inventory cost less. Retailers can also reduce payroll costs because fewer employees are needed. At the Anchor Blue store here in Santa Ana, three employees now work on the floor instead of four.

Retail chains “saw their lives flash before their eyes in the financial crisis downturn,” said John D. Morris, an analyst with BMO Capital Markets, a financial services provider. “When you’re looking at such a severe slowdown as they were in consumption, you worry about the commitment in real estate.”

Mr. Shaw said he reduced the amount of clothing in the Santa Ana store by about 15 percent, removing many slower-moving items like unpopular sizes — and increasing profitability. As leases expire on its 118 stores, Anchor Blue is moving into spaces about half their size .

“You’re placing a sizable bet when you’re buying a lot of inventory and filling up a 6,000-square-foot box,” he said.

The financial success of many smaller stores is simple, retail analysts and the stores say: Smaller spaces are cheaper, and can be easily changed to carry the most profitable, fastest-selling inventory. The stepped-up foot traffic at the Anchor Blue store in Santa Ana, and the sales increase, for example, are both above the chain’s averages.

“It certainly enhances the productivity,” Mr. Morris said of the smaller spaces.

Bloomingdale’s store in Santa Monica, which opened this summer, is about 105,000 square feet on two floors, less than one-eighth the size of the chain’s Manhattan flagship store. The developer packaged in the third floor, but Bloomingdale’s declined the extra room, said Michael Gould, chairman and chief executive of Bloomingdale’s.

Article source: http://feeds.nytimes.com/click.phdo?i=26bf91269b87bf5da583b671cf048f63

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