GO
Loading...

In These Lean Days, Even Stores Shrink

Stephanie Clifford|The New York Times
Wednesday, 10 Nov 2010 | 8:28 AM ET

A temporary wall slices the Anchor Blue store here in half. On one side are abandoned dressing rooms, a few mannequins and no customers. On the other are racks jammed with clothing and accessories — and more customers than ever coming into the store.

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.

Getty Images

“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.

"We can be specific to a customer and marketplace..."

Mr. Gould said he wanted a smaller store to move through inventory faster. The Santa Monica store dropped two slower-moving categories, home and children’s, that are often found in other Bloomingdale’s stores. It has also saved space with innovations like a mobile rack, that resembles those dry cleaners use, on the second floor ceiling that moves mannequins and clothes.

“You have a store that’s turning very quickly,” he said.

In addition, Mr. Gould said, many shoppers have responded to a more focused retail experience — stores that have been stripped of the distractions and temptations of unwanted merchandise — as the success of Bloomingdale’s smaller Manhattan store in SoHo, opened in 2004, has demonstrated.

"We can be very specific to a customer and to a marketplace, and that’s what we need to do." -CEO, Bloomingdale's, Michael Gould

“We can be very specific to a customer and to a marketplace, and that’s what we need to do,” he said.

Nike is also looking at flexible layouts as it experiments with smaller stores. The typical Niketown store is more than 50,000 square feet, while its prototype “brand experience” store, opened in Santa Monica in August, is just 22,000 square feet. Nike has no plans to open more Niketowns, opting instead for smaller options like the “brand experience” store.

The driving force was to make shopping simple, said Tim Hershey, Nike’s vice president and general manager of North American retail. “Customers are always asking us to make it easy,” he said.

Almost all the elements of the new Nike store can be rearranged at a moment’s notice. Each wall contains horizontal slats about six inches apart, and almost every piece of hardware — the circle of metal that holds a soccer ball, the wire cages that contain socks — can be hooked into the wall slats. Freestanding tables and locker-compartmentlike display cases are on wheels. A big orange station where the cash registers are housed looks like the only permanent fixture in the store — but it is not.

“It’s wired to be relocated in multiple places,” Mr. Hershey said. “We like where it’s at but we haven’t been through a holiday. Live and learn.”

Charlotte Russe , which has more than 500 outlets nationally, is also experimenting with a new concept store in Santa Monica that is about 25 percent smaller than the norm.

Jenny Ming, the chief executive, ordered freestanding glass walls to distinguish between types of clothes. “It just makes it more shoppable,” she said. “So many stores now, it’s just big, you throw everything in there,” Ms. Ming said.

For maximum versatility and efficiency, each fixture has been designed for multiple purposes. A metal rod that lies perpendicular to the wall can hold shoes on plastic hooks, underwear looped through a leg hole or hangers.

Ms. Ming tried stacking shoe boxes on the selling floor so customers could select their sizes without waiting for a clerk. But that backfired, she said, as boxes were scattered, requiring extra staff (and money) for cleanup.

The boxes are back in the storage area, the experience pointing to an axiom of the new smaller-is-better movement. “It’s building in as much flexibility as possible,” Ms. Ming said.

  Price   Change %Change
M
---
NKE
---

Featured

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video