Steve helps organizations understand and respond to retail disruption by creating customer-centric, memorable and profitable growth strategies.

Honey, I Shrunk The Store: Retailers Go Small To Get Big

Does size matter? Well, in the world of shopping, we might soon find out. A new batch of small store formats from a variety of retailers are being rolled out. And if they work, they could jump start the prospects for many brands that have struggled to reignite growth or achieve profitability.

For decades, many of the top names in retail found success by opening an ever expanding fleet of superstores and big box “category killers.” As has become all too familiar, the moribund department store sector is dominated by huge multi-story formats, most ranging in size between 150,000 – 200,000.

As retailers strive to right-size their prototypes to make the numbers work for dense and expensive city center real estate, we’ve seen Target, Best Buy and others roll-out smaller formats in urban cores. In the past, some national retailers have also shrunk their footprint for entry into second tier cities. The intent of these efforts is to optimize the existing model for what is presumed to be a smaller total addressable market. These are tactics, not strategies.

What’s new—and potentially strategically impactful—are emerging concepts from some legacy retailers and disruptor brand alike that aren’t driven merely by value engineering a typical large format model. Instead, these new micro-concepts seek to reimagine the value proposition and answer the key strategic questions of “who’s it for” and “what’s it for” in more interesting ways. Let’s look at a few of the more newsworthy efforts.


Despite many well-intended innovation efforts over the years, Macy’s has barely held serve as the moderate department store sector enters its third decade of steady contraction. In addition to rolling out Macy’s Backstage as both an in-store department and free-standing off-price concept—a reasonably solid idea that was launched at least a decade too late—Macy’s has recently opened two “Market By Macy’s” in Texas and a “Bloomie’s” location outside Washington DC.

While somewhat different in product offering and design aesthetic, Market by Macy’s (a boring and confusing name) and Bloomie’s (pretty much perfect), both weigh in at just over 20,000 square feet and offer a far more curated assortment than their parent brands. Instead of being in a mall, they are in modern lifestyle shopping districts (apparent real estate strategy: Find the Warby Parker. Open next door). The food and service offerings are dialed up a notch and the visual designs aim for a hipper-than-thou vibe.

The first Market By Macy’s (in Southlake, TX) landed with a thud and is now closed for retooling. The store aimed to be an upscale contemporary boutique but came across as a pastiche of random cool ideas and warmed up leftovers from Macy’s ill-fated Story acquisition. There were also plenty of unforced errors like using Macy’s awful plastic shopping bags and dreary promotional signage, along with an under-sized and underwhelming “omni-service” area. The Fort-Worth store is better executed, but still feels like a store in search of a customer. Bloomie’s seems to have a clearer sense of purpose. Yet with a full-line Bloomingdale’s just 10 minutes away, it remains an open question whether the convenience, merchandise edit and more intimate shopping experience can drive the numbers they need for meaningful expansion.

Nordstrom Local

I first wrote about Local for Forbes back in 2017. Local is nothing like a Nordstrom department store. At about 2,000 square feet, the concept carries no regular merchandise, instead focusing on personal services like styling advice and express alterations. Most importantly, it has become one of the best examples of a concept conceived specifically for the blended, blurred and hybrid modern shopping world (what I called “harmonized retail.”). By offering fast and easy online order pick-up and returns while—and this is crucial—locating stores close to where its core customers live or work, Local provides an incredibly convenient service that expands Nordstrom’s reach and complements its flagship store, Nordstrom Rack and e-commerce presence.

The Warby Parker of Whatever

In Remarkable Retail: How to Win & Keep Customers in the Age of Disruption, I tell the story of meeting I had about a decade ago with the now well known founder of a digitally native brand that had just raised a bunch of venture capital to grow his start-up apparel business. When I saw his growth roadmap I asked him when he was planning to open stores. He looked at me like I must be insane. And then he said: “We’re never opening stores.

Today, that brand not only has many dozens of physical locations, but virtually every DNVB has embarked on a store opening strategy. Warby Parker has just gone public and is on its way to more than 200 stores—and many DNVB’s are essentially copying their playbook. The vast majority of these brick & mortar locations break free of the traditional role of the store as simply a place to go see stuff, make a selection, pay for it and take it home with you. Instead, these disruptive brands understand that physical stores can serve diverse purposes—as a brand billboard, a product showroom, an omni-service center for product returns and exchanges, a customer data factory and more. Defying the “pile it high and watch it fly” ethos of traditional retail, most have little or no merchandise for the customer to take home with them and, instead, employ a showroom model.

Challenges and the Hybrid Opportunity

At one level—particularly for legacy brands that are over-stored and under-relevant—pursuit of more focused formats that break-free of the disadvantages of inconvenient real estate to get closer to customers makes a lot of sense. On the other hand, it may be far too little, far too late. In Macy’s case, for example, even if their free-standing boutiques or off-price concepts generate decent unit economics, not only won’t they off-set the market share the mothership continues to lose, it will be many years before their total contribution to enterprise value would be material.

As for the DTC disruptors, as Warby Parker, Casper, Allbirds and others are becoming part of the public markets, the significant challenges of scaling these formats profitably are increasingly clear. How many will cross the chasm from intriguing magnets for venture capital dollars to actually becoming beloved and financially sustainable brands, remains to be seen.

One thing seems certain: the retail market is becoming increasing hybrid in nature. Shopping isn’t about digital or physical channels, it’s an evolving blend of both. And retailers need to embrace this blur. The role of the store is no longer singular in purpose, but increasingly diverse: a hybrid of demand generation, demand fulfillment, brand elevation and more. Many one-size-fits-all formats continue to lose market share and retailers need to consider more of a hybrid portfolio of concepts to meet diverse and evolving customers’ needs, while also improving return on investment. For many, smaller and focused may be the antidote to many years of being too big, too unfocused and, ultimately, decidedly unremarkable.

A version of this story originally appeared on Forbes, where I am a senior retail contributor. We also discussed this topic on a recent episode of the Remarkable Retail podcast.

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"The Store Operations Council enjoyed every minute of Steve Dennis's presentation on retail's future. He always keeps it real and speaks the language of retail experts."

Cathy Hotka


Cathy Hotka & Associates


"The Store Operations Council enjoyed every minute of Steve Dennis's presentation on retail's future. He always keeps it real and speaks the language of retail experts."

Cathy Hotka


Cathy Hotka & Associates