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Retail Giants Bet on Small Concept Stores to Lure Shoppers
August 18, 2021

Retail Giants Bet on Small Concept Stores to Lure Shoppers

by The CE Shop Team

As Online Shopping Continues to Dominate, Some Retail Chains Experiment

Bloomingdale’s, the 160-year-old luxury department store chain, is joining several other national retail chains in experimenting with much smaller versions of their stores that feature heavily curated merchandise — an apparent effort to compete amid the rise of online shopping.

The COVID-19 pandemic changed many consumer behaviors, including how people shop — and it only fueled the already steady rise of the online shopping industry.

Despite “sharp job losses, government-mandated closures, and health concerns,” total annual retail sales grew 6.4% year-over-year in 2020 to reach a record $4 trillion, according to CBRE, a commercial real estate firm. E-commerce accounted for a record $788 billion — or about 20% — of that total. That’s a 32% increase from 2019.

As the pandemic took hold in the second quarter of 2020, online sales accounted for 23% of all retail sales, CBRE said, concluding that “the COVID-19 pandemic has accelerated the retail industry’s ongoing digital transformation.”

Commercial Real Estate Is Rebounding

The commercial real estate industry took an enormous hit in 2020 due to the COVID-19 pandemic but has largely rebounded, according to the latest Commercial Market Insights report by the National Association of REALTORS®, released in July. 

“Sustained job creation, more consumer spending, and the continuing return of the workforce to the office underpinned the commercial real estate’s recovery across all property sectors in the first half of 2021,” the report says.

Apartment and industrial properties are the market’s “most favored assets,” but “the office market remains the weakest property sector, suffering sustained occupancy losses in the second half, with a total negative net absorption of 170 million square feet since the pandemic and a vacancy rate of nearly 18%.”

NAR said the retail sector is rebounding, “but investors remain cautious.” 

Smaller Concept Stores Are Trendy

Bloomingdale’s new concept store, Bloomie's, will open in late August in Fairfax, Virginia. At 22,000 sq. ft., the store will be much smaller than traditional Bloomingdale’s stores, which average 150,000 sq. ft.

The store offers “a more convenient and casual concept that fits into the everyday lifestyle needs of our customer,” Tony Spring, CEO of Bloomingdale’s, told The Wall Street Journal. “We want Bloomie’s to be their neighborhood store.”

Bloomie’s will carry women’s and men’s apparel, footwear, jewelry, handbags, and beauty products, CNBC reports. Merchandise will be rotated frequently throughout the week, and the store will also offer alterations, a drop box for returns, and appointments with stylists.

“Bloomies' launch comes at a time when retailers — particularly traditional department stores — are desperate for shoppers,” CNN points out. “While stimulus checks brought a wave of shopping and increased sales after the latest round of checks were exhausted, retailers saw a decline in sales in May.”

Of course, many malls and department stores have struggled for years, a trend that predates COVID-19. But the pandemic presented many new challenges.

“The launching of smaller stores isn’t going to provide much relief for owners of malls and other shopping centers that have seen rents, values, and occupancies dwindle,” WSJ reported. “Most of the new stores don’t want to be in malls. Rather, they are opting for locations in downtowns or suburban shopping centers with more of an open-air feel.”

Another department store chain, Nordstrom, launched a smaller concept store in 2017, but with a twist: Nordstrom Local is a store with no inventory. Instead, it offers customers the option to buy online and pick up in-store, as well as other services, such as alterations, easy returns, and styling assistance.

The unconventional experiment appears to have been successful. In the years since, the company has opened more Nordstrom Local storefronts, bringing the total to seven locations across New York City and Los Angeles.

Macy’s has launched a smaller version of its department store in recent years, called Market by Macy’s. There are two of the stores in Texas, with more in the works. And much like Bloomie’s, the stores feature a much smaller, curated selection of inventory.

Target also has opened smaller stores in urban areas and college towns.

“What the last several years have taught us is that retailers need to be keenly aware of how to reach customers,” Daniel Hurwitz told WSJ. He’s the founder and CEO of Raider Hill Advisors, a private retail real estate investment and advisory firm.

In this era of online shopping, there’s no telling what the future of retail will look like — but Bloomingdale’s seems willing to bet that it could look something like Bloomie’s.

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