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The average store size in the U.S. is the smallest it’s been in at least 17 years, a finding the Wall Street Journal attributed to the “rise in e-commerce and a growing distaste for giant emporiums.”
CoStar Analytics reported that the average size of retail leases executed during the first three quarters of 2023 fell to a new historic low of just 3,200 square feet, reflecting change in the types of tenants and how certain categories of tenants are using their space.
The newer tenants include more outlets supporting in-person services and experiences such as nail salons, coffee shops, and yoga studios. Shopping centers are also seeing an increase in food and beverage concepts overall as Americans spend more time dining out and seek the convenience of drive-thru and curbside pickup.
According to the WSJ, rent prices are also rising, leading apparel and other traditional retailers to seek smaller spaces. Technology is being tapped to shrink inventory to local tastes.
The smaller box trend isn’t new. Walmart, Target, Macy’s, The Container Store, BJ’s Wholesale Club, IKEA, Meijer, and Sprouts are among chains that have been rolling out or testing smaller concepts in recent years. The stores help chains squeeze into urban centers or suburban towns, but they can also offer more opportunities for intimacy and storytelling.
Location analytics platform Plaicer.ai wrote in a study last year, “Retailers can tailor these small-format stores to target a specific demographic, create a personalized shopping experience, or experiment with a new brand direction. Small-format stores can also serve as fulfillment centers for click-and-pay shopping and as a location for returns, all while fostering brand awareness and customer engagement. And thanks to their smaller size, these stores can help companies expand their reach in urban centers and other highly-priced real estate markets while lowering overhead costs.”
Nonetheless, Costco is among the chains that continue to thrive despite its massive halls, and Target recently debuted a new larger-store that better supports same-day fulfillment services and the use of stores for digital fulfillment.
Zara and H&M are among fashion retailers opening fewer but larger stores that emphasize services such as beauty salons, repair stations, and coffee shops, digital features such as in-store navigating apps, and more spacious layouts to better highlight individual collections.
Dick’s Sporting Goods continues to find success with its experiential House of Sport concept at more than double the size of a standard 50,000-square-foot Dick’s store. The store features a climbing wall, golf bays with simulators, and multi-sport cages that can be used for baseball, softball, lacrosse, and soccer. Outside, a turf field with a track allows customers to try products and converts to an ice rink during the winter. Dick's has said the stores enable the chain to attract new customers, secure better brands, and drive higher basket sizes.
Dick’s plans to have between 75 and 100 of these stores in operation by 2027. Lauren Hobart, CEO, said on the retailer’s recent third-quarter analyst call, “House of Sport stores are performing very, very well.”