While Myer in Australia has been building a grand monument to itself on Bourke Street, most of the world’s premier department store companies have been going small and customized with their new units, breaking out of the old 20,000 sq.m box blueprint.  Some of the new department stores in value shopping centers are as small as 2,000 sq.m.  This makes sense for a variety of reasons.

First, you have to edit your assortment to suit the size and preferences of the local market.  One size fits all just doesn’t cut it anymore.

Second, the local real estate opportunity might not fit the box you’ve been accustomed to building.  This is typical of infill situations.

Third, department stores like other retailers that operate out of large formats are experimenting with models that will allow them to replace physical store space with e-commerce.

Nordstrom and J.C. Penney in the U.S. are both getting very good at this in their different ways.  By making their warehouse and store inventories both accessible to the customer at home and in the store, they accomplish several objectives at the same time:

  • Put their customers in more control of the shopping process by given them more choices as to where and how a transaction is completed
  • Free up existing store space for other uses and open up the possibility of using smaller stores
  • Capture sales that might in the past have slipped away when a customer fails to find the exact item he or she wanted in the store
Sears, another national department store chain is going a step further and while it pushes sales online it is actively subletting large amounts of redundant space within its boxes to other retailers and even non-retail users.

It isn’t just the department stores that are doing this of course.  Any retailer working out of a large format has to be looking at e-commerce as a way of slimming down on physical real estate.

Shopping center operators needn’t worry too much because while the big formats are trying to slim down there are usually smaller fry wanting to bulk up on space, particularly if it means obtaining access to real estate that it wouldn’t have had a shot at in the past.

Of course, it means shopping centres will need to be configured differently to accommodate these changes, but that’s a story for another time.