Why retailers are embracing multiple store formats

Written by Mary Berko on September 14th, 2022

With the rise of e-commerce and a more digitally-forward existence, one question remains: what about brick-and-mortar retail?

Some have speculated an abrupt end to the era of retail; however, the numbers tell a different story. Retail store sales are still leading the charge, with almost 80% of sales coming from physical stores.

While the e-commerce space has certainly grown over the past few years, there’s no doubt that in-person retail is here to stay. But consumer behavior is changing. If retailers want to keep up with customers’ increasing expectations for a more engaging, personal experience, they’ll have to think outside the box

Cue: the retail storefront. What seems like an average part of a retail journey quickly becomes a tool for customer engagement and experience – so long as retailers are willing to step away from the notion that their business should have only one type of storefront.

Let’s dive in.

What is a storefront?

In retail, a storefront is a designated area for shoppers to browse items in person and purchase directly on-site.

For shoppers, the delight of a retail storefront is that they get to leave the building (or area) with a product in their hands. No waiting, no shipping woes, no delivery fees – just a quick check-out.

For retail stores, this advantage comes in many forms: direct engagement with their audience, lower rate of abandonment, and zero consumer shipping logistics.

What makes storefronts particularly interesting is the various physical formats they can. While some things will always stay the same (like branding to inform passersby), the retail storefront comes in all shapes and sizes.

The small stands that you pass while walking down a mall corridor? Those are retail storefronts. Instagram-worthy decorations with limited products in small pop-up venues? Another type of storefront. The kiosk inside of another store? That’s a storefront as well.

With so many types of retail stores to choose from, the question is: why not invest in more than one?

Why should retailers consider using multiple retail store formats?

Some of the most popular brick-and-mortar storefronts include department stores, grocery stores, and specialty stores. These retail formats are usually set in stone (pun fully intended).

A department store like Macy’s or Nordstrom’s is typically found as its own large building within a mall or a standalone in a city. Similarly, a brand like CVS can be found as standalone stores across the US.

While these larger companies have different physical locations in shopping centers, malls, and towns globally, each physical storefront is almost exactly the same – similar layout, similar experience. We know what we’re going to get when we step into a CVS… whether it be in NJ or CA.

But, in only re-creating the same large department store or discount store throughout the country, these companies are missing out on quality engagement with their customers through a more personalized lens. How? Three main reasons:

Target audiences change with location

No two locations are the same. Depending on the median income in the area, shoppers might be looking for retail outlets or discount stores rather than luxury boutiques. Or, vice versa. A college town will have a much different demographic than a residential community. Whereas a college-aged audience might benefit from boutique pop-up stores to peruse on their weekends, an audience in a busy city could need something a bit more eye-catching and unique like an experiential store.

Different shopping journeys require different store formats

Each retail store format serves a particular purpose along the shopping journey. If a brand is looking to expand their audience reach, a store-within-a-store (SWAS) setup might be beneficial for tapping into another brand’s audience with similar shopping history. If a brand wants to provide a next-level, frictionless experience, a self-service store might do the trick. It’s important to take a look at your target audience and determine their wants and needs to help drive which storefront formats will work best.

Variety piques customer engagement

It was Einstein who said insanity is doing the same thing over and over again while expecting different results? Granted, we’re talking about retail stores, but the sentiment is similar. If brands are creating the same store over and over again, but searching for something “more,” the room for growth becomes exponentially smaller. With a variety of retail formats, not only will companies be able to learn more about their audience; audiences are more likely to engage with something “different” than what they’re used to.

6 Retail store formats to consider

Apart from the convenience stores and chain stores of the world, there’s an entirely different subset of stores that brands can consider (some that don’t include a long-term lease or lengthy contract!)

Pop-up store layout

Rather than entering a long-term agreement, brands can dip their toes into offline retail with the pop-up shop layout. A pop-up shop is typically a smaller physical store that’s open for a limited amount of time to drive a sense of urgency and get customers in the door.

One example that hits close to home for Disney fans everywhere? This fall, Big Lots! discount stores are opening their 1,440 store doors to Disney, Pixar, and Star Wars pop-up shops. But, these shops will only be available from Sept. 2nd to Oct. 14th.

Pros of pop-up stores

• Limited engagement creates excitement around the brand and encourages more customers to check out the pop-up.
• Brands get to dip their toes into another company’s audience – expanding their reach to new prospects.
• Pop-up stores provide valuable research for brands if they’re in the market for a permanent store location.

Cons of pop-up stores

• It can be tricky to navigate and find shorter-term agreements for temporary space.
• Developing a positive returns experience is not as easy since customers might not be able to come back once your shop is gone.
• The costs of implementing and running even temporary, smaller stores can be quite high – it’s important to understand your budget and evaluate how much you’re willing to spend.

Small-format store layout

Small-format stores are exactly what they sound like – smaller versions of larger stores. Big-name retailers like Target, Bloomingdales, and Macy’s are utilizing small-format layouts to facilitate a more personalized, casual experience with a selection of highly-curated products based on location.

Pros of small-format stores

• Small stores fit easily into city locations where there isn’t much space for expansive buildings.
• Typically a small store isn’t locked within the traditional mall or shopping center format, which means there’s less competition for the customers in the area to find.
• With less inventory, brands can begin to strategize what’s sold, making products sold within the store more relevant to the foot traffic.

Cons of small-format stores

• Because the space can only hold limited inventory, customers who are searching for specific products from the larger store selection may be out of luck.
• Post-COVID, smaller spaces aren’t exactly popular and don’t lend a hand to social distancing for consumers who prefer to stay 6 feet away from other shoppers.

SWAS (Store Within A Store) layout

The store within a store format has been around for quite some time, featuring small kiosks or larger sectioned areas of brands in department stores or retail stores. For example, Kohl’s, a household name shopping outlet, entered a partnership with beauty giant Sephora to add the makeup brand as a freestanding stores within the larger building.

Pros of SWAS

• Stores that fall within another store are immediately immersed in that parent store’s target audience; therefore, expanding the brand’s reach.
• The SWAS retail format makes way for customized offerings like brand associates who are trained in product tutorials or product sampling.

Cons of SWAS

• There’s less control over the actual layout of the SWAS – it needs to conform within a limited range of a larger store.

• Department stores (where many SWASs reside) rely heavily on foot traffic. If the department store itself isn’t doing so well, the store within it won’t reap any benefits by being there.

Experiential store layout

Remember the Rainforest Cafe craze of the 90s? Families everywhere gathered to experience a “storm” that happened every twenty minutes or so, with lights flickering on and off to mimic lightning and animatronic animals coming to life with loud reactions.

This is what we’re getting at when we talk about an experiential store; however, in retail the focus is on interactive displays and product demos. For example, digitally-native brand Karl’s Fishing & Outdoors opened up an experiential retail store with interactive experiences to help novice fishers understand how each product functions.

Pros

• The buzz around experiential stores may be enough to get customers into the space, but it can be hard to get them to actually purchase the items. (Think food retail: how many times have you tasted samples of products in grocery stores without buying them?)

• Interactive experiences that help customers understand a product can help lower the return rate – if customers are comfortable with using their purchases before they get home, they’re less likely to return out of frustration!

Cons

• Understanding the total ROI for experiential stores can be quite difficult. Perhaps customers came in just for the experience and didn’t purchase anything, but visited the site a few days later to buy a product – very hard to track.

• Experiential stores are typically not sustainable for brands. The technology and upkeep itself are extremely expensive, and volatile industry trends mean a retailer’s experience might not be “in” the next week.

Themed store layout

The social media-worthy themed store layout is all about building a buzz and driving store visits. Plus, creatively speaking, the world is a brand’s oyster when it comes to an experiential retail layout. Glossier recently themed all of its permanent stores by location. Their Miami location? Beach theme. Seattle? Pacific Northwest inspiration.

Pros

• In a digitally-fueled world, there’s always excitement around the aesthetically pleasing. Stores that include extensive visual merchandising are more likely to capture the attention of consumers who are used to scrolling through Instagram on the daily.

• increased engagement and social media reach (customers likely taking pictures and sharing with their own followers)

Cons

• Like experiential stores, themed stores are not exactly cheap. If the physical facelift costs a pretty penny, a brand better hope that customers actually purchase products once they’ve seen the theme themselves.

• While themed storms are certainly exciting, the merchandise typically remains the same and can leave customers satisfied with a one-time visit and snapshot of the surroundings.

Distribution store layout

Much like a distribution center stores products available to be purchased digitally by consumers, a distribution store stores products to be purchased directly by in-person consumers, with no intermediaries involved (not even a cashier or salesperson!)

Focused on a frictionless experience, Amazon opened grocery stores as well as Starbucks pick-up sites where customers can quickly select their products and scan in/out without ever having to speak to a representative or pull out their wallet.

Pros

• A cashier-less environment means fewer lines, making a trip to a distribution store more time efficient than your regular chain store.
• Self-service stores are particularly popular simply because customers want to have control over their own experiences.

Cons

• A positive customer experience can quickly turn into a negative one without the right IT infrastructure in place – if the self-service technology is down, brands will need to have a quick response in place to keep customers happy.

• Not only are self-service machines incredibly expensive, but they also take away jobs from people who need them.

What do brands need to consider when picking store formats?

Type of product sold

Your product should pave the way for your retail store format. A brand selling fishing gear will have a different look and feel than a beauty brand. Are your products easy to use? Do they need a tutorial experience? Whatever you’re selling should fit in well with your retail format. For example, a product tutorial for a fitness mirror brand makes sense, whereas a vitamin brand probably wouldn’t need one.

Target audience

Is your target audience likely to shop in department stores? If so, it might be beneficial to enter a SWAS agreement with a larger retailer. Are they a part of the younger generation whose attention spans need a little more TLC? Maybe an interactive experience would work best. Your target audience will have unique wants and needs depending on who they are. Get to know them, ask for their feedback, and understand what they’d like to see your brand do.

Location

Location matters! Where your physical store is will determine your layout, space, and what you can do with it. If your store is in a more residential area, you might have to tune down the music volume or any outside decorations that could upset your neighbors. If you’re within a busy city, it may be in your interest to have an eye-catching theme to lure customers in. Likewise, if you’re situated within malls or department stores, you’ll have to understand the customer flow and where your brand can fit.

Should omnichannel brands try a multi-retail format?

In 2022, consumer behavior is changing, but one thing’s for sure – customers are expecting more from brands. More content, more options, and more seamless experiences. Plus, brick-and-mortar is absolutely here to stay.

Whether you’re a small startup, a well-known convenience store, a high-end specialty store, or anything in between, creating an omnichannel approach to distribution (including utilizing different types of physical retail formats) is more likely to keep the majority of your customers satisfied, engaged, and coming back for more.