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5 Emerging Retail Formats: 2023’s Brick-and-Mortar Evolution

by 
Ezra Carmel
 on 
January 12, 2023
5 Emerging Retail Formats: 2023’s Brick-and-Mortar Evolution

Physical retail has continued to prove its resilience and relevance by adapting to niche markets and fast-paced changes in consumer behavior. We dove into the foot traffic data for 5 brands that employ new brick-and-mortar retail formats in order to take a closer look at how these configurations impact visits. 

  1. Small Stores, Big Visits

When it comes to physical stores, bigger isn’t always better. Real estate for a large store is hard to come by – especially in dense urban areas or college towns – and comes with high overhead. But opening a small format store is relatively simple and bears significantly lower property and operational costs. And in contrast to the sometimes overwhelming number of products available in large stores, small stores can offer curated selections for key consumer segments.

Target is a prime example of a chain that has gone small to drive visits. Many of Target’s small-format stores are in close proximity to college campuses and stock dorm and college-living essentials. The stores serve as one-stop shops for students who find everything from food to furniture easily at their fingertips. 

  1. Purposeful Fleets

While some companies are making individual locations smaller, other retailers are shrinking their overall store fleet. Selectively closing venues can help brands avoid cannibalization of visits and make the most out of every location – especially for companies with a large, high-density footprint.

Pharmacy giant CVS is pivoting to offer surrounding communities a range of online and offline healthcare services to supplement retail sales. And fewer, but strategically placed locations support its new healthcare-focused initiatives while increasing efficiency and foot traffic allocation. Comparison of the True Trade Areas of CVS locations in Norman, OK before and after a store closure shows how the chain’s True Trade Area size and population grew despite closing one of its locations in the region.

  1. Shop-in-Shops: Visits for All

Efficiency being the name of the game, the shop-in-shop retail format entails specialty brands opening a branded “shop” in a larger department or big-box store. The bigger retailer broadens its product selection, differentiates itself from competitors, and increases engagement. The specialty brand gets an efficient way to reach more potential customers and often leverages the bigger retailer’s online ordering and distribution system.

The Kohl’s and Sephora shop-in-shop partnership launched in 2021 continues to demonstrate the retail format’s ability to drive foot traffic. Visits to Kohl’s stores that host a Sephora shop-in-shop outperform those without, while Sephora freestanding stores have increased visits from Kohl’s shoppers. It appears that Kohl’s visitors who encounter the beauty retailer at the department store are more likely to also visit Sephora’s own retail outlets. 

  1. Creating Offline Experiences

Shop-in-shops demonstrate the value of a brick-and-mortar presence for specialty brands, and digitally native brands (DNBs) – or specialty brands that first launch online – are now recognizing the benefits of offline retail as well. Physical stores can streamline order fulfillment and build brand awareness for a traditionally online retailer while facilitating discovery and providing consumers with a direct and sensory brand experience.

Like other DNB brands, Allbirds is also well-known for the experiential nature of its brick-and-mortar stores. The company’s offline stores engage visitors in a natural and un-designed space that provides a sensory encounter with Allbirds’ proprietary fabrics. This physical encounter between customer and brand drives engagement and builds brand recognition in a way that isn’t possible online, and the company’s experiential retail format has sparked staggering visit growth fueled by record store openings. Consumers can’t get enough of experiential stores – a call to retailers to provide something more than just a place to make a purchase.

  1. Pop-Ups Picks Up

When it comes to discovering something new in retail, pop-up stores deliver. The format provides an opportunity for brands to create buzz and test new markets and store layouts without a long-term lease commitment. And the exciting, limited-time engagements that are pop-up stores can provide a significant foot traffic boost to the malls that host them. 

Foot traffic trends to the Oakbrook Center shopping mall in Oak Brook, IL, illustrate the pull of pop-ups. Visits picked up when the center hosted a temporary art exhibit in early May 2022. But foot traffic to the mall climbed even higher just a few weeks later when a Stranger Things pop-up store opened to promote the new season of the hit Netflix show. The pop-up format engaged fans and drove foot traffic and required no long-term commitment from either the store or mall. 

Final Word on Retail Formats

Physical retail is evolving to match a dynamic market landscape. Emerging formats such as experiential stores and shop-in-shops, along with smaller locations and slimmed-down fleets, are just some of the ways brands are responding to changing consumer behavior and shaping the future of brick-and-mortar. 

Retailers’ ability to adapt while continuing to drive foot traffic attests to the resilience and relevance of physical retail and data-driven strategy. 

For updates and more data-driven retail insights, visit Placer.ai.

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