Who said size doesn't matter?
It does in retail, but not the way it used to. Small is the new big.
Retailers, like Kohl's Corp. (KSS) are among the latest to announce a downsizing of its stores. As part of its omnichannel strategy, nearly half of the retailer's 1,100 stores will be smaller by the end of 2017, it announced Tuesday, Aug. 22.
To increase profitability, Kohl's stores will be "operationally smaller through balancing inventory and adjusting fixtures," Kohl's said in a statement. Already, 300 stores of its stores have cut its internal floor space. In addition to the mass downsizing, Kohl's will open four "small format" stores in October, all of which are 35,000 square feet as opposed to its normal 90,000 square feet. The new pint-size stores will be in Rhode Island, Ohio, New Jersey and California.
"By optimizing and rightsizing stores based on customer and inventory needs, Kohl's stores are able to operate more efficiently and provide a more engaging customer experience," the company said in the release.
A Kohl's spokeswoman told TheStreet on Tuesday that no layoffs are planned in connection with this new strategy.
"If Kohl's reduces their square footage, they cut operating cost by reducing rent and cut their staffing needs," Robin Abrams, a retail consultant at Eastern Consolidated, told TheStreet on Tuesday. "But they also [get to] feature a more focused product mix that caters to their target customer."
Many other retailers have jumped on the Lilliputian bandwagon too. Macy's Inc. (M) CEO Jeff Gennette told TheStreet in an interview on Aug. 10 that it is "not inconceivable" that the retailer, known for mega department stores, would eventually reduce store sizes. In a sense, Macy's has already done so by offering stores within stores, like from the cosmetics maker BlueMercury that it bought in 2015, and the optician Lenscrafters.
Now, Abrams added, once retailers cull their best-selling products for sale, e-commerce can take care of the rest. "We're seeing lots of retailers [that] decided they don't need as much square footage and products in the stores. This is in line with the fact that they are accounting for online stores...they don't have to carry every item, just the items that sell the most."
Add to the "littler can be good" trend, that smaller retailers are taking over some space once occupied by the big guys—Macy's, Sears Holdings Inc. (SHLD) and J.C. Penney Co (JCP) . Simon Property Group Inc. (SPG) noted that reality during a second-quarter earnings call earlier this month.
Finally, there are pop-up stores in which landlords lease out sometimes-tiny retail space for a limited time, which adds more weight to the small is beautiful trend.
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Editors' pick: Originally published Aug. 22.