Some of the biggest retail brands in the world are downsizing. 

Ikea – known for its large and expansive physical stores – is the latest name to announce an investment in small outlets. It follows on from the likes of B&Q and Target, which have also experimented with small, super-targeted micro-stores.

So, why are retailers doing this, and what are the benefits? Here’s more on micro-retailing and why it’s a growing trend for today’s omnichannel retailers.

Aligning with online behaviour

We’re constantly hearing that the high street (and physical retail in general) is dying. However, at the same time, it seems like more and more ecommerce companies are opening brick-and-mortar stores. From Birchbox to Casper – a number of disruptive digital-first brands have created pop-ups and showrooms with the aim of bringing to life the customer experience.

It might sound ironic in the context of dwindling footfall, but essentially, these brands are taking the very best of the offline experience (customer service, customisation, and convenience), and leaving the most difficult behind (high rents and unsold stock).

Meanwhile, brands that traditionally operate both online and offline are taking note of this shift to ‘experiential’ retail, creating mini-stores that allow consumers to experience products in-person before ordering online. 

This looks to be the aim for Ikea, with the retailer offering online shoppers the chance to interact with in-store staff before ordering online – as opposed to visiting a large self-serve superstore and taking products home. 

Offering a limited selection of stock in micro-stores (with one set to open in London’s Tottenham Court Road this autumn), Ikea is able to offer customers more of what they want (and less of what they don’t), meaning it’s unlikely to be left with unsold or outdated products.

Ikea superstore

(An Ikea superstore)

Offering greater convenience

Another reason behind the rise of micro-stores is greater customer convenience. 

For IKEA, micro-stores will also act as delivery hubs. The retailer has announced plans for a super-fast delivery service, investing in logistics and distribution systems to offer 24-hour delivery on almost all its 10,000 products. Competition from Amazon has undoubtedly led to this, with consumer expectations rising as a result of efficient delivery.

We’ve already seen other retailers open micro-stores with this aim. Argos has launched 41 ‘digital stores’ in select Sainsbury’s, solely to allow customers to pick-up products they’ve ordered online. The venture has proven to be a success, leading to 11 new stores being opened since the start of this year alone.

Meanwhile, the shift to urban locations (as opposed to out-of-town outlets) is a deliberate ploy to align with growing city populations. According to research by the United Nations, two out of every three people are likely to be living in cities or other urban centres by 2050. 

Another brand with this motivation in mind is Target. With most of its large stores located in malls and retail parks, its new micro-stores are designed to reach demographics in other surburban, urban, and college locations. Here, it hopes to draw in customers looking for small, every-day and essential products rather than big-price purchases.  

Incorporating personalisation

Another big benefit of micro-stores is that they are far cheaper and quicker to set up. As a result, this can allow brands to invest more money in experimental initiatives and innovative tech. 

As well as giving micro-stores unique value (and something different from the standard store format) – it also means brands have the flexibility to adapt to customer trends and needs.

Personalisation is one thing consumers crave on all channels. Beauty brand Sephora has successfully incorporated this into its online strategy, and on the back of its success – and the clear demand for physical customer experiences – it has launched Sephora Studio. 

The micro-store, which is less than half the size of its standard store, focuses on creating meaningful connections with customers based on customised recommendations and makeovers.

It uses new technology to do this. Staff process payments on phones and tablets rather than traditional cash registers. Meanwhile, beauty advisers can create online profiles of customers, listing all the products they’ve tested in-store in a summarised and shoppable email.

Sephora Studio’s strategy is designed to offset dwindling foot traffic to US malls. And as well as the convenience of its city locations, the aim is to create a more personal and memorable experience for customers – one that mimics a boutique or luxury store rather than mall outlet. 

sephora studio

Benefiting local communities

In a similar sense, micro-retailing also helps big brands make a stamp on local communities. 

Large stores like IKEA or Target can often feel sterile and impersonal – a world away from the ‘mom and pop’ sensibility of old. 

In contrast, micro-stores can be designed to fit in with smaller locations, as well as offer something of real value to local communities.

Target has donated $6,000 in grants to non-profit charities within close proximity to its new small-format stores, and strives to employ local residents. With some of the new stores also located in deprived areas, both the business and its philanthropic efforts look to benefit those who live nearby.

Similarly, B&Q’s micro-store (which opened in London’s Holloway Road last year) focuses on giving back to the community it serves. It is involved with a number of local projects, including building playgrounds and gardens for kids, and supporting organisations that work to improve landscape and housing in the area. Ultimately, it aims to better serve the local population rather than the mass consumer market, in hopes of drawing in shoppers who might usually head online.

Related reading:

Nikki Gilliland

Published 26 July, 2018 by Nikki Gilliland @ Econsultancy

Nikki is a Writer at Econsultancy. You can follow her on Twitter or connect via LinkedIn.

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