Macy's And Nordstrom Make Push For Small-Store Strategies As Sales Flag

Big retailers have begun shrinking in size, hoping to curb the pullback in retail spending in the past year and bring stores closer to shoppers.

Retailers like Macy's, Kohl's and Nordstrom all saw declines in consumer spending in recent earnings calls, with executives noting they'd had to rely on discounts to sell inventory at big mall locations, The Wall Street Journal reported.

The retailers are now ushering in smaller store concepts in local shopping centers, which have outperformed larger mall locations in the past couple of years.

Macy's announced its rollout of smaller stores in suburban shopping centers and strip centers in May after some locations outperformed Q4 2021 expectations. The retailer has closed 80 mall locations, with another five on the chopping block, Retail Dive reported.

The retailer already operates 10 smaller stores: eight Market by Macy’s and two Bloomie’s stores, per Retail Dive. Each store averages 30K to 40K SF, and, of the four locations that opened in the last year, fourth-quarter comps rose 8%.

The retailer plans to open five more small-format stores this year, Retail Dive noted.

“If new locations continue to outperform, we will look to incrementally accelerate off-mall openings beginning in 2024,” Macy's CEO Jeff Gennette said in a call with analysts March 2.

Last year, Macy's also opened 37 new Backstage locations, a store-within-a-store concept that offers discounted products. The stores, which take up an average of 11K to 16K SF, were already up and running in 300 locations nationwide as of early 2022.

Macy’s is not the only retailer following the go-small model. Nordstrom announced that it would pull back its Canadian operations to focus on business in the U.S. in hopes to expand operating margins with smaller stores.

Other retailers like Abercombie & Fitch Co. have also moved out of big retail spaces and focused on expanding out into suburban and neighborhood shopping districts.