Stores Are Small Now

The era of the teeny store is upon us. Spend time in some of America’s prime shopping destinations, and you may be presented with just a few racks of clothing or a small collection of shoes. You might enjoy a lovely floral display and a comfy spot to sit, but you won’t be offered options. If old-school department stores and malls were all about excess, this new kind of store emphasizes the opposite.

In spite of bleak predictions about the decline of the store as e-commerce blossomed in the 2010s—and a sharp drop in in-person shopping in the early 2020s, for obvious reasons—physical stores are still with us. And they are opening at a steady clip: Many more brick-and-mortar stores opened than closed in the first half of this year, according to one tracker. But as of late last year, the average retail space size was the smallest it had been in the nearly two decades since CoStar, a real-estate platform, started collecting the data. These smaller stores are not exactly competing with online retail: Instead, they’re adapting, and shrinking, to complement it.

Back in the age of department stores, people walked in expecting a bunch of products, in a range of sizes and colors. That was convenient (if occasionally overwhelming) for consumers, but inefficient for stores, which spend lots to acquire large spaces, staff them, and fill them with goods, Jonathan Zhang, a business professor at Colorado State, told me. Many big, well-known retailers have gone bankrupt in recent years. Their competitors, facing pricey leases and the looming threat of Amazon, tried something new. Over the past decade, major brands such as Nordstrom and Macy’s have started experimenting with much smaller locations. Since 2022, new retail leases for spaces larger than 25,000 square feet have gone down, according to CoStar data.

The new American store is not built just for buying stuff. Smaller stores are operating as “showrooms,” Zhang explained—they’re focused on helping customers discover products in person that they can then order online. Put generously, such a store can educate consumers about a brand; less charitably, it can indoctrinate them. A shopper can chat with a knowledgeable salesperson, try something on, and make a note of something to check out later. Brands rely on data from a region’s online shoppers and returns to determine what to put in a small store’s limited floor space.And when people walk out without making a purchase, the store does what it can to prompt them to spend money on its website. Didn’t buy anything in person? No problem! But expect a follow-up email, or several, plus maybe a promotional code. And the addition of experiences—an early iteration of the small-format Nordstrom Local, for example, offered manicures—can help leave customers with a positive association about a company.

Some retailers—see Gucci, Chanel, even Bass Pro Shops—are still operating large flagship locations. But, broadly speaking, retailers are thinking small. This shift is good for shoppers in certain ways: It’s nice to get special attention from a salesperson, and to have amenities built into the shopping experience. But something is lost, too. The thrill of shopping in a big store, at least for me, has to do with the chance of making a random, wonderful discovery—is that a perfect dress hanging on the reject rack in the dressing room? Discovery can still happen in small stores, but the experience is much more curated and directed. True serendipity is harder to come by.

As I listened to Zhang explain the strategy of the tiny store, I realized that this approach had recently worked on me: During a lunch break last fall, I walked into a SoHo clothing store that offered a small selection. I tried on a couple of beautiful things, talked about the brand with the person working there, and didn’t buy anything. I returned a few weeks later and bought a dress to wear to a friend’s wedding. Almost a year went by. The brand emailed me to say it was having a sale. Having tried on several items in store, I had a good sense of my size. I ended up buying something.

I didn’t think at the time that my little lunch break was setting any groundwork. But my spin through the store educated and indoctrinated me—and turned me into a repeat customer. It’s hard to imagine a night of online shopping having quite the same effect.

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