For many years, retail and ecommerce took the approach that bigger stores and online inventories were better. Now, some retailers that traditionally built large stores are experimenting with so-called micro-stores (aka small-format stores).
These small retail outlets typically contain a narrower selection of products, yet offer advantages that larger stores cannot, resulting in better in-store experiences for many customers and employees, more last-mile delivery options for online shoppers, and reduced staffing costs for businesses.
The small-format option can also lower the barrier for entry to online retailers seeking to add physical locations.
In this article, we’ll look at some of the ways in which retailers can use the micro-store format to expand their footprint, reduce costs, and improve CX and EX in the short run and over the longer term.
A better fit for pedestrian-friendly neighbourhoods
Large-format stores first emerged in the U.S. in the 1960s, when many consumers were moving to newly built suburbs and relying on cars for errands. In an era before the internet and online shopping, big box stores offered customers a huge selection of products in one place, and plenty of free parking.
Now, two trends are challenging the dominance of this trend.
The first trend is the growing desire in recent years for walkable, mixed-use neighbourhoods – a preference that was accelerated by the pandemic.
Whether these neighbourhoods are newly planned or exist in older pedestrian-friendly areas, they typically don’t have the space for large-format stores, but a micro-store can often fit into available space.
The second trend is the explosion of product availability online, especially through marketplaces. If shoppers can’t find everything they need in their neighbourhood shops, they can order online for pickup or delivery, which reduces the necessity of the big-box format.
An optimised in-store experience for targeted customer personas
In addition to reaching consumers in areas where large-format stores won’t fit, micro-stores can also be tailored to suit the specific needs of the customers in each neighbourhood. For example, mass-market retailer Target’s small-format locations near college campuses offer dorm supplies, school items, and groceries.
These locations saw higher quarterly visit growth rates through the first three quarters of 2022, compared to “larger Target stores already in the area.”
The same principle can apply to retail micro-stores in areas that primarily cater to families with small children, retirees, and people on vacation.
For example, a micro-store location near the beach might offer sunscreen, towels, swimwear, and picnic supplies, while the same retailer’s small-format store in an area full of young families could focus on baby gear, children’s clothing, toys, and healthy snacks.
More ways to solve the last-mile ecommerce delivery challenge
The pandemic forced retailers to streamline their delivery operations to stay competitive and meet the high volume of demand for home deliveries. But even that pivot point didn’t result in a solution to the problem of last-mile delivery, which is still a "massive pain point" for many retailers.
Some companies are exploring new technologies to get products into customers’ hands faster; others are experimenting with using small-format stores as a way to make BOPIS orders more convenient and shorten the time between online order and delivery.
