Why Large-Format Retailers Should Consider Product-Focused Urban Locations

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While the suburbs provide opportunity for retailers to open large stores with a wide range of product, dense urban cores can be challenging and as a result, some retailers may choose not to locate downtown. There are some innovative solutions available, according to Marjorie Mackenzie, Vice President of Retail at leading Toronto-based design firm figure3

Small-format real estate may prove strategic to retailers seeking to sell to customers in dense urban areas. Rather than carrying a store’s entire line of products, smaller stores with curated product assortments could be a strategic move, catering to local tastes by carrying product tailored to local demographics. 

Sears Canada is one example, noted Ms. Mackenzie. The retailer typically occupies store locations in excess of 100,000 square feet, with a wide product offering ranging from fashion to cosmetics to tools and appliances. While the fashion side of Sears struggles amid considerable competition, its Craftsman (tools) and Kenmore (appliances) brands are strong enough to spin off into their own retail locations in Canada, which would take considerably less real estate and could be accommodated in dense urban centres. 

Sears Canada has a considerable amount of competition in the market, and yet its focus continues to be on fashion apparel. Ms. Mackenzie said that Sears should look at ‘what it does best’, particularly in categories of appliances, tools and baby items, and consider opening smaller freestanding locations devoted specifically to these categories.

Ms. Mackenzie explained how home furnishings brands, even possibly Sears Whole Home, could open smaller locations near thriving urban cores to cater to locals moving into the area. A store could promote paint one week, for example, with locals being invited to check out the newest shades, potentially leading to sales. 

As Canada’s urban cores continue to see an increasing number of new residents, retail can strategically follow, she said. At the base of new condominium towers, for example, a furniture retailer may choose to open a location, if even for a limited time period, to cater to new residents. Transporting purchases could therefore become relatively simple and in some instances, only be an elevator ride away. 

A ‘hub and spoke’ model could also be used for optimal retail productivity, according to Ms. Mackenzie, where a large retail location (such as a department store), or distribution centre could act as a ‘hub’ for a series of smaller ‘spokes’, each of which would be tailored to local areas based on postal code data. Ms. Mackenzie also used the example of a large-format fashion retailer that has a number of in-house brands. If the large retailer is unable to find enough real estate for a store housing all of its brands, it may choose to focus brands on local markets. For example, a dressier in-house fashion brand could locate in the Bloor-Yorkville area, while trendier fashion offerings might better serve a retail location on Queen Street West. 

The ‘hub and spoke’ model is already being tested by some retailers in Canada, though in a somewhat different way. Ikea, for example, has launched a number of smaller ‘pick up and order point’ locations in a market that also features full-sized comprehensive locations, with fulfillment from smaller stores coming from the regional warehouses. Some financial institutions are doing it as well. For example, a full-service financial institution may also include smaller branches that may feature ATM’s and a US depository, or even a separate mortgage lending centre within close proximity to new condominium communities.

Ms. Mackenzie went on to describe the concept of a downtown ‘Ikea Design Centre’, located near burgeoning condominium communities. As locals move into the area, they may look to make furniture purchases. Furthermore, in nearby areas where established buildings are seeing unit renovations, unit owners may visit the Design Centre with dimensions of kitchens or bathrooms, for example, and purchase fixtures that can be easily shipped and built within the renovated unit. 

Stores don’t need to be big to be compelling, according to Ms. Mackenzie. She used the example of the figure3-designed 158 square foot Penguin Random House store in downtown Toronto, which opened over the summer. Although the retail space is small by most standards, its configuration, functionality and branding are on-trend with the ‘Seven Principles’ of retail design. We also discussed these seven principles in more detail in a previous article discussing La Maison Simons at Square One, which has seen considerable positive feedback since opening last spring. 

Article Author

Craig Patterson
Craig Patterson
Located in Toronto, Craig is the Publisher & CEO of Retail Insider Media Ltd. He is also a retail analyst and consultant, Advisor at the University of Alberta School Centre for Cities and Communities in Edmonton, former lawyer and a public speaker. He has studied the Canadian retail landscape for over 25 years and he holds Bachelor of Commerce and Bachelor of Laws Degrees.

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