For big-box retail, one of longest-running experiments is shrinking

As shoppers search for deals this holiday season in an environment where less in price is more for many consumers, more Americans may find the square footage they visit in retail matching this “reduction” mantra.

Ikea is known for its behemoth blue and yellow big box footprint, often sprawling to 300,000 square feet in suburbia. But when they opened an 8,800-square-foot store in Gaithersburg, Maryland, earlier this year, they joined the latest in a long line of retailers to embrace a smaller-is-bigger strategy. Target, Macy’s, Nordstrom, and others have experimented with small format stores over the past decade. Kmart’s lone remaining U.S. outpost in Miami is a third of the size of its once dominant big boxes.

Chain store experiments with smaller formats go back to at least 2011, when Walmart introduced a “Walmart Express” concept to compete with dollar stores, but shelved the format five years later.  Walmart has continued to open smaller format Neighbor Market concepts.

For Ikea, the smaller format stores are part of bringing the brand to where their customers are. Two more smaller format Ikeas opened this autumn, one in Alpharetta, Georgia, and the other in South Charlotte, North Carolina, bringing the total to 11.

“A Plan and Order point with Pick-up is one of many new format stores that are part of the growth strategy for Ikea U.S.— increasing accessibility to the brand and ensuring there are more ways to meet customers where they are and how they like to shop,” an Ikea spokesman said, saying that the smaller stores offer a more personalized experience.

“It is different from the traditional large-format Ikea stores as it gives customers the opportunity to meet with the Ikea store team to plan and order home furnishing solutions that require a bit more help,” the spokesman said, citing jobs like bathrooms and kitchens.

Target, which is dealing with major headwinds in the discretionary consumer market, is going smaller and larger simultaneously, opening some stores last year at 135,000-square feet — larger than its typical 125,000 square foot footprint — while continuing to open smaller stores, an effort that dates back to 2016. In 2024, it opened 10 stores at 20,000 square feet or less, usually in urban areas or tucked into neighborhoods around college campuses.

“Our flexible model allows us to bring the Target experience to life in any size or format,” said a Target spokesman, adding that they will continue to open both sizes of store.

Maximizing revenue per square foot of store

Shrinking stores don’t surprise Roger McMahon, professor of marketing at Pepperdine University’s Graziadio Business School and a retail expert. He says the current wave of shrinking stores’ roots goes back decades but is picking up speed. The 2010s brought the beginning of the shift to online shopping, and the pandemic accelerated it.

“Retailers have been…