The Supply Side: Retailers invest more to enhance store formats

Retailers and brands are investing in enhanced store formats as consumers return to brick-and-mortar venues and crave experiences. Walmart spent $500 million on 117 store remodels in 30 states to connect store experiences with online capabilities.

“Every change is thoughtful,” said Hunter Hart, senior vice president of Walmart Realty. “They all ladder up to a greater goal: to meet our customers wherever they are, leveraging our stores to welcome people to a more modern, highly connected Walmart.”

Walmart set out to complete 700 store updates this year which follows $9 billion spent in the past two years to modernize more than 1,400 U.S. stores.

“With nearly 90% of the U.S. population living within 10 miles of a Walmart, we understand how important our local stores are to customers and communities, and these construction investments allow us to create more local jobs and make it easier for our associates to get customers what they want when they want it,” Walmart U.S. CEO John Furner said.

Upgraded features in the remodeled stores include improved layouts, expanded product selections and technology that allows Walmart employees to help customers better and make shopping more convenient. The upgrades also made the stores more digital with touchpoints that help shoppers find various online products and services through QR codes and digital screens. For example, in Walmart’s pet area, customers may scan the QR code to see additional dog bed options, learn about Walmart’s pet insurance service options or have a 20-pound bag of kibble delivered to their door. Virtual try-on options are available in the cosmetic department to allow shoppers to see what a particular shade of lipstick or face powder would look on their image.

Walmart also added a new grab-and-go section to the grocery areas for quick meal and drink options near the front of the store. To better accommodate busy shoppers, Walmart also added more check-out stations, including staffed lanes and additional self-check-out stations with separate Scan & Go stations for those shopping with that function in the app. The most recent remodel has added a mother’s room with a clean and private area for nursing mothers.

Walmart is not the only retailer sprucing up stores and introducing more features to enhance consumer experiences. Some retailers are experimenting with smaller formats. Macy’s and Ikea are investing in smaller formats that offer consumers a more convenient choice. Macy’s recently announced 30 new off-mall small-formats it plans to open next year.

“Our small-format stores are efficient to operate, provide the customer with a shopping alternative within our omnichannel ecosystem and present a unique opportunity to target high-traffic shopping centers. Our small-format strategy is one way we intend to harness the full power of the Macy’s brand to deliver sustainable, profitable sales growth for Macy’s Inc. beginning in 2024,” said Macy’s Chief Financial Officer Adrian Mitchell.

As one of Macy’s five growth vectors, small-format stores play a role in the company’s omnichannel strategy to expand in existing markets, enter new markets and maintain a presence in existing markets by replacing stores that may not be as productive. According to Macy’s, the small-format stores offer a convenient and distinct shopping experience in an open environment, roughly one-fifth the size of full-size stores. Macy’s said it targets locations in high-traffic centers where the retailer’s products and brands provide a different shopping option.

Ikea is also experimenting with smaller, showroom-like stores in select cities that allow consumers to see curated selections and order the items they want for delivery. Ikea recently outlined plans to spend $2.2 billion on expanded storefronts and fulfillment centers in U.S. urban centers.

Ikea U.S. CEO Javier Quiñones said the investment will bring Ikea closer to U.S. customers physically and digitally, making it easier and more convenient to shop. Ikea anticipates opening eight new stores and nine smaller Plan & Order showroom stores over the next year. Ikea will also open 900 new pick-up locations where customers can collect purchases. In the past year, Ikea has opened four showroom stores including the latest locations in San Francisco and Arlington, Va.

“We are committed to continuing to grow in this market with our thousands of co-workers and millions of customers who look to Ikea for home furnishing inspiration and solutions at an affordable price. Our priority is to become more accessible while staying as affordable as possible for many people, which is especially important given the increasing living costs,” Quiñones said.

ATTRACTING BRANDS
Netflix, which teamed up with Walmart last year to sell merchandise related to its popular shows in more than 2,400 stores, is planning to open “Netflix House” stores, with the first two slated to open in 2025. Netflix House stores plan to sell merchandise based on the most popular shows on the streaming platform. The locations will also offer curated in-store dining and live events. The restaurant plans to serve items from Netflix’s food-based reality shows ranging from fast casual to high-end dining.

Josh Simon, Netflix’s vice president of consumer products, said adding physical stores comes as fans love to immerse themselves in the world of movies and TV shows. Simon said the past pop-up stores in areas like The Grove in Los Angeles last holiday season sold limited merchandise based on popular Netflix shows and featured photo-ready vignettes featuring life-size versions of Netflix characters. In July, Netflix opened its first pop-up restaurant in Los Angeles’ La Brea neighborhood. The pop-up offered dining experiences from several well-known chefs from shows on its platform, such as Chef’s Table or Iron Legend.

“Netflix is already a destination for beloved food programming, from documentaries to competition shows,” Simon said in July. “From episode to entrée, with Netflix Bites we are creating an in-person experience where fans can immerse themselves in their favorite food shows. We are excited to collaborate with these incredible chefs who will bring this vision to life and showcase an array of their delicious menus.”

Radio Flyer, maker of iconic toys like red wagons sold in major retailers for the past 100 years, opened its first brick-and-mortar location on Nov. 10 in Schaumburg, Ill. The 15,000-square-foot store in the Woodfield Mall offers the brand’s lineup of products, including stroller wagons, tricycles, scooters, go-karts, bikes and wagons. The company said the new store allows customers to customize wagons and other items.

The store also allows shoppers to interact with products before they purchase them. The store includes a race track for kids and hands-on experience in the Radio Flyer go-karts, scooters and other products. The store also has a bike shop that gives free test rides for kid’s bikes and adult electric bikes, professional assembly, service and customization.

Radio Flyer CEO Robert Pasin said the goal is to create the ultimate Radio Flyer experience for kids of all ages where new and existing customers could have a one-stop shop for their favorite Radio Flyer products.

“When my grandpa built the first Radio Flyer wagon 106 years ago in his Chicago garage, he always dreamed of creating a space for families to experience the joy of the Radio Flyer brand,” Pasin said.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.