31k sq ft Macys to open in Elk Grove, CA

[storewanderer]

https://www.abc10.com/article/news/loca ... b9d2b083af

They were going to have a full size store in a half built mall in Elk Grove that never came back after the 2008 downturn.
The mall site was finally demolished for a casino.

[hushpuppy212]

This has me shaking my head. It looks to be less than half the size of the neighboring Target. What is their focus going to be, certainly not home goods. Higher-end cosmetics? Expensive shoes? Both Macy's in downtown Sacramento and Arden Fair are a 20-30 minute drive, why would you visit a mini-Macy's when you can go to 'real' one?

[ClownLoach]

This has me shaking my head. It looks to be less than half the size of the neighboring Target. What is their focus going to be, certainly not home goods. Higher-end cosmetics? Expensive shoes? Both Macy's in downtown Sacramento and Arden Fair are a 20-30 minute drive, why would you visit a mini-Macy's when you can go to 'real' one?

A fifth of the size of a Target. These are primarily women's clothing and cosmetics stores. They also don't seem to follow the ad cadence of full line stores and all clearance is shipped out. They intend to have fewer large format stores and more of these smaller format locations in busier box centers to fill in the gaps. They were calling these something like Market by Macy's but now it's just the same Macy's name.

Although I was skeptical about the small formats, I have read that there is a surprisingly large curated assortment in these new stores. There is a ridiculous amount of backroom and wasted space in the traditional department store buildings. A typical 150,000 Sq ft two or three story building may have less than 80,000 Sq ft of sales floor when you're done with the endless corridors of offices, stock rooms, warehouses and so forth. Now you remove clunky furniture, slow moving kitchenwares etc. that are clogging a third of that giant department store sales floor and suddenly these small formats aren't all that small. They have no back room to speak of, stock overnight, and no back stock. A 150,000 Sq ft Macy's building may only have 50,000 Sq ft of actual sales floor space in clothing, shoes etc. You can see how more efficient fixtures and such could make that fit into a former Bed Bath and Beyond. More important, this gives them an opportunity to survive in a market where the mall is dead or dying and their only two choices are close down or move to a strip mall as they're doing here.

I expect to see them manipulate the model further and try putting a BlueMercury cosmetics store next to or adjacent to a small format so they can remove the cosmetics and add in menswear and kids clothes. There might be almost as much selection in these smaller stores as a full size where they have ample empty floor space these days.

And realistically although you mentioned the "full" Macy's is 20 or 30 minutes away, there is usually a Target or Walmart, Kohl's, TJMaxx or Marshall's or Ross in the centers they're putting these small formats in which is likely "on the way to the mall." The customer who doesn't want to drive that 20-30 is going to these box centers and shopping those competitors and completely cutting Macy's out of the equation. By locating in the same center as those modern competitors they now remain relevant and will bleed some sales from those other stores.

The fact is that they're investing very little in these small format stores, reusing existing box stores. It's low risk and potentially very high reward. The big department stores as the CEO stated were built for a different era, the buildings are terribly inefficient and wasteful with tons of space that is unused in this modern era of distribution centers and automatic replenishment. The big buildings are only worthwhile in the busiest and largest malls that can pull in traffic from an entire county or metro area, and then the smaller stores fill in the gaps where the smaller malls are going under and taking Macy's with them. It becomes a hub and spokes model, so if you did buy from the "big" store you can return closer to home at the "small" store. And most importantly of all, Macy's has already stated ALL of their open locations are cash flow positive which means these relatively new stores are already turning a profit... Having opened many new stores personally in different retailers I can tell you most new stores take up to 5 years to break even. These new stores aren't that old and already profitable? It must be working..

This location is one of about 30 of these new small formats to be opening soon.

[hushpuppy212]

Thank you for your well thought out reply; I found it most informative. It will be interesting to see what happens.

[storewanderer]

I think these small formats are another sort of throw random stuff out there and see what works thing. But if they are cheap enough to run... worth a try...

Not much appeal to the one I saw in Las Vegas and they aren't spending much on build out. Really bare bones in there.

[ClownLoach]

I think these small formats are another sort of throw random stuff out there and see what works thing. But if they are cheap enough to run... worth a try...

Not much appeal to the one I saw in Las Vegas and they aren't spending much on build out. Really bare bones in there.

That Vegas one looks tiny. Maybe 20K at the most. Supposedly there are a variety of floorplans, assortment levels, and such and the ones with "more" are pretty decent.

[buckguy]

You guys make this out to be a new thing---it isn't. Most of the earliest department store branches were small--like 10-20-30K sf small. They were in suburban downtowns, satellite town downtowns and early shopping centers.

What usually led to the closure of these stores was the opening of bigger mall stores nearby, but some survived for a long time. The original Marshall Field's branch in Lake Forest stayed open until 2008. It was tiny and somehow lasted under May and Macy management, despite there being other branches that served the North Shore, including one in Evanston that opened a short time later but was much larger and closed before Lake Forest. Some chains used these for their national presence like Best & Co, which was a very traditional store based in NYC that entered malls too late to really benefit.

Given that malls have been dying off for a few decades now, the mall store isn't going to work everywhere and if you don't try to experiment, you're going to die. Other kinds of retail have been downsizing---LL Bean closed its flagship-sized store at Tyson's Corner, even as it opened a smaller store elsewhere in the DC area. I've noticed that newest Marshall's are smaller and a one of their replacement stores outside of Cleveland is probably a 1/3 smaller than the store it replaced.

[ClownLoach]

You guys make this out to be a new thing---it isn't. Most of the earliest department store branches were small--like 10-20-30K sf small. They were in suburban downtowns, satellite town downtowns and early shopping centers.

What usually led to the closure of these stores was the opening of bigger mall stores nearby, but some survived for a long time. The original Marshall Field's branch in Lake Forest stayed open until 2008. It was tiny and somehow lasted under May and Macy management, despite there being other branches that served the North Shore, including one in Evanston that opened a short time later but was much larger and closed before Lake Forest. Some chains used these for their national presence like Best & Co, which was a very traditional store based in NYC that entered malls too late to really benefit.

Given that malls have been dying off for a few decades now, the mall store isn't going to work everywhere and if you don't try to experiment, you're going to die. Other kinds of retail have been downsizing---LL Bean closed its flagship-sized store at Tyson's Corner, even as it opened a smaller store elsewhere in the DC area. I've noticed that newest Marshall's are smaller and a one of their replacement stores outside of Cleveland is probably a 1/3 smaller than the store it replaced.

I've seen the Astoria JCPenney and such, I'm aware of smaller format department stores. The reality is that everyone changes their size.

Hobby Lobby was pursuing 80,000+ Sq ft stores, now the craft business is crashing, Joann is bankrupt, and they're walling off the space and downsizing to 40,000 Sq ft stores.

Sam's Club is growing from their typical 125,000 Sq ft box to a new wave of 165,000 Sq ft boxes in a major expansion that will be their largest stores they've ever operated.

Costco has downsized from 180,000 Sq ft as their standard to 150,000 Sq ft. For typical prototypes going forward.

Michaels is moving from 25,000 Sq ft big box to small format 10,000 Sq ft stores and pursuing closed Rite Aid and Walgreens location, along with outlet malls and other odd spaces. Yet their previous small format Aaron Brothers was liquidated about ten years ago as it didn't have enough selection to retain customers. And their mega format Pat Catans closed.

Target was building small formats as tiny as 15,000 Sq ft, now they've reversed course entirely and building the biggest stores they've put up in two decades with a wave of leases signed at 148,000 Sq ft and up with more on the way.

Everyone has some kind of strategy. There is not necessarily a trend to smaller stores, there are just more bigger store brands dabbling in smaller formats. And the bigger stores like Sam's and Target are pursuing their biggest stores ever.

The reality is that each company has to figure out where their customers are, where they're going to, and what kind of space is available where they're going to. For some brands that means taking smaller stores than they used to. For other brands that means taking larger stores.