The New Retail Equation: Better, Not Bigger?

Remember when the ultimate retail accomplishment was bigger stores—and more of them? The tide seems to be turning, with “big box” giving way to “out of the box” when it comes to retail thinking. Retailers are increasingly shifting their strategies to prioritize efficiency, adaptability, and customer experience over sheer scale.

Here are a few high-profile examples reported by BDO in its recent retail update:

• Macy’s opened 12 small-format stores that are 30,000 to 50,000 square feet (one-fifth the size of Macy’s mall locations) and plans to add 30 more locations by the end of 2025.
• Nordstrom plans to open 23 Nordstrom Rack stores through spring 2025, in mostly suburban markets. Locations range between 23,000 and 36,000 square feet.
• IKEA opened more than 70 new, mostly small-format stores in 2023.

Store size is not the only thing retailers are experimenting with. They are also seeking new store approaches to help combat retail turmoil.

Bath & Body Works, for example, plans to locate two-thirds of its stores outside of malls as part of its long-term strategy, while Walmart aims to convert 150 locations to new concept stores featuring improved layouts, expanded product selections, and new technology by 2029.

Supporting Innovation and the Customer Experience

Regardless of which direction retailers go, it will be imperative for them to focus on designing and managing their supply chains to support innovation and greater complexity. That will likely mean relying on advanced analytics and artificial intelligence tools, which will be pivotal in forecasting demand, optimizing inventory levels, and personalizing the customer experience.

By boosting overall supply chain efficiencies, retailers can make the most of these paradigm shifts and deliver superior customer experiences across all channels. A demand-driven supply chain approach—which we’ve been championing for 40-plus years now—is still the best way to meet evolving needs while ensuring the adaptability and flexibility it takes to enact retail pivots like smaller store footprints or new concepts.

In this new retail landscape, companies that innovate and adapt by refining their operational models to be more agile and responsive will be best positioned to thrive. That formula is likely to work regardless of the shape, size, or strategy that takes hold as the new norm.