Large retailers are launching a number of concepts to expand their bases, but they’re not blanketing markets with new stores as they’ve done in the past. Rather, the brands are taking a more strategic and experimental tack. In some cases, the goal is to expand omnichannel options, and in others, it is to capture new audiences in existing markets.

The slew of new concepts hitting the market at once is not novel, said Howard Meitiner, managing director with investment bank Carl Marks Advisors. In the current expansion cycle, however, retailers are catering to shopper preferences for convenience and experience. Retailers also must exhibit concern for environmental and social issues, he added. “Brick-and-mortar retailers have pivoted to what will be interesting as consumers emerge from COVID with all of these new omnichannel buying habits,” said Meitiner, a retail industry veteran who focuses on business improvements, organizational turnarounds and market share analysis. “While the disruption is partly responsible for this round of new concepts, the real visionaries were trying and planning new initiatives before the pandemic.”

The optimism required to trot out new retail offerings represents quite a reversal from the surge of retail bankruptcies during the early days of the pandemic. As cities reopened, deep-pocketed brands wasted no time in launching or resuming the expansion of concepts. Now, those retailers appear prescient: Retail and food services sales — excluding vehicles, vehicle parts and gas — rose 16.5% in the first 10 months of 2021 year over year, according to an advanced estimated from the U.S. Census Bureau.

“It’s impressive to see how quickly and strong retailers are coming out with these new concepts,” said Melissa Gonzalez, founder and CEO of retail strategy and experiential design firm Lion’esque Group. “For a lot of people, it is confirming that the purpose of stores continues to evolve as so much more is possible through technology, flexible fulfillment, curbside pickup and drop shipping. It opens up the opportunity to build brand loyalty in a very competitive landscape.”

New concepts of note

Public Lands: This outdoor clothing and equipment concept from Dick’s Sporting Goods aims to “reinvent the outdoor marketplace,” Dick’s president and CEO Lauren Hobart said during a second-quarter earnings call. The second Public Lands opened in early November in a former Field & Stream store at Polaris Fashion Place in Columbus, Ohio. Dick’s also owns the hunting-oriented Field & Stream brand but is scaling back hunting products while emphasizing conservation and making the outdoors accessible to all. On a third-quarter earnings call last week, Hobart added that more Public Lands will open next year. “While it’s still early, Public Lands is off to a strong start, and we are very enthusiastic about this growth opportunity and its goal to get more people outside, exploring and protecting America’s public lands,” she said.

Amazon Fresh: Amazon’s portfolio of offline grocery stores has increased to 19 across the country since the e-commerce behemoth launched the concept in the Los Angeles area last year. Visits grew by 1,000% from September 2020 through August 2021, according to location analytics firm Placer.ai. Amazon Fresh delivers items within two hours and, in a handful of stores, recently introduced Just Walk Out technology, which allows customers to grab what they need and avoid the checkout stand. “The goal around this is to really raise the bar for what customers can expect from the omnichannel experience,” Amazon director of investor relations Dave Fildes said during a third-quarter earnings call.

Ikea Planning Studio: Ikea’s first Planning Studio in the U.S. opened in Manhattan two years ago, and this spring, the retailer will open its first two on the West Coast, in the Los Angeles area. Design specialists help customers plan and order furniture solutions for kitchens, bedrooms, bathrooms and other areas of the home. The move is part of the brand’s “ongoing transformation to meet customers in new innovation and accessible ways,” a spokesperson said.

Popshelf: Discount retailer Dollar General brought Popshelf to consumers in late 2020 and expects to have as many as 75 locations open by the end of 2021, about 25 of those within existing Dollar General stores. Popshelf carries, among other products, continually refreshed home decor, party goods and seasonal items generally priced under $5, and it seeks to “engage customers by offering a fun, affordable and differentiated treasure hunt experience,” Dollar General COO Jeff Owen said during a second-quarter earnings call.

These and other new concepts — such as TJX’s Sierra and Homesense, Sephora in-store shops at Kohl’s, and small formats from Macy’s and Bloomingdale’s — allow retailers to operate multiple brands within the same area and in some cases within a single shopping center while avoiding cannibalization, said Dennis Cantalupo, CEO of Pulse Ratings, which analyzes the financial fundamentals of retailers. The brands are building on lessons learned over the past decade, he added. “Retailers have been trying to compete with the digital space before the pandemic, and they’re focusing on ways to differentiate themselves and provide new experiences. They’re going into less space at lower rent and are turning over inventory faster. The pandemic paused some of the activity, but now the overhang of vacancy in the market lends itself to trying out new ideas.”

Customer proximity

Not only does the growth of e-commerce allow retailers to shrink their store footprints, it also facilitates a spoke-and-hub system that offers more access to customers, said retail advisor Steve Dennis. “COVID got retailers to think differently about physical store strategies as they became more involved in things like order fulfillment and curbside pickup. It is also causing some retailers to think about what kind of stores they want in any given city.”

Like Ikea Planning Studio, Nordstrom Local is a small, merchandise-free concept. It offers pickups and returns of online orders, as well as the core services of alterations and advice, Dennis pointed out. The first Nordstrom Local launched in the Los Angeles area four years ago, and the retailer since has added four in that market and two in Manhattan. “These local formats speak to the maturity of some of these well-established retailer models and the realization that they can’t keep building traditional stores and have the economics work out,” Dennis said. “So they’re thinking about new concepts in a different way.”

The Ikea spokesperson noted that large-format stores will continue to play a vital role in the Ikea experience, and the Planning Studios will provide new experiences closer to customers. “We developed the concept for these studios based on extensive market research to understand consumers, what logistical barriers they face, how they like to shop, how they live at home and more.”

Advantage: big brands

It’s no coincidence that retailers pursuing these new concepts have strong balance sheets and credit profiles, Cantalupo said. Distressed brands simply don’t have the flexibility to test ideas because failure could be devastating. Financially sound companies, though, typically can withstand an underperforming new brand or can change direction as consumer preferences change and apply the gained experience to its next initiative. Exhibit A, he continued, is the decision by Dick’s a few years ago to reverse its Field & Stream expansion and chart a course for the nonhunting Public Lands concept.

Meanwhile, Amazon has an insatiable appetite for market share, and there are rumors that it’s considering entering the department store category, Cantalupo added. Aside from its Whole Foods acquisition, its retail concepts have yet to contribute much to its bottom line. “But Amazon’s ability to invest in growth leads us to believe that they will eventually find the right formula through trial and error and then expand more aggressively,” he declared.

Even if a retailer has a stout financial position, Wall Street’s demands for immediate results can make it difficult for retailers to test new ideas, Gonzalez said. “A lot of brands are scrutinized quarter to quarter as to how profitable they are, and that sometimes inhibits their ability to make some of these more strategic, long-term moves. But the more success we continue to see due to the growing ability to track in-store attribution, the more it will become apparent that these types of investments are critical for brands that want to create lifetime value for consumers.”