Multi-format retailing has slowly entered retail over the past 20 years. The term is specific to the different formats a retailer adopts with its brick-and-mortar stores versus omnichannel, which includes online channels, catalogs, etc. Carol Spieckerman, president of Spieckerman Retail, talks about the shift in the current multi-format fashion from major retailers and why the trend is growing.
“The fact is that multi-format retail has quietly become the rule, not the exception. Most retailers that have made it this far are now multi-format operators,” said Spiekerman, noting that “the refinement and evolution of existing formats is very much part of the story of multi-formats.”
Major chains changing the retail landscape
- Dollar General – an efficient small-format department store branching out into Popshelf stores to attract middle-class suburban shoppers, DGX stores to break into the urban market, and a plan to test its concepts internationally by opening stores in Mexico.
- Walmart – a major retailer exploring new opportunities for convenience stores and out-of-stock pickup locations. What’s interesting about Walmart is the company’s willingness to experiment with ideas in different locations, such as the now-defunct “Walmart Pickup with Fuel” concept.
- Macy’s – starting in August 2022, the well-known department store is testing six Market by Macy’s concept stores in Texas and Georgia. These are smaller stores designed to be in shopping centers instead of large malls with new items arriving several times a week and regular events including exhibitions to attract more frequent visits.
And these are only a small part of the stores that are experimenting with new formats. Others include Kohl’s plan to open 100 mini-stores by 2026; Petco’s expansion into farm animal products and services; 7-Eleven’s continued rollout of its successful Evolution concept, which includes dining, cocktails and contactless payments; and HEB (a Texas grocery store chain) launching a new format that includes home goods.
So why are retailers changing their multi-format fashion?
There are multiple reasons and strategies depending on what the retailer is trying to achieve and what consumers they are trying to reach. “If you’re in the B2B space anyway and you’re selling to retailers or brands, it’s really worth analyzing it and learning the reasons why because it’s going to be so important to your strategy and it’s very important to their future growth,” said Speakerman. She notes the three main reasons why retailers decide to commit to multi-format brick-and-mortar locations, as well as the impact on the business that sells in those stores.
Diversification of categories
When retailers experiment with new formats, they are able to provide new categories of offers to shoppers. A few examples include Dollar General and Target adding food to store offerings. Food is a popular supplement because it encourages more frequent trips to the store and increases sales, including non-food sales. Grocery stores do the same when they add home goods, clothing and popular non-food seasonal items to their inventory.
Without new categories, retailers are limited to specific locations and shopper demographics. For example, Petco’s farm offerings give the company access to rural areas that cannot support large stores. Dollar General’s DGX appeals to urban shoppers with popular grab-and-go items, and its Popshelf concept is designed to attract suburban consumers who might never shop at a dollar store.
Category Diversification + Location Expansion = New Market Segments
In the end, it all comes down to acquiring new market segments, which leads to increased profitability and helps retailers stay in business longer.
Company stores are still at the core of retailers’ strategies
“The multi-format movement helps keep physical products relevant and on every retailer’s radar. This is an opportunity for anyone doing business with multi-format retailers… Because by their format expansion, you can expand with them. So a retailer can now present all kinds of options without you having to look any further,” Spikerman explained, concluding with the following statement.
“The bottom line is that there’s never been a better opportunity to position yourself for multiformat opportunities and change your multiformat mod.”