NEW YORK • With holiday shopping in full swing, Sears decided it was time to host a "grand re-opening" for its department store at Fair Oaks Mall in Virginia, complete with magic shows, jugglers, face painting and free cotton candy.
The biggest change for the decades-old shopping-centre anchor? It is now just half its size.
The store has done away with its entire second floor, concentrating efforts on its appliance and mattress departments on the ground level.
The apparel departments are smaller and the many cash registers have been consolidated into one sleek, white check-out counter that looks like it has been borrowed from the Apple store.
It had taken more than a year to renovate the store, part of a company-wide effort to square a difficult retailing circle.
Sears Holdings, which has not posted an annual profit since 2010, is trying to pare costs while making its stores attractive to a generation of shoppers who are increasingly buying online.
Sears is not the only store cutting back on real estate. Across the country, retailers such as Walmart, Target, Macy's and Nordstrom are experimenting with ways to distil their inventory into smaller, more focused locations.
The shift comes, analysts said, as Americans flock from the suburbs to city centres, where space is at a premium.
Big-box stores on the outskirts of town are no longer convenient nor practical for millennials with tiny apartments and no car.
Target is opening 30 smaller stores by year-end, doubling its presence near urban areas and college campuses.
"That big weekly stock-up where you fill up the back of the car? That's very much boomer mentality that millennials aren't buying into," said Mr Mike Paglia, director of retail insights at research firm Kantar Retail.
Sales at smaller-format stores are projected to grow 3.9 per cent annually until 2022, outpacing 0.8 per cent sales growth for their big-box counterparts, according to Kantar Retail projections.
Stores smaller than 20,000 sq ft account for US$612 billion (S$822 billion) in annual sales, with that figure slated to grow 21 per cent to US$741 billion in five years.
With the boom in sales online, "nobody needs a gazillion square feet of store space anymore", said Mr Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates.
The shift can be painful for retailers. Renovations can cost hundreds of thousands of dollars and, in some cases, they may have to pay landlords to alter existing leases.
Americans have also become accustomed to megastores.
Getting them to pare down expectations can be difficult. Professor Mark Cohen, a professor of retailing at Columbia Business School, said: "How do you successfully distil 200,000 sq ft of products into 80,000 sq ft?"
Take, for example, Walmart. The company, which had been testing small-format Express stores since 2011, last year announced that it was scrapping its plans and closing all 102 of its Express stores.
At the Sears outlet in Fair Oaks Mall - which is now about 78,000 sq ft, down from 145,000 sq ft - dozens of elliptical machines and treadmills were on display, as were hundreds of appliances, many of them wrapped in festive red bows.
Store managers said they tried to keep the most popular departments - appliances, mattresses, lawn and garden - as large as possible, while shrinking the selection of apparel, jewellery and home goods.
The company had also added computer kiosks throughout the store where customers could browse the selection at Sears.com.
But long-time customers did not seem to know what to make of the changes. One regular was confused by its new layout.
"That was a shocker when I walked in and there was no upstairs," she said.
WASHINGTON POST
