Store Design Goes Local

Retailers are catering their locations and product assortment to the local community, a strategy that takes significant investment.

January 09, 2023

ALEXANDRIA, Va.—Retailers are rethinking store design, designing and stocking them based on the neighborhoods that stores are located in, reports Modern Retail.

Target recently announced it was introducing a new store design and existing store redesign and plans to localize its products “to inspire and serve its guests,” according to a statement. Starting in 2023, more than half of Target’s approximately 200 full-store remodels and almost all the retailer’s roughly 30 new stores will include elements of the new design. Beginning in 2024, all of Target’s remodels and new stores will feature the majority of the reimagined store design elements.

Modern Retail also reports that Kohl’s plans to use data science to accelerate localization to its entire store fleet in the next two years. The company opened an experimental small format store in Tacoma, Washington, last month, and the location includes a strong focus on outdoor gear, catering to the local residents and their hobbies.

Experts say that this move to tailor retail locations to the local community allows companies to gain an advantage over their competitors.

“When they see merchandise that reflects their lived experiences, their interests, the designers and artists that they know in their neighborhood, that’s just a really crucial moment and source of pride,” Melissa Minkow, director of retail strategy at digital consultancy firm CI&T, told Modern Retail. “Having localized assortment just demonstrates that you know your customer.”

It’s much easier for retailers to have the same look, layout and product assortment in all locations. A uniformed approach is easier to operate, but customers can feel as if they are “walking into a faceless monolith,” John Clear, a director in the Consumer Retail Group of global professional services firm Alvarez & Marsal, told Modern Retail.

According to a Twilio survey, 62% of respondents said they expect a personalized experience from brands.

“There’s a big benefit there from a loyalty perspective and from a branding perspective,” Clear told Modern Retail. “When your assortment actually matches what the consumer is looking for, it’s going to drive sales.”

The move to focus on personalization comes during a shift in generational spending power.

“Millennials are now moving into this phase of having the largest spending power in the economy, followed fairly quickly by Gen Z,” Clear told Modern Retail. “Both of those demographics have a tendency to want to understand their products.”

However, because it’s more expensive and difficult to have a localized strategy, significant investments in data science and inventory management are needed, Dan McCarthy, assistant professor at Emory University’s Business School, told Modern Retail.

“It’s things like that make [localization] not that easy to be able to pull off,” McCarthy said. “It could be part of the reason why it hasn’t been until relatively recently that we’ve seen a bigger shift toward it.”

“If you’re going to go down the localization route, it’s very important that you get it right because you’ll have a bigger impact on a local community by getting it wrong,” he told Modern Retail.