There are a lot of forces buffeting retailers today. In combination, they are all leading inexorably to a consistent trend: Retail stores are getting smaller, both in number and in size. The key forces leading to this change include shrinking in-store sales, wage pressures, and the continuing growth of digital demand. First, for virtually every well-known retailer, recent results show sales declines. There are some exceptions; Home Depot enjoyed a nearly 9 percent bump in the most recent holiday season. But for famous names such as Sears, Macy’s, Restoration Hardware, and Best Buy, sales shifted for the worse, and the retailers suffered substantial losses. Second, even as their sales dwindle, retailers are facing demands that they increase the wages paid to their employees, which puts even greater pressure on their margins. Third, the well-documented shift by consumers to electronic shopping channels continues on pace. At Kohl’s for example, online sales increased by 30 percent in the fourth quarter of last year. In response to these simultaneous pressures, retailers are rapidly and actively seeking to shed themselves of stores. Sears is closing about 50 stores immediately, and it notes that leases on hundreds more are set to expire within the next few years. The Gap closed 73 stores, with a similar warning that more closings might be required soon. Simultaneous with these closings, some retailers are shifting their remaining physical operations into smaller spaces. For example, rather than averaging 88,000 square feet, Kohl’s plans for future stores will move the average down to about 35,000 square feet per store. With these fewer and smaller stores, retailers hope that they can lower their costs, in terms of the overhead associated with the stores themselves, as well as the wages needed to staff them. They also hope that, if customers really are buying mostly through online or mobile devices, the store reductions will not lower their sales any further.

 Source: Suzanne Kapner, The Wall Street Journal, February 25, 2016