How Old Navy, Kohl’s & Nordstrom Are Keeping Stores Relevant Amid Thousands of Closures

Retailers have announced a staggering number of store closures this year. As of May 31, the total reached 7,215 — far more than the 5,864 closures announced during all of 2018, according to retail advisory Coresight Research.

Openings haven’t kept pace, either, with retailers announcing 2,784 store openings so far in 2019, compared with 3,239 openings last year. Still, brick-and-mortar is hardly on its deathbed: E-commerce accounts for only about 10% of total U.S. retail sales, according to the latest Census Bureau data, and even in fashion — where by most measures, online penetration exceeds that of the overall market — the share is still less than a third, according to Forrester, a market research company.

For most retailers that sell both online and in stores, then, adapting to the shifting tastes of today’s consumer doesn’t just mean throwing money at digital marketing or free shipping. It means making sure their physical locations are well situated and updated to serve shoppers’ needs. Here’s what several leading retailers say they’re doing to adapt:

1. Thinking small

While Abercrombie & Fitch said last week that it will close three flagship stores, including Manhattan’s four-story Soho Hollister location, CEO Fran Horowitz was adamant that downsizing doesn’t mean the company is losing faith in its physical fleet.

“Though I’ve said it before, it is worth repeating: Stores matter,” she said Wednesday on a call with investors and analysts. “In this increasingly omnichannel world, the customer continues to value the ability to shop across channels, and we remain focused on providing the most brand-appropriate experiences whenever, wherever and however they choose to engage with us.” Rather than hold on to unprofitable leases, Abercrombie will focus on “smaller, more omnichannel spaces.” In some cases, this could just mean shrinking an existing space: The company says it reduced square footage by 30% in more than 30 stores over the past few years while maintaining store revenues.

2. Prioritizing convenience

At Nordstrom, where digital purchases account for nearly a third of total sales, the retailer’s small, inventory-free Nordstrom Local outposts are increasingly looking like the way of the future. The company said it will open two Manhattan locations in September, allowing customers to pick up and return online orders, and take advantage of services like personal styling and alterations. It introduced the concept in 2017 in Los Angeles and has since expanded to three locations there, finding that Local customers spent on average two and a half times more than other Nordstrom shoppers and made returns earlier, giving the retailer a better chance of getting inventory back on the shelf at the same price.

“We are on pace to bring our learnings to New York,” said co-president Erik Nordstrom. “We have two Nordstrom Local service hubs planned on the island, and we’re well positioned to execute that in New York. And then our plan is next year to take that to our biggest markets across our portfolio.” The model for the new stores, he said, “leads with service engagement across channels and services, and it leads with leveraging inventory to get customers a greater selection to them faster and add better economics for us.”

Kohl’s, too, is counting on convenient returns to draw customers in — although the Menomonee Falls, Wis.-based retailer is partnering with Amazon to capture an even bigger share of e-commerce shoppers. In July, Kohl’s will roll out its Amazon Returns program nationwide after 18 months of testing at its Chicago, Los Angeles and Southeast Wisconsin locations.

“As you know, our top strategic priority is driving traffic, and this transformational program does just that,” said CEO Michelle Gass. “It drives customers into our stores, and we are expecting millions to benefit from this service.”

3. Making inexpensive upgrades

Not every remodel needs to be a gut renovation: Old Navy — Gap Inc.’s current crown jewel — is updating many of its existing stores as it expands its overall fleet, and according to Gap CEO Art Peck, “even very low-scope remodels, which are largely a can of paint and a paintbrush, have yielded really good returns in terms of the lift in the business and the return on investment that we’re making.”

The company is adding 70 Old Navy stores in 2019, including six opened in the first quarter, with an eye to omnichannel features like buy online, pick up in-store. “One of the most important foundational cornerstones of Old Navy as a business is an exceptional four-wall model,” said Peck. “And nothing, and I would just underline, nothing has done anything other than give us confidence about the growth opportunity as we’ve continued to roll out stores in smaller markets and infill opportunities.”

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