Key facts
- Big-box retailers are adopting smaller store formats to enter urban markets.
- Physical retail, especially in grocery and big-box sectors, has shown resilience.
- Store openings outpaced closures in 2022 and 2023, with a net gain of physical locations.
- In 2024, a surge in closures primarily impacted specialty retailers, not major big-box chains.
- Foot traffic to grocery stores and large superstores saw healthy growth in 2024.
- Physical stores handled approximately 72.6% of U.S. retail sales in 2023.
Big-box retailers are increasingly adopting strategies to penetrate crowded urban markets, often by right-sizing their store formats and diversifying their physical presence. This shift comes as many municipalities focus on building affordable housing, creating new opportunities for retailers to establish a foothold in densely populated areas.
Despite the ongoing growth of e-commerce, physical retail, particularly in the big-box and grocery sectors, has demonstrated resilience. In 2022 and 2023, store openings consistently outpaced closures, resulting in a net increase in physical retail locations. While 2024 saw a rise in store closures, these were largely concentrated among struggling specialty retailers, with major players like Walmart, Target, and Costco maintaining or expanding their footprints. This stability is partly attributed to their focus on essential goods and value-oriented offerings.
Consumer behavior further supports this strategy, with brick-and-mortar foot traffic showing a strong rebound. Grocery stores and large supercenters, including those operated by Walmart, Target, and Costco, experienced healthy traffic growth in 2024. Discount and dollar stores also saw significant gains as consumers sought value amid high inflation. Physical stores continue to handle the majority of retail sales, with groceries remaining predominantly an in-store category.
Retailers are experimenting with various formats to meet evolving consumer needs. This includes downsizing with flexibility, testing smaller or modular store concepts tailored for urban neighborhoods, and integrating robust digital services to create seamless omnichannel experiences. Companies like Target and Macy's are exploring smaller formats, while Ikea is utilizing 'Plan and Order' points with pick-up options. Furthermore, retailers are repurposing distressed big-box locations and implementing shop-in-shop concepts to optimize space, enhance shopper engagement, and diversify revenue streams.