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Abercrombie and Victoria’s Secret Aren’t the Only Retailers Rethinking Store Strategies

Now that in-person shopping is on the rebound, some retailers are rejiggering their store network with an eye toward grabbing market share.

What’s their answer to growth? New shopper-friendly brick-and-mortar concepts.

Even after more than 11,000 fashion-related stores closed last year, some believe the U.S. is still very much over-stored. But this mentality fails to account for retail’s need to evolve along with new consumer behaviors. In that sense, it’s a matter of out with the old and in with the new. Whether due to a routine evaluation of a retailer’s store base or a bankruptcy filing or liquidation, closing stores is a necessity if that evolution is to take place.

The good news is that stores are not going away anytime soon. And more important, they’re finding new ways to connect with customers. Some are even finding a new loyal consumers along the way.

Here’s a look at how some merchants are adapting to the new retail reality.

Abercrombie & Fitch

Although Abercrombie & Fitch had been considering closing some international flagships before the pandemic, the company accelerated its timetable once consumers flocked to e-commerce when Covid temporarily closed stores.

Most of the global and domestic flagships were under the Abercrombie banner and opened between 2005 and 2014, CEO Fran Horowitz said last month, describing those stores as “represent[ing] a different era.”

Those expensive flagships were located in major tourist hotspots, and their presence was part of a marketing strategy to drive brand awareness. And while the large formats were successful, the rise of digital means they’re no longer the critical traffic drivers of yesteryear. These days, Abercrombie is focused on smaller-format, localized stores tailored to their surrounding communities.

In 2017, the company resurrected Gilly Hicks, a women’s intimates line within the Hollister brand, four years after it had shut down the label’s stores. Since then, the company has ramped up brand awareness, and opened several Gilly Hicks popup stores in 2019.

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In June, Gilly Hicks revamped to embrace a gender-neutral point of view aligned with what Gen Z consumers prioritize and opened its first standalone store, located in Columbus, Ohio. The new location tests the experimental concept offering merchandise side-by-side, without any separation or reference to either men’s or women’s.

American Eagle Outfitters

If Aerie is the go-to intimates brand for Gen Z women, then its sibling American Eagle (AE) is one of the major go-to denim brands among teens.

Earlier this month, CEO Jay Schottenstein described American Eagle as the No. 1 brand for 15-to-25-year-old consumers as well as a top brand for denim. New new washes and finishes keep teen customers interested, he added in a Wall Street conference call.

“AE’s position as a deep denim destination could not be stronger. Our jeans collections continue to deliver great results across genders,” he said. “We believe the current trends and shifts and silhouettes will be a tremendous win for the AE business.”

And now AE has even bigger ambitions for denim.

Though he was light on specifics, Schottenstein said the retailer will probably have an announcement “in a few weeks about a new denim brand” it’s been hard at work on for the past 12 months. Test stores could open in the next 30 days.

The retailer did some out-of-the-box thinking when it acquired Seattle logistics startup AirTerra last month. While retailers have invested to improve and transforms their supply chain processes, buying an aggregation shipper hasn’t been on many priority lists. (Target, however, went against the grain when it paid $550 million in cash for Shipt, which has been a boon for the chain’s same-day success.) AirTerra will operate independently and can support AE’s supply chain, in addition to other retail clients. Schottenstein said AE could acquire another company, potentially a second logistics player, in the next few months.

Burberry

The British luxury brand opened its first flagship reflecting a refreshed global design concept on London’s Sloane Street, with three more slated to open over the next year. Seven locations in Asia also showcase the new store concept. Updating the store’s aesthetic enhances the store experience to better match the brand transformation strategy under the oversight of outgoing CEO Marco Gobbetti and chief creative officer Riccardi Tisci’s new designs.

Perhaps more interesting will be the new concept store Burberry is testing in Shenzhen in partnership with tech giant Tencent as it looks to forge closer social ties with China’s luxury consumers in China. The social retail store merges social media with retail for a digital and physical experience that fosters interaction, inspiration, sharing and shopping.

Opened over the summer, the social retail store, which integrates Tencent’s WeChat messaging and mobile payment app, serves as a laboratory where Burberry can test innovative projects it can scale to its other China outposts.

Dollar General

After teasing the launch last fall, the dollar store now operates at least 10 pOpshelf locations, with two opened this in July near Nashville, Tenn. The pOpshelf store-within-a-store concept allows Dollar General (DG) to include a 9,000-square-foot-section in DG Market stores that carry merchandise beyond its traditional assortment, with 95 percent of these items $5 or less.

About 25 larger format DG locations are set to feature a pOpshelf shop-in-shop  this year. DG Market stores that house pOpshelf are larger than the chain’s typical doors.

DG previously piloted an urban store concept called DGX back in 2016. With 22 locations in operation, the 3,000-to-7,000 square-foot stores target millennial urbanites by offering quick-service options such as grab-and-go food.

Express Inc.

Mall-based Express had been struggling to regain its footing as online sales supplanted physical-store sales. And while its fashion offerings were okay, sales were sagging. Amid wider third-quarter losses, Express cut 10 percent of its corporate jobs and saved $13 million in the process. It put together the Expressway Forward strategy to renew its fashion point of view for both men and women.

Express is learning how to do more with less, betting big on small-format stores with 45 percent less square footage compared versus its usual footprint.

The retailer is piloting five 4,500-square-foot Express Edit stores on high-traffic streets. With two-thirds of store leases up for review in the next three years, Express could expand the concept across its fleet.

Visitors to Express Edit stores will find enhanced customer service and curated, localized assortments.

Francesca’s

New ownership and financing gave the specialty chain money to target the hot tween market. Mango and Old Navy are also chasing the pre-teen demographic.

In February, Francesca’s launched the Franki by Francesca’s tween assortment, featuring tie-dye sweatshirts, tonal animal-print joggers, slogan T-shirts, rompers and dresses. It paired with new merchandise with a mobile app, a first for the youth-centric retailer.

Up next could be two standalone Franki stores, possibly in time for the holiday season, CEO Andrew Clark told RetailDive.

The women’s boutique chain formerly operated under the name Francesca’s Holdings Corp., but in December filed for Chapter 11 bankruptcy to escape its debt. In February, the retailer was acquired by Francesca’s Acquisition LLC, an affiliate of TerraMar Capital LLC, Tiger Capital LLC and SB360 Capital Group LLC.

Victoria’s Secret & Co.

Last month, Victoria’s Secret separated from L Brands sibling Bath & Body Works, after repositioning to be less “tone deaf” and more relevant to target customers.

The lingerie seller, which operates Pink and Victoria’s Secret-branded stores, plans to experiment with locations beyond the mall, whose recent struggles have only worsened during the pandemic. In fact, the company has already folded nearly 250 locations, mostly in malls, and more closures are likely to follow. It’s also looking to get digital sales to about 50 percent of its total, up from 43 percent.

The specialty chain isn’t the only one moving off-mall. Macy’s Inc., which operates anchor doors at many malls, said last September that is planning to test smaller stores in off-mall locations.

The federal document says the company plans to increase its global store count with new store designs and more flexible formats and adjusted assortments to reflect local preferences.

The retailer is also planning a “store of the future” concept that will include smaller, more flexible spaces with a dual-brand layout showcasing merchandise from both nameplates.