IKEA, Bunnings, Myer and supermarkets all look to smaller store formats for big growth

Carolyn Cummins and Catie Low
April 1, 2016
In retail, it seems size does not always matter.
IKEA, Woolworths, Coles, David Jones, Myer and even Bunnings are all competing for smaller-format sites as the brands seek to build networks of boutique-sized stores to service the capital cities’ time-poor, affluent shoppers.
In Sydney, Woolworths is opening its smallest supermarket so far, with the launch of a 310-square-metre store in York Street in the CBD, and insiders claim its scaled-down city supermarkets are some of the busiest and most lucrative outlets in its network.
The new Woolworths format will offer fresh food to go and a smaller line of dry groceries for city shoppers and the new influx of residents. It is understood this will be one of many for the supermarket giant in the Sydney and Melbourne central business districts.
Woolworths is also understood to be running the rule over a site in Docklands, with a plan a develop a new convenience-style community supermarket.
Property agents claim the biggest hurdle for retailers is the scarcity of good locations but some are coming back to the market with the pending closure of the Dick Smith chain.
Hardware giant Bunnings is another big-box retailer with ambitions to go small.
Its store in Balgowlah in Sydney’s northern beach area is a smaller format over two storeys but it is also opening a downsized site in Vicinity Centre’s Toombul Shopping Centre in Brisbane.
Bunnings general manager property Andrew Marks said the hardware giant had several smaller-format stores throughout Australia, including stores in shopping centres.
“They’re part of our DNA, offering convenience and enabling us to reach markets that we plan to open larger warehouse stores in the longer term,” Mr Marks said.
Coles is not far behind in its smaller-store concepts and is competing for sites in Melbourne and Sydney’s CBD. It is expected Aldi will also open in the capital cities if they can find the right space.
The rise in residential developments will offer street-level sites, which the major supermarkets will look to lease to compete with the ubiquitous 24/7 convenience stores.
David Jones and Myer are also opting for smaller stores that use warehouses for storage. David Jones has a smaller store in Malvern, Melbourne and at AMP Capital’s Macquarie Centre in Sydney’s north.
David Jones also plans to build a network of upmarket food outlets within its existing stores and in stand-alone properties. Woolworths Holdings group chief Ian Moir revealed a team had already been created and it was negotiating with top-end food producers in Australia.
The South African-owned department store has promised shoppers a taste of its new food offering this year, and Mr Moir said it would revolutionise food shopping in Australia.
According to Colliers International, the large-format retail sector is evolving, with greater attention being paid to the mix of tenants within homemaker centres.
New centres under construction are pushing the boundaries of who is large format and who is retail, and bringing retailers closer together. These developments will have elements of high street, pure retail and large format combining. Similar to trends being experienced in other sectors, food and beverage is increasingly being incorporated into centres.