Foot Locker Embraces Localization Strategy Through Small Concept Stores 

Despite facing challenges in the first quarter due to changes in Foot Locker’s physical presence, brand assortment, digital initiatives, and omnichannel strategies, the retailer is using concept stores as experimental spaces to explore localization in a bid to make deeper customer connections.   During the Q1 earnings call on May 19, Foot Locker President and CEO […]

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Despite facing challenges in the first quarter due to changes in Foot Locker’s physical presence, brand assortment, digital initiatives, and omnichannel strategies, the retailer is using concept stores as experimental spaces to explore localization in a bid to make deeper customer connections.  

During the Q1 earnings call on May 19, Foot Locker President and CEO Mary Dillon highlighted several challenges Foot Locker encountered, leading to steep declines in comparable store sales.

These included the company’s reset with Nike, the transition of the Champs banner, the closure of the Eastbay banner, and a 10% decrease in average tax refunds. Given Foot Locker’s customer base, which tends to over-index toward lower-income consumers, fluctuations in tax refunds had a pronounced impact on the business. 

In addition to these notes, Dillon also discussed the company’s “Lace Up” strategy. She emphasized that the plan’s core principle revolves around leveraging focused investments and enhanced capabilities to actively participate in the rapid and sustained growth of the category. The aim is to restore sustainable growth to the business beyond the current reset year. However, comp-store sales experienced a decline of 9.1% in Q1. 

See also: Foot Locker Reports Rough Q1 as It Readies New Formats, Loyalty and Omnichannel Strategy 

Part of its “Lace Up” strategy includes the expansion of its community-oriented concept stores which are positioned in areas where sneaker enthusiasts are most likely to gather and serve as a testing ground for localization efforts. 

On the other hand, Nike launched its own retail concept dubbed Nike Unite, in Harlem at the end of October. The primary goal of this concept store, originally launched in 2020, is to embody and establish a connection with the local community, using sports as a catalyst for fostering connections among individuals. 

In 2020, PYMNTS reported that Nike Unite stores featured local maps showing “how consumers can explore their surroundings.” 

See also: Nike Launches Community-Minded ‘Unite’ Stores With Digital Focus 

Similarly, The Athlete’s Foot launched a neighborhood store concept in Atlanta this month to showcase localized product selections and engage with the community through various initiatives. 

Why Footwear Stores Are Going Local

Going beyond immersive store experiences, footwear retailers are looking to go local in a bid to get more personalized. By introducing community-based concept stores, footwear retailers aim to create an  ambiance that resonates with the specific geographies they serve. The ultimate goal is to establish personalized connections with shoppers. 

According to Dillon, these changes are reflected in the brand’s evolving real estate strategy. Currently, off-mall locations account for 35% of North America’s square footage across all banners, an increase from last year’s 31%. The company aims to exceed the 50% mark by 2026.

Dillon said that both the new store formats and off-mall locations are outperforming the rest of the store fleet, reinforcing their confidence in the strategy. As part of this optimization effort, Foot Locker closed 35 underperforming stores in Q1. 

Concept stores and localization strategies reflect industry trends. Shoppers are expressing a desire for in-store shopping experiences, while brands are prioritizing personalization.  

There has been an uptick in in-store foot traffic. Foot Locker experienced a 4.2% increase in comparable sales during the fourth quarter, attributed to heightened traffic and improved availability of high-quality inventory. Similarly, Nike witnessed a 17% year-over-year surge in direct sales, encompassing its website and owned-and-operated stores, in the third quarter. 

Other Retailers Are Thinking Small

In response to investors’ perception of department stores as outdated and lacking excitement, Macy’s is venturing beyond the traditional mall setting. The company is targeting customers in thriving shopping centers and rapidly growing suburbs, while stepping away from declining malls. In these smaller locations, Macy’s is focusing on creating a curated shopping experience by featuring a carefully selected assortment of popular brands. The displays are regularly refreshed to ensure they remain up-to-date and appealing to customers. 

During a March CNBC interview, CEO Jeff Gennette shared his optimistic outlook on Macy’s off-mall stores, expressing confidence in their potential for future scalability. He stated that the company aims to pursue more aggressive expansion of the concept starting in 2024 and beyond.  

See also: Macy’s Expands to Strip Malls With Smaller Stores and Leaner Inventory 

Macy’s has introduced two smaller store formats, Bloomie’s and Market by Macy’s. These new stores occupy about one-fifth of the space of a traditional Macy’s or Bloomingdale’s. 

Macy’s has launched 10 scaled-down versions of its flagship and Bloomingdale’s stores in strip centers, with five more mini-stores slated to open during the fiscal year. 

The post Foot Locker Embraces Localization Strategy Through Small Concept Stores  first appeared on PYMNTS.com.