Is Retail Shifting to Smaller Spaces?

The sale of luxury goods has always been a vital component of the retail market. In order to appeal to the world’s wealthiest customers, some retailers have begun to make slight changes in their operating strategy.

Neiman Marcus Inc. is one such example. The global retailer specializing in high-end fashion items, filed its initial public offering last week with the goal of raising $100 million in order to facilitate growth. There are several reasons for this sudden influx of money into the global luxury goods industry.

For one thing, the rich are getting richer, and this increase in consumer purchasing power will lead to a spike in demand. In the next five years, the industry is estimated to net a 6.6% annual growth from $83 billion to $114 billion, and the number of worldwide ultra-high net worth individuals is expected to grow at an annual rate of 3.9%. With this high growth potential in mind, private equity firms are also heavily investing into the luxury goods industry.

Neiman Marcus expects to help out its own cause by shifting its focus to smaller-format stores that offer reasonable prices. Smaller spaces offer retailers a few distinct advantages. With such a strong emphasis on online shopping nowadays, companies will look to increase their online presence and are more likely to shift to smaller stores in order to save money.

Neiman Marcus plans to follow this formula to the tee. Over the next five years, the firm is expecting to double its smaller-format stores. (CoStar)

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