Big Box Stores Opt for Smaller Warehouse Operations

Retailers have begun scaling back their warehouse and logistics operations amid changing consumer spending patterns.

That’s according to a report Monday (June 5) by The Wall Street Journal, which names Big Lots and Walmart among the companies shutting down warehouses and/or laying off distribution workers as consumers begin to spend more on services.

“You’re starting to see demand slowing and they’re realizing, ‘Maybe we don’t need as much inventory, and if we don’t need as much inventory, we don’t need as many [distribution centers],’” Rob Handfield, a supply-chain management professor at North Carolina State University, told the WSJ.

The report notes that vacancy rates for warehouses are on the rise after a rush to snatch up spaces during the pandemic.

Meanwhile, Amazon — which had expanded its fulfillment network during COVID — has begun scaling back its expansion, closing, canceling or postponing work on 115 U.S. warehouses in the past year, the report said, citing findings from logistics consultant MWPVL International.

This contraction has affected warehouse employment, with payrolls in that space reaching their lowest point since January 2022, and dropping by more than 41,000 jobs over the past year, according to the Bureau of Labor Statistics.

PYMNTS wrote last week that a number of merchants are embracing smaller footprints to cut costs and put more focus on customers.

“Marking a significant shift in retailer strategy, major stores determined to adapt to the reality of today’s economic landscape are overhauling their brick-and-mortar approach,” that report said.

“The move is being spearheaded by Macy’s, which is branching out from the traditional mall format in favor of the smaller strip mall format after investors voiced concerns of department stores becoming obsolete.”

The retailer has begun moving out of struggling malls in favor of smaller locations known as “Market by Macy’s.” At these storefronts, the company will offer a more curated inventory than at its main stores, emphasizing apparel, shoes, handbags and beauty items with prices that reflect the smaller scale.

But Macy’s isn’t the only well-known brand to use this strategy. Nordstrom recently said it was opening nine new Rack stores even as it closes larger locations and embraces deep discounts.

“With its long-established physical footprint, the recently reopened NYC mainstay, Century 21, is instead streamlining its inventory away from less profitable offerings,” PYMNTS wrote.

“Foot Locker is also abandoning malls as the shoe retailer struggles to find the right mix of omnichannel offerings for its customers. Even historically huge stores such as IKEA and Big Lots are getting into the trend.”