Why Bloomingdale’s is launching a new small store chain

The retailer said on Wednesday that it would open the first store in a new “Bloomie’s” chain on August 26th in Fairfax, Virginia. In doing so, Bloomingdale’s becomes the the latest retailer testing the use of smaller locations to adapt to big changes in shopper habits, including fewer mall visits, buying more directly from the top brands, and from luxury specific e-commerce sites.

The name itself, “Bloomie’s” is borrowed from the nickname long used by customers for the 160-year-old retailer’s full-sized stores, and is meant to convey hipness, friendliness and familiarity rather than the formality of grand department stores that shoppers find increasingly off-putting.

The Bloomie’s store will be 22,000 square feet in size, or roughly one-seventh the size of a regular Bloomingdale’s store, and offer a much smaller assortment, but one more focused on up-and-coming brands than the full-size stores. Merchandise turnover will be quicker and areas like furniture and men’s formal suits won’t be found. Notably, it will not be located in a shopping mall as are most of the 34 Bloomingdale’s stores.

“The store is designed to be more casual, more comfortable, something that fits into your everyday life,” Bloomingdale’s CEO Tony Spring tells Fortune in an exclusive interview.

Its sister chain Macy’s is also experimenting with a burgeoning chain of smaller stores, something Macy’s Inc CEO Jeff Gennette told investors in May was key to winning new and younger customers. (Bloomingdale’s is owned by Macy’s Inc but operated independently.)

The new concept is designed to help Bloomingdale’s adapt its business model to a luxury world where fewer shoppers want to go to sprawling department stores and see the same-old, same-old, and where high-end brands are now selling directly to customers via their own stores or websites. This is something Bloomingdale’s main rivals Nordstrom, Saks Fifth Avenue and Neiman Marcus are also grappling with.

The launch of the new chain (see rendering above) comes at a time when Bloomingdale’s is looking to strengthen its rebound from a pandemic that decimated its business last year. In its first fiscal quarter ended on May 1,comparable sales rebounded compared to 2020, but were still 7% below 2019 levels. Nordstrom has similarly reported tough numbers. Saks and Neiman are both private and don’t report their financials.

Spring says that by speeding up its metabolism and by making Bloomie’s a more dynamic place to shop, new ideas will filter up and benefit the whole chain more quickly.

“It also affords us the opportunity to have a laboratory that can feed learning into the bigger boxes,” says Spring, CEO of Bloomingdale’s since 2014.

The success of Bloomie’s will hinge to a great degree on its more highly-focussed selection of products compared to regular stores, where merchandise can sit unsold for a long time with barely anyone noticing.

“The assortment is well-curated and well thought out,” Spring says. “You just don’t have the latitude to have everything from everyone.” He adds: “The ‘buy’ is as important as the (product) presentation so the first thing is getting the buy right.”

The Bloomie’s store will focus a bit more on hip clothing brands than grand luxury compared regular Bloomingdale’s locations, while beauty will skew highest-end with brands that aren’t readily available in Fairfax. Brands that the Bloomie’s will carry that the retailer’s other stores don’t include Le Jean, RE/DONE, Salomon, The Range and Madeworn.

Another goal: getting shoppers to come more often and offering new products each time. To achieve this, the Fairfax Bloomie’s store, and those likely to follow, is on one-floor, with no vendor shops and flexible floorplans so Bloomie’s can be more responsive to what shoppers are gravitating toward, and bring in fresh merchandise more easily and often.

Nordstrom is in the process of building out its own chain of smaller locations to serve a similar subset of customers. But those, called Nordstrom Local, are tiny in comparison, averaging 1,000 square-foot in size and only act as service hubs for things like order pickup or alterations, without actually selling anything.

While Spring says Bloomie’s offers services like tailoring, order retrieval, returns, and bookings with stylists co-ordinated at its “Front Desk” customer service area, it has to offer more than that to work. “We don’t just want to have a hub,” he says. “We want to have an experience that people are excited by.”

Spring won’t say how many Bloomie’s he thinks he needs to open to fully test the concept. But by opening in a shopping center in a market that already has two Bloomingdale’s stores (Tysons Corner, Va., and Chevy Chase, Md.), he is showing that the logic is to fill out markets where Bloomingdale’s does well but needs a different way to reach more shoppers.

And in theory, the retailer could build a few Bloomie’s in markets where it is physically absent entirely, like Denver, at much less expense and effort than it would with a full size store.

Entering new markets won’t help until Bloomingdale’s has nailed the concept. So these smaller stores will have to have the energy, sense of fun, and right selection of merchandise that customers are looking for. That’s Spring’s ultimate hope for Bloomie’s. Despite its small size, the first Bloomie’s will have a restaurant, a new outpost of the Washington-area’s popular Colada Shop.

“It’s going to give you that opportunity to engage with retail in the way it was intended, where we do more than one thing right, and where we string it all together,” says Spring.