• by Teresa Liu , July 18, 2013

In today's world, where the role and function of physical retail space is constantly being challenged and redefined, it’s no surprise that retailers are continually finding new ways to adapt in order to stay competitive.

As online and mobile sales in particular continue to grow, individual brick-and-mortar spaces are popping up in different formats, and in some cases are literally beginning to shrink.

In the U.S., big-box retailers, such as Target and Walmart, are looking to expand through smaller-footprint formats in urban areas while other retailers such as Office Depot and Best Buy are minimizing square footage in order to survive in a fragmented channel landscape. In Asia, however, a retail format that is gaining traction takes “smaller” to a new extreme.

The phenomenon is cubic-retailing: independent entrepreneurs, artists or online retailers can rent out box-sized spaces (think cubbies) within a larger retail environment to showcase and sell their goods. Individual stores are compartmentalized into micro retail boxes of varying sizes called “cubics.” These cubics are rented to entrepreneurs looking for a physical space to sell their goods or advertise their services with posters or brochures. A monthly rental fee will grant sellers access to their own cubic in a well-maintained, high-traffic store (usually in a shopping mall) staffed by friendly personnel. The seller pays a small commission for each sale made.

In many respects, this setup is not unlike a physical eBay: a way for entrepreneurs, small businesses and hobbyists to sell their products through a high-traffic medium -- minus the auction aspect. The company enables this by managing the marketing and infrastructure to drive awareness and transactions; the sellers provide the goods for sale and in turn, pay fees for listing and commissions once goods are sold. In fact, what cubics promote is the ability for small online businesses and artisans -- such as those that might sell on eBay or Etsy -- to affordably showcase their products in the physical realm for consumers who want to touch and try on merchandise before they purchase.

While this form of retailing is not new to regions such as Hong Kong, Singapore or Japan, its growing appeal in those countries (and its first foray into Manhattan’s Chinatown a couple of years ago) may signal an increasing relevance to today’s retail landscape.

Of course, the notion of sharing retail space is not a new one to the U.S. The store-within-a-store concept has always been the core business model of department stores and gained new popularity a couple years ago when retailers, such as Target, began introducing new, smaller boutique experiences within their space. But what is remarkable about cubics is that they manage to accomplish the store-within-a-store idea on steroids -- in essence, they are the physical “showrooming” medium for hundreds of entrepreneurs all at once. The innovation here is efficiency in markets where space is limited.

While the role of the store will continue to evolve, the need for physical space will always exist. The fluidity with which brick-and-mortar stores today rely on digital presence while more and more online retailers are entering into the physical realm suggests their interdependent nature and that success lies in finding the right balance. But one thing is likely: traditional brick-and-mortar stores that don’t adapt to the changing times will inevitably continue to downsize or disappear. To succeed, retailers need to evolve their business models to think outside the box…or in some cases, inside it.