ANSWER THE FOLLOWING QUETIONS:

1. What are the external factors that have led large retailers to downsize their brick-and-mortar stores?

2. Many large retailers need to attract customers with a large variety of products and low costs. Are there trade-offs?

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FAIRFAX, Va. — With holiday shopping in full swing, Sears decided it was time to host a “grand reopening” for its department store here in suburan Washington, complete with magic shows, jugglers, face painting and free cotton candy.

The biggest change for the decades-old shopping center anchor? It was now just half its size.

The store had done away with its entire second floor, concentrating its efforts on its appliance and mattress departments on the ground level. The apparel departments were smaller, and the store’s many cash registers had been consolidated into one sleek, white checkout counter that looked like it had been borrowed from the Apple store.

It had taken more than a year to renovate the store, part of a companywide effort to square a difficult retailing circle. Sears Holdings, which hasn’t posted an annual profit since 2010, is trying to pare costs while making its stores attractive to a generation of shoppers who are increasingly buying online.

“The business is evolving. and we’re evolving with it,” said Matt Trautwein, the company’s district manager.

Sears is not the only store cutting back on real estate. Across the country, retailers such as Walmart, Target, Macy’s, and Nordstrom are experimenting with ways to distill their inventory into smaller, more-focused locations.

The shift comes, analysts say, as Americans flock from the suburbs to city centers, where space is at a premium. Big-box stores on the outskirts of town are no longer convenient nor practical for millennials with tiny apartments and no car. Target alone is opening 30 smaller stores by the end of the year, doubling its presence near urban areas and college campuses.

“That big weekly stock-up where you fill up the back of the car? That’s very much boomer mentality that millennials aren’t buying into,” said Mike Paglia, director of retail insights for research firm Kantar Retail.

Sales at smaller-format stores are projected to grow 3.9 percent annually until 2022, outpacing 0.8 percent sales growth for their big-box counterparts, according to recent projections from Kantar Retail. Stores smaller than 20,000 square feet account for $612 billion in annual sales, with that figure slated to grow 21 percent to $741 billion in the next five years.

With the boom in sales online, “nobody needs a gazillion square feet of store space anymore,” said Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates. “Retailers are realizing that they have to downsize stores to save money.”

Those smaller footprints means more shopping centers are struggling with how to fill their empty spaces. The shift can be painful for retailers as well, Davidowitz said. Renovations can cost hundreds of thousands of dollars, and in some cases, retailers may have to pay their landlords to alter existing leases.

There can be other challenges, too. American shoppers have become accustomed to shopping in megastores that offer dozens of varieties of shampoo, apples, and socks. Getting them to cut down expectations can be difficult.

“It’s a challenge of enormous consequence,” said Mark Cohen, a professor of retailing at Columbia Business School and the former chief executive of Sears Canada. “How do you successfully distill 200,000 square feet of products into 80,000 square feet?”

Take, for example, Walmart. The company, which had been testing small-format Express stores since 2011, last year announced it was scrapping its plans and closing all 102 of its Express stores. Walmart executives did not offer much of an explanation, but analysts say the chain likely had difficulty persuading shoppers to think of Walmart stores as anything but one-stop shops for thousands of items.

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“Walmart made several mistakes on the merchandising level,” Jeremy Bowman wrote for the stock investors’ website Motley Fool last year. “It stocked multiple brands of the same item, costing space, and consumers often felt the product selection was not right.”

Now Walmart says it’s shifting gears to slightly larger Neighborhood Markets stores, which average about 40,000 square feet and focus primarily on produce and groceries. (The company’s Express stores, meanwhile, maxed out at about 15,000 square feet. Its Supercenters, by comparison, average about 180,000 square feet.)

“When you walk into a Walmart, you expect a Walmart assortment,” said Sucharita Mulpuru, a retail analyst for Forrester. “Some of the best-performing stores right now are small-format stores: Dollar General, Francesca’s, Five Below. But going from a big-box store to a small format is often much more challenging.”

At the Sears in Fair Oaks Mall here — it’s now about 78,000 square feet, down from 145,000 square feet — dozens of ellipticals and treadmills were on display, as were hundreds of appliances, many of them wrapped in festive red bows. Store managers said they tried to keep the store’s most popular departments — appliances, mattresses, lawn and garden — as large as possible, while shrinking the selection of apparel, jewelry, and home goods. The company had also added computer kiosks throughout the store where customers could browse the selection at Sears.com and place orders for items that weren’t offered in a store.

“Obviously we want to restore profitability, and what that means is Sears is taking a good look at the assets we have available,” said Leena Munjal, senior vice president of customer experience. “The physical experience is very important to our members, but do they need 150,000 square feet? In many cases, no.”

The retailer needs to move quickly. Sears has already cautioned there is “substantial doubt” about whether it can remain a going concern even as it pursues a turnaround plan.

“Sears is just biding its time,” Davidowitz said. “Everybody else is downsizing, so they’re trying it too.”

But longtime customers at Fair Oak Mall didn’t seem to know what to make of the changes. For much of the morning, employees in Santa hats outnumbered shoppers. The ones who did walk in said they’d mostly come to browse.

A regular at the Fair Oaks Mall store, who said she had been coming to the store for 30 years, was confused by its new layout.

“That was really a shocker when I walked in and there was no upstairs,” she said. “I’m used to going to certain levels for certain items. I’m completely lost.”