Box Retailers For Small Business

Big box retailers are getting smaller. Some are being compelled to do so by the market: Circuit City and Sports Authority liquidated. Others are shutting down less-trafficked locations. And some are doing so by design. Literally.

Take Target. In 2014, it launched a beta version of a smaller store with far fewer offerings in its hometown of Minneapolis. As significant as the new format is the fact that when these stores began to roll out elsewhere, they shifted the retailer’s geographic and product focus away from the traditional suburbs and toward cities and college towns.

In an age of e-commerce and muted spending, Target, like many retailers across the U.S., is trying find a way to reverse declining foot traffic and revenue. U.S. retailers saw low sales growth in 2015, the slowest since a 2009 decline, and so far overall retail sales are up only 2.9 percent in 2016 (pdf). This, despite falling gas prices and an improving economy and jobs market, which, theoretically, should spur higher spending. Indeed, Target reported a drop in same-store-sales, a closely watched gauge of retailer performance, in its third quarter and lowered earnings expectations for the full year.

While Target is taking some of the usual steps such as cutting prices andbringing in new executives, the company is notably doubling down on mini-Targets. The plan is for the upscale downscale retailer to continue to roll out small shops in college towns and urban centers, which feature what it calls “curated” products (read: a lot less shelf space means room for only stuff that appeals to millennials, such as dorm-room and apartment-sized home goods and fast fashion). For example this fall, Target opened a mini store in State College, Pa., with pantry items geared toward how students eat and Penn State merchandise, and another in Cupertino, Calif., featuring fresh grab-and-go food choices for commuters’ lunches and tech gear.

Target’s large stores, which carry a huge range of goods and groceries, can be about 175,000 square feet. But the smaller stores are a fraction of that size, at around 20,000 to 50,000 square feet. Fewer square feet means fewer employees to pay, lower rents, smaller energy bills, all while still selling goods at the same cost as in its traditional big boxes and instilling brand loyalty in the next generation of consumers.

An old newsroom adage holds that when something happens three times it’s a trend. And there is definitely a trend of really big retailers going small.

As we’ve noted, Whole Foods is opening a chain of lower-priced natural-foods stores in hopes of luring price-conscious and millennial customers who may be tempted to trade down. The company’s 365 by Whole Foods stores are going into hip neighborhoods like Los Angeles’s Silver Lake as well as affluent suburbs such as Lake Oswego, Ore., outside of Portland.

Much like the new Target stores, the 365 markets differ significantly from the typical Whole Foods superstore. They have a smaller layout, employ fewer people, use more technology, and stock a smaller selection. But they offer lower prices. And the problem with that is Whole Foods risks 365 cannibalizing sales from the mother ship.

Both comments and pings are currently closed.

Comments are closed.