Why Big-Box Retailers Target And Kohl’s Are Going Small

Forbes — April 5, 2018

While many retail companies are closing stores or closing up shop altogether, some big-box retailers are boosting business by opening new, smaller stores in strategic locations. Target in particular is finding new customers in places where there isn’t enough space for a warehouse-like big-box store, but where there are plenty of people who appreciate the convenience these stores offer. Target’s new small-format stores are typically in big cities, near college campuses, and in dense suburban spots where space is limited.

Target announced this week that it would open three new small-format stores in New York City – one on the Upper East Side of Manhattan, one in Queens, and the third in Staten Island – over the next two years, and another in Chicago’s Logan Square in 2020. The retailer already has several small-format locations in New York, including Herald Square and Harlem, and says it will have more than 130 small-box stores around the country by the end of 2019.

These new stores are part of a major move into metro areas, particularly Los Angeles, where Target’s small-box Burbank store opened this week; Minneapolis, where the company is headquartered; Chicago, Boston, and New York. Although Target has a huge online business – according to its website, Target.com is the fourth largest retail site on the web – company CEO Brian Cornell has repeatedly stressed that brick-and-mortar remains the cornerstone of its strategy. In a statement in March, he said the company would be “reimagining our network of stores into hubs for commerce and community.”

Typically between 20,000 and 40,000 square feet – compared with as much as 145,000 square feet for a regular Target – the small-box store allows Target to take advantage of previously untapped markets, where it caters to the local clientele. In a new take on hyper-local, Target uses customer data to choose merchandise that is likely to appeal to shoppers in a specific area. The smaller stores are performing well, producing twice the sales per square foot as regular Target stores, and supporting e-commerce by serving as convenient pick-up points for online orders.

In a recent visit to a small-format Target in suburban New York, I found lots of women’s clothes prominently displayed, as well as men’s and children’s clothing, a wide array of cosmetics and other beauty products, and a limited selection of home décor, groceries, electronics, and toys – typical suburban stuff, but no furniture or other large items. In a college town, Target might highlight student essentials, like toothpaste, dorm furnishings, school supplies, and snacks. Target currently operates in about a dozen campus locations, including the University of Maryland, UC Berkeley, and UT Austin.

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