Coming soon? Targeting the development of even smaller stores – Orange County Register

In the world of mass distribution, the term "smaller" is increasingly present.

Target Corp, which started unveiling small format stores in 2014, is looking to get even smaller. John J. Mulligan, executive vice president and chief operating officer of the company, discussed the strategy this week during a call for results with investors.

"This year we are exploring models that are redefining our idea of ​​the size of our stores," he said. "I'm not talking about a new format, but another round of the dial that gives our strategy even more flexibility to reach new customers."

Target's smallest location is approximately 12,000 square feet, said Mulligan, but the company is exploring sites that would be half that size – approximately 6,000 square feet.

"This design could open up hundreds of additional site options to serve even more people in new commercial areas and to give customers a nearby pickup point for online orders," he said. . "We plan to sign the first such lease this year, with plans to open and test in 2021. And just like our first small formats, we're going to start slowly to learn and fine-tune before we go faster."

The move is a testament to the growing number of retailers who have cut their brick and mortar operations in the face of Amazon's strong online sales. Target, Walmart and other big box retailers have also stepped up their online operations to capture more e-commerce.

More small size slots planned

The Minneapolis-based retailer currently operates 111 small format stores with an average area of ​​40,000 square feet. The reduced outlets have found an echo among buyers who no longer have to travel as far to reach a target and who do not necessarily want to fight their way through one of the largest stores of the company, which average 145,000 square feet.

"We have built a process to locate the assortment for each neighborhood, but on a large scale," Mulligan told investors. "And we reoriented our supply chain to replenish these stores as the backroom space got smaller and smaller." We plan to open approximately 30 of these stores per year for the foreseeable future. And this year, we will be opening nearly three dozen, making 2020 our highest year on record for small format growth. "

Target has small stores scattered throughout southern California in locations such as Burbank, Koreatown, Los Angeles, Mission Viejo, Anaheim and Orange. This year, two new stores have opened in Los Angeles and additional locations are planned for Hollywood, Rolling Hills Estates and Santa Monica.

The small size locations offer clothing and accessories for men and women, interior design, groceries, health and beauty items and technological accessories, but in a reduced size.

Mulligan is considering a more compact version of this – convenient size stores tucked away in infill neighborhood sites or on college campuses.

The company has also expanded its same-day delivery options and integrated more automation, robotics and artificial intelligence throughout its supply chain to help stores operate more efficiently.

Walmart neighborhood markets

Target is not the only retailer to think small.

Walmart, with massive supercenters averaging 180,000 square feet, operates 687 smaller Walmart neighborhood markets, averaging 38,000 square feet. The retailer has 68 markets in California in places like Anaheim, Torrance, Rialto and Panorama City.

A handful of Walmart market concepts closed in 2019, likely due to poor performance.

A failed experience

Sometimes small can be too small, as Walmart learned with another concept store.

The Bentonville, Arkansas retailer launched a Walmart Express chain of stores (12,000 to 15,000 square feet) in 2011, but this concept "seemed to be unsuitable for the company, given its price leader strategy , which largely depends on the scale and is not suitable for small formats, " Trefis online stock research service said in a research note.

In 2016, the company closed 102 Walmart Express stores.

Aside from failures, the trend for "little ones" should gain ground in the coming years, according to Jim Dillavou, co-founder and director of Paragon business group, a business development company based in El Segundo.

"Rents are high and retailers are looking to strike a balance between e-commerce and brick and mortar," he said. "Target has done a remarkable job in establishing an omnichannel presence for which other retailers are striving. Small stores give them a more flexible footprint and they have become a master at marketing different items from one store to another. "