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Will Target’s small-format stores work?

Oct 4, 2016

target_320x320.jpgTarget is finally going small in a big way.

The retailer has talked for years about opening more urban stores, but it recently made it official with plans to open 100 small-format locations across the country. The planned stores, most of which will be in Chicago and Philadelphia, are less than 50,000 square feet and offer products that cater to urban shoppers, many of whom are well-to-do and don’t have a lot of options for what you might consider higher-end (but still discount) products.

Building on past success and examples from others

Target has previously launched pop-up stores in Manhattan, drawing much fanfare and interest from consumers in the city. Now, it looks like it’s trying a new strategy to build on that success.

The small-store format has certainly worked for other chains. The Home Depot opened a store in Manhattan in 2004, and has since expanded its outlets around New York City. Lowe’s got in the game in 2015 by opening a similar-sized store in NYC.

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Home improvement and discount goods aren’t the only industries with an eye on the urban environment. Several grocery stores, including Whole Foods, have started branching out from the suburbs and into cities. They understand the need to target a built-in consumer clientele, rather than relying on destination locations.

What brokers should note about these successes and failures

The trend makes sense. As we’ve profiled before, both millennials and baby boomers are choosing to live in urban areas across the country, opting for convenience over space.

Not all big retailers have had success with the smaller-format concept, though. Walmart closed its several Express stores after a brief trial period, apparently because it failed to place the stores in dense enough areas and had issues with supply-chain logistics.

Walmart has also had problems opening traditional stores in inner cities. Several metro areas have banned big-box stores of a certain size, partially because they don’t want them taking away the business of small, local retailers.

Commercial real estate brokers should pay attention to these restrictions in their markets, as well as the location of warehouses, distribution centers and local-preferred vendors that might go out of business if forced into competition with a larger chain.

It’s also worth noting that Target is often perceived as more stylish, sophisticated and employee-friendly than Walmart. Whether or not that is truly the case, cities seem more likely to welcome Target to their streets.

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Topics: Industry News

Ian Ritter

Written by Ian Ritter

Ian Ritter is a veteran commercial real estate writer. He worked several years as retail editor at GlobeSt.com and currently writes about the industry for several corporate clients and news organizations. He holds a Master's Degree from Columbia University's School of Journalism.

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