Growing numbers of smaller format grocery stores with limited inventories are popping up all over the country. Major chains like Target, Kroger, and Meijer have started opening small-format locations that are typically fractions smaller than their traditional big box stores. How are these smaller grocers improving sales? Let’s find out.
Grocery stores are a $600 billion industry according to the Food Market Industry. The shift from larger format stores to smaller stores is really driven by the availability of real estate. Urban, high-populated areas simply don’t have the space for mass merchandisers like Walmart. This allows these major retailers to reach their urban consumers without taking on hefty rent prices for larger spaces that are nearly impossible to find in these areas.
Smaller stores in locations that experience high foot traffic are a much better fit with the fast-paced and busy urban lifestyle. A smaller store offers better access to products so that consumers can pop in, grab everything they need and be out quickly. Even though many consumers have now started using e-commerce avenues to purchase things like toilet paper and toothpaste, consumers are also very interested in fresh food and want to be able to get things more conveniently.
The Future of Grocers
Smaller format grocers will continue to come about all over the United States, but this doesn’t mean big box grocery stores will disappear or become irrelevant. These smaller format stores are really targeted in dense urban areas where the real estate is limited. Larger format stores will still be prevalent in suburban areas that have the space to accommodate them. In one of Dallas’ most popular retail centers, Target is opening a small format store. Also in Dallas, Tom Thumb has plans to open a full-format 60,000 square-foot store in an area that is highly underserved by grocers. These are both examples of how there is no one size fits all for grocery store formats.
The Goal of Grocers
Grocers are now recognizing that in order to compete, they need to find ways to reach the largest number of consumers possible within their consumer base that makes the most economical sense. This means utilizing physical space as efficiently as possible as part of an all-encompassing omnichannel strategy. In order to keep customers loyal, grocers must give consumers convenience and choices that work for their schedules.
Customer experience will always top the size of the store. If a consumer enters a store either large or small format and has trouble navigating through it and can’t find the items they are looking for in a timely manner, they will likely not return no matter how close the store is to their home. As retailers begin to understand the merging between different channels, this will result in potentially different sized stores, different locations of stores and they will enter different markets. For suburban areas, grocers may stick with the larger concepts and for urban areas that offer limited space, the smaller format stores with grab and go items will work better in that market.