Small-Mart: An urban legend in the making?

I’ve written before about the ongoing trend of some of the biggest names in retail downsizing. Now I’m seeing how brands like Target, Wal-Mart and Office Depot are rolling out smaller new store formats in urban environments, and it has me thinking about how this downsizing phenomenon might be even more important than many people realize.

From what I’ve read lately, the difference between a traditional Office Depot and the new, smaller urban concept being rolled out is significant: At around 5,000 sq. ft. the new urban stores are about one fourth the size of the traditional stores. Target’s new City Targets, the first wave of which recently opened in Chicago, Los Angeles and Seattle, are sized at around 80,000 sq. ft. to 100,000 sq. ft. — about half the size of a standard Target. I see these retailers’ willingness to radically alter their store size as a pretty big deal. To overcome all the logistical and operational complications that often accompany the process and to consider a much smaller inventory, to me, is an indication that they’re really open to changing their way of thinking.

While the smaller stores are designed to address one of the traditional headaches of operating in densely developed urban areas — namely, the physical limitations and lack of space — other issues exist. Cities are still generally demanding higher rents (in some cases much higher rents) and will continue to present zoning and operational complications that pad sites in the suburbs do not. Basically, it would seem that national brands have reached the point where their saturation of many suburban markets has now made the untapped urban markets more appealing and worth these potential headaches.

What’s really interesting to me is the fact that, by nature, these smaller urban stores will have to carry a much more limited inventory — both because of their smaller size, but also because of the unique requirements of urban shoppers. Not only do urban shoppers like to get in and out quickly (no different than most of their suburban counterparts), they’re also more likely to prioritize the portability and efficiency of the products they purchase. Urban shoppers are less likely to have the room to transport or store that economy-sized pack of toilet paper. And, the size of the home furnishings they look for will vary, too. It’s not likely an outdoor dining set containing a large table and eight chairs will fit on the balcony of an efficiency apartment, so the size of the products being offered will require much less space on the showroom floor.

Inventory control is nothing new for retailers. It’s a process that began for many when recessionary pressures made tighter inventory controls a necessity. This urban downsizing could help retailers take their inventory control one step further and really edit their offerings based on the actual needs of the consumers, and not the perceived needs (think even more micro-merchandising by location). I think the retailers with these smaller urban stores can (and will) get creative and will ultimately figure out more ways to save space that can translate to their non-urban stores as well. Which is when the trend of downsizing could get even more interesting. After all, editing your inventory doesn’t have to be a bad thing. As I’ve mentioned before, I think it can actually be a real positive for some retailers. I’ve seen a number of restaurants, both casual and fine dining, have success with focusing on a few select items and offering a limited menu. Doing a few things really well — at least in some select locations and circumstances — just might be a trend with some legs.

It will be interesting to see how these smaller urban locations perform. I think their success might have us asking ourselves, “Are smaller, more efficient layouts just an urban phenomenon, or are they the wave of the future for all markets?

What do you think? Please make a public comment below or feel free to e-mail me privately at jeff@jeffgreenpartners.com.


 Click here for past columns by Jeff Green.

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