What it means to be small

Target announced its intention to experiment with smaller stores nine months ago, and now the company has disclosed that downtown Seattle will be home to the first of these stores. Plans call for a 103,000-sq.-ft., three-level store to open sometime in 2012, according to media reports based on presentations last Friday in Minneapolis at what was referred to by those in attendance as Target’s first, “media day.”

The company indicated in January of this year at an analysts’ meeting it hosted in Philadelphia that one of its long-term growth strategies involved penetrating urban markets with smaller-footprint stores in the range of 60,000 to 100,000 sq. ft. CFO Doug Scovanner affirmed the company’s commitment to that strategy when he spoke to investors on Sept. 15 at the Goldman Sachs Global Retail Conference. The new news last Friday was the location of the first unit and there Target chose to proactively manage the information flow given that what happens in downtown Seattle wouldn’t stay in downtown Seattle when a major national retailer is involved.

The bottom line here is that small formats, or what are being called small formats, are all the rage these days and for good reason. Operators of big box stores are exhausting expansion opportunities in suburban areas where new housing construction and shopping center development has slowed, leaving few choices but to seek square-footage expansion in areas that previously were avoided due to real estate considerations, operational and profitability challenges.

While Target’s entry into downtown Seattle is noteworthy, a 100,000-sq.-ft. store hardly qualifies as small given that the typical Target discount store is around 130,000-sq.-ft. Merchants and store designers probably won’t even break a sweat squeezing a reduced product assortment and relevant brand experience into the smaller space. The same can’t be said when the company begins opening stores toward the lower end of the square footage range Target is using to define small. That’s when things become more challenging as the brand equity and value proposition of “expect more, pay less” is built on a broad assortment of competitively priced, differentiated merchandise presented in a compelling fashion made possible by the abundance of space in large suburban stores.

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