Big growth in small formats at Target

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Big growth in small formats at Target

By Mike Troy - 09/16/2019
Laurie Mahowald, Target's vice president of real estate, at Groceryshop.

Stores remain the center of Target’s strategy, according to Laurie Mahowald, the Minneapolis-based retailer’s vice president of real estate, but the size of those stores and their locations and assortment is changing. Mahowald spoke Sunday at Groceryshop, which runs through Wednesday in Las Vegas.

Sharing a stage with The Kroger Co.’s Vice President of Real Estate Nick Hodge, Mahowald described a dual-pronged approach to upgrading Target’s core large-format stores while penetrating new urban markets with smaller-format concepts that can be as tiny as 12,000 square feet.

Target recently opened a 33,000-square-foot store in the South Beach area of Miami and a 59,000-square-foot store in West Hartford, Conn., that give it more than 100 small-format locations. A total of 30 small Target stores will open this year, a pace of expansion that speaks to the popularity of a concept that was only introduced five years ago.

Mahowald didn't comment on whether Target plans to accelerate the pace of small store openings, but did say the company is “really excited about the flexibility of the real estate and the format.” She also noted that the grocery component in small stores is outpacing larger stores.

The flexibility is evident in some of the real estate choices the company has made. Next April, Target plans to open a 20,000-square-foot store on the Las Vegas strip at a location previous occupied by a Smith and Wollensky restaurant. Flexibility also helped Target open five small stores in Manhattan with the prospect of more to come in Manhattan and surrounding boroughs.

“We have so much room to grow and better serve those areas. We are able to serve an entirely new guest,” Mahowald said.

Target is also committed to its roughly 1,800 larger stores and recently completed the remodeling of its 500th location in just two years and is on pace to have 1,000 stores remodeled by the end of next year.

As for Cincinnati-based Kroger, real estate executive Hodge said the company is excited about some of its experiments too. It recently opened a small format in Seattle and has plans for locations in Atlanta, Phoenix and Cincinnati. Kroger’s real estate strategy, like Target’s, also involves leveraging its expansive footprint. The company will have grocery pickup available at 1,700 locations this year, which Hodge said required “a lot of heavy lifting" that was done in a short time.

Another way Kroger is leveraging its installed based is through partnerships with other retailers, most notably Deerfield, Ill.-based Walgreens. Beginning this fall in Knoxville, Tenn., 35 Walgreens stores in the area will feature the store-within-a-store Kroger Express concept and Kroger Pickup, while 17 Kroger stores will launch Walgreens' private brand health and beauty products. This pilot is a continuation of a test that began in northern Kentucky late last year.

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