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Target has high hopes for its new tiny stores

Target Big Box Stores

Target long associated with big-box stores plans to open hundreds more new locations in coming years but they will be a fraction of the hundred and 40,000 ft. of the typical store. The six largest retailer plans to open more than a dozen of what it calls Flexible Format stores in 2017 in urban areas and near college campuses. Several include outside of Washington DC, near Harvard University and MIT and in neighborhoods near the University of Florida, North Carolina and Southern California.

It open 30 Flexible Format locations this year including one in New York City's trendy Tribeca neighborhood, 21,000 square-foot location in Apple's hometown in Cupertino, California and a 28,000 square-foot operation in State College, Pennsylvania near Penn State.

Target CEO Brian Cornell said the Minnesota-based company is excited about the continued and strong performance of the new smaller format stores. As we do more and more business adjacent to college campuses, we understand more and more about the needs of the college student. We really think right now we've got a unique opportunity to leverage this new footprint as a future growth element. Target reported better-than-expected third-quarter results. These results were a change in fortune for the retailer, which reported a bad performance for the second quarter that fell at stock to a multiyear low.

Like other big-box retailers, target is lost ground to smaller, nimble arrivals such as dollar stores and convenience stores, which are more profitable than larger locations on a per square foot basis and cheaper to operate as well. That's in addition to intensifying competition from e-commerce players such as Amazon.

The idea of it makes tremendous sense. Local neighborhood stores are much less vulnerable to competition from online sales because of the convenience element. Rival Wal-Mart is in a similar predicament to target, and it too is opening fewer larger stores. Grocers such as Kroger and Whole Foods have also been introducing smaller stores that provide limited offerings with convenience and affordability. Big stores are less relevant than they used to be. Going smaller, though, is no guarantee of success. Earlier in the year, Wal-Mart closed down its Wal-Mart express to focus on his neighborhood markets and supercenters because of disappointing results at Wal-Mart Express.

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