Target Corp. thinks its smaller format CityTargets can get even smaller.
During a recent conference call with analysts to discuss second quarter earnings, CEO Gregg Steinhafel said the company was looking at ways to reduce the size of the urban centric store.
“We are building the capability to operate stores in smaller spaces, particularly in urban markets,” Steinhafel said. “We are analyzing results in our [existing CityTargets] to understand where in the stores we have the ability to reduce space even more allowing us to further shrink the size of this store format.”
Launched last year in cities like Chicago, San Francisco, and Seattle, CityTargets are typically 80,000 to 100,000 square feet compared to the regular big boxes, which typically 150,000 square feet or larger.
For Target, the obvious advantage of the format is that you can find more places to stick one in a dense urban core.
Target was pretty lucky to find the urban real estate to accommodate the seven CityTargets it currently operates, said Amy Koo, an analyst with Kantar Retail consulting firm in Boston.
“It’s really hard to find these spaces,” she said.
Going smaller will presumably give Target more options as it scouts future locations for the format.
Thinking even further ahead, Target’s experimentation might allow it to figure out ways to shrink the size of its regular big box stores to make them more productive, Koo said.
With U.S. sales weak, big boxes like Best Buy and Sears have adopted strategies to make the most of its space. Best Buy has partnered with vendors like Microsoft and Samsung to create store-within-a-store concepts while Sears has leased excess space to outside companies.
Big boxes over the next decade will realize that they don’t need nearly all of the space they currently own or lease, Koo said.
“People just don’t go to the general box to stock up anymore,” she said.