Target goes 'Urban' and Big Box vs. Small Box

This is a follow-up blog to a previous post on Walmart’s emerging ‘urban strategy’. Target has also announced that it will be focusing its efforts on urban areas, including remodeling existing stores and focusing on smaller format stores more appropriate for urban markets.

How small is small?
Target has indicated plans to introduce a smaller store formats in the range of 60,000 to 100,000 square feet. Compared with its typical format of 125,000 to 180,000 square feet, this is small, but for most urban markets, finding that much square footage can still be a challenge, if not downright impossible. They plan to open the first small-format store in Seattle in 2012 – with plans to expand to at least 10 additional cities, including San Francisco and Baltimore, in the coming years. The stores will continue to carry a smaller selection of everything from fashion to home furnishing, but will focus on daily needs. These new Target stores will also include groceries. Target is rolling out a store within a store concept called “P-Fresh” that offers groceries within a 10,000 – 12,000 sf format.

Will this format work for or against traditional business districts?
Not every business district can support, or wants, a Target in their vicinity. The square footage requirements, not to mention the parking requirements, do not make this concept suitable for most traditional business districts. Where smaller format ‘big box’ stores do work are dense urban areas where parking can be reduced because of high mass transit usage. In New York City, Target has successfully development new stores – very profitable ones at that – where parking is limited and in some cases non-existent. In other markets, this is simply not possible.

Big box or small box on our commercial corridors?
A recent "Livability" survey by the Municipal Art Society found that far from shunning chain stores, most people want a healthy mix of retail in their neighborhoods – including chains stores. Not only that, but they actually prefer chain stores to mom-and-pops when shopping for certain goods, including food and apparel.

But not all chains are alike. Smaller chains, like Dunkin Donuts, Subway, Walgreens Drugstores, etc. are more in keeping and appropriate in traditional commercial districts and often help draw more pedestrian traffic to commercial districts – helping mom-and-pops increase sales as well.

Additional research into commercial districts suggests that there is a marked difference between  the impact of ‘big-box’ chains like Target and ‘small-box’ chains like drugstores on traditional commercial districts. A seminal study of all of Philadelphia commercial districts - completed two years ago by Philadelphia-based Econsult - found that while big box stores do increase trips to the district, they do not always help surrounding businesses grow their retail sales [For more on the study, click here for the Executive Summary]. The study also found that “big-box stores…are moderately harmful for real estate values” and “large-scale national chains are associated with lower retail sales in some circumstances.” It seems that people want to shop at big-box stores, but don’t want to live too close to them. Which means that most urban districts might want to take care before putting out the welcome sign for big-box stores.

On the other hand, small-box stores, and pharmacies in particular, were found to play a positive role on commercial corridors. The study found that “chain pharmacies are beneficial by all measures in a corridor, and are most beneficial when they are in, not near, a mixed corridor. Chain pharmacies …should be seen as an amenity to a neighborhood.”

What is your take on the chain store?