Rosenfeld Realty Advisors

Tuesday, February 4, 2014

TARGET EXPERIMENTING WITH SMALLER FORMATS

Happy Tuesday everybody! I hope everyone had a great weekend and got over that stinker of a game last night. I have a nice article this morning about Target experimenting with smaller store sizes. This has been going on for a while, and it is not in response to the data breach. In fact, many retailers have been experimenting with this, most notably Target’s arch rival and enemy, Wal-Mart. The reasons are simple and they should probably have done this long ago. From an urban perspective, it is very difficult to find locations that are between 125,000 and 180,000 SF. Unlike the suburbs, where large retail spaces are almost always discounted, all space is at a premium in an urban setting. Two years ago Target started a concept called CityTarget and the latest concept is called TargetExpress which will be smaller than the CityTarget concept. It will be 20,000 SF, which allows them to compete against many of their smaller more aggressive rivals like the drugstores (CVS, Walgreens & Rite Aid) and apparel stores (Ross Dress for Less, Marshall’s). It will allow them to open more stores and penetrate more markets. The smaller stores are offering groceries, clothing, pharmacy, home décor products and electronics. I would imagine this will hurt local companies as well as national competitors of Target. It is a familiar theme in economic inequality that also works in retail many times: the rich get richer. They use their size and buying power to undercut the competition and eventually drive them out of business. The smaller footprints also allow them to save money on their occupancy costs (rent), expenses and labor. In the suburbs these formats will go head to head with the drug stores, who have steadily morphed into grocery stores. It is very interesting to see how these companies have adapted their store sizes to compete more effectively against each other. I think this more will pay off well for Target, provided it survives the data breach situation, which just won’t go away.

I predict that very soon the Gov’t. will announce that they will adopt the credit card technology that Europe did years ago to stop these types of data breaches from occurring. That is the silver lining in this whole mess and hopefully it will happen soon before it happens to someone else. It does make you wonder why they haven’t already.

Target goes small as it chases shoppers to cities

http://www.pressdisplay.com/pressdisplay/viewer.aspx