Target and Other Big Box Stores Bet on Small Urban Outposts

Duane Reade beauty department

Almost a year ago, we noted that traditionally suburban big box stores were scaling down and targeting Main Street in order to appeal to customers with a different, more mom-and-pop retail style.  Now, The New York Times reports, those same retailers are taking that approach and applying it to gain entry in urban areas.  Some businesses are adjusting their models to better suit customers’ needs, while others have been more overtly forced to play by cities’ rules in order to gain a foothold.  Via smaller stores and even smaller packaging, here’s how the national behemoths are changing their models for a metropolitan mindset:

Duane Reade appeals to youthful urban populations with its high-end beauty department, “Look.”

  • Target is working with a new model called “City Target.”  (Three opened yesterday, in Los Angeles, Chicago, and Seattle.) Besides being half the size of most Target stores, their products are packaged with apartment dwellers in mind.  Cutting back on bulk makes sense in urban markets.  What’s interesting about this approach is that it’s the exact opposite of what Target did in New York City eight years ago, when it opened a 192,000 square feet store in Brooklyn’s Atlantic Center.  Besides being one of the largest of its locations in the country, the company hailed the outpost as its first “metropolitan store,” while opening it in what is essentially an urban simulacrum of a suburban mall.  Despite a consistent yearly bottom line, the retailer seems to be moving away from its original city approach with forthcoming urban stores.
  • Walmart, meanwhile, is trying out a range of different store sizes across the country, to see what works best where.  From 2011 to 2012, the company saw their net income shrink, so the experimentation with new, improved retail models seems logical. And Walmart’s actually been experimenting with all kinds of new endeavors these days — we’ll ultimately be most interested to see if they combine some of their more service- and digital-oriented efforts with smaller, more flexible city stores.
  • Whole Foods has faced success with smaller Manhattan stores, but was forced to adjust its bigger plan for an undeveloped lot in Brooklyn when faced with extensive neighborhood resistance.  In order to finally secure a work permit at the Gowanus location, besides cutting 25% of the square footage and almost half the parking spots, the retailer also had to re-tool its image as a community center as opposed to a big box store.  (They haven’t begun construction, but this is coming in the form of a 20,000 square feet green roof and extensive stocking of local products.)  In trying to please the local community before the store is even built, Whole Foods might have actually hit on a solution to the biggest challenge for mass retailers trying to break into urban areas.

Other businesses, like Walgreen, which owns New York’s Duane Reade drugstore chain, have tried to combat this inherent inflexibility by using loyalty card data to tailor products for specific neighborhoods.  That’s certainly one useful strategy, but we expect the approach Whole Foods has been forced to take with its newest New York City location will prove more effective, since it will cater to its local community from day one.

Though big box stores are getting with the urban program – as seen in particular through the lens of Whole Foods’ forced Brooklyn re-modeling and Walmart’s extensive urban experimentation – we don’t think their presence in cities spells the end of mom-and-pop shopping just yet.