buckguy wrote: ↑November 11th, 2022, 7:56 pm
One of the articles said that the space for fulfillment will be 5x larger than existing stores. Given that these stores aren’t that much larger than existing stores, the overall experience won’t be much different, and will have only minor differences related to merchandise and decor. They have saturated most markets, as have most big boxes, but may have some backlog of potential locations because of COVID-related disruptions to developments.
My guess is that they have exhausted most of the best locations for the smaller formats. They focused on places near large college campuses or urban/inner ring locations with high foot traffic and their usual demographic (or both as in the case of the DC a store near American U and Tenleytown Metro). The ones that I’ve been to seem to do a decent business. The negative Yelp reviews seem to come from people who hadn’t figured out that the stores were small or that you can spend a couple minutes online figuring out what they have. I’ve had better luck finding a few things at the smaller stores. The larger City Targets do very good sales/sq ft. The one in Columbia Heights DC led the chain when it first opened and still does enough volume for over a dozen self checkouts.
In DC, the one gap I see for a small store is Georgetown/Foggy Bottom. They did plan to go into the formerly dead mall in Georgetown but instead another big box took their place. Now that some large retail/restaurant spaces are vacant near George Washington University, I could see them doing a small store there. That area is convenient for GWs medical center.
The small formats aren't worth it except in limited circumstances. Even in those limited circumstances where it appears to be a home run, the small format is having other problems that pressure profitability (see: San Francisco). They are not getting the ROI of the larger stores. Customers buy fewer items than they buy in the larger stores. Operating costs and overhead are far higher per square foot despite fewer employees, smaller mix of items, etc.
I still think what could be viable is small pick up locations for online orders only near where they placed these small stores. As you point out these locations have foot traffic but when average tickets are in the $15 range vs. average tickets well over $50 for a larger format store, and the small stores do thousands fewer tickets per week than the larger stores, the sales and profits just aren't there for these smaller stores to even be worth management effort. And as these stores start to cause brand dilution as evidenced by an inability to keep shelves stocked in the small stores, negative Google/Yelp reviews, shorter store hours for whatever reason (lack of customers, crime, whatever), it is questionable if these small stores help the brand or hurt the brand.
Those college students who were so excited to have Target, after they get burned by the small Target not having what they need a few times and go back to their dorm and order from Amazon, and Amazon takes care of their needs, are potentially lost customers forever long after they move on from the college due to having the negative experience. In cases like that, Target would have been better off not even being there. No interaction at all is better than a negative one.
I think Target and Wal Mart are both in trouble. The difference is Wal Mart has so much grocery/consumables business to wash out the major other problems it is having. Target does not have that luxury, and their execution and store operations have nosedived down to a level of a bad 90's Kmart this year. These small format stores will be the first casualty next year unless Target has an excellent Christmas.