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Why big dealers get smaller



Target said this week it will open around 30 slimmed-down stores this year in cities like Los Angeles, New York and Washington, D.C. and in colleges. These stores, which average about 40,000 square meters, are one-third of Target's traditional scattering stores.

The plan follows several other malls that open smaller stores or downsizing existing to bring in city buyers and save money when online stores take over in the suburbs.

Small shops on city blocks and in colleges are a key part of Target's growth strategy because they help the company to draw customers who had been out of wealth in the past. For example, Target opened ( TGT ) a 60,000 square meter store last year in South Burlington, Vermont, the first in the state.

"These stores help We enter new neighborhoods where a full-size store does not fit," says CEO Brian Cornell to analysts during a earnings presentation Wednesday.

Winning new city dealers and students with conveniently located stores will be Target opens only two of its traditional stores in 201
9. Rival Walmart ( WMT ) also reduces new store openings. fewer than 15 supercents this year, and will invest in remodeling stores and online growth instead.

Target has accelerated its small store push after testing out various formats and designs.In 2017 and 2018, it opened around 30 of them a year. Target has 87 small stores today and will open its 88th this week in San Diego.The company plans to open around 30 new this year over the next few years.

Target stock h shop with different goods. Shops near campuses carry school equipment and dorm rooms, while others in New York offer more luggage for tourists.

It is difficult to operate these small format stores. Target's teams had to use smaller trucks to deliver on city blocks and find out which items should be put on shelves. Target has strengthened its investment in the supply chain to meet the extra demand in small stores.

"Running a small shop is not as simple as cutting your variety for less shelf space," says Kantar Consulting analyst Tory Gundelach. "Most dealers haven't figured out how to make a small footprint."

  Target opened a small store in Bensonhurst in Brooklyn in 2017. Target currently has 87 small shops around the country.

Although real estate is often pricier in cities and around campus, small shops are cash cows for Target. Target's Herald Square store in Manhattan earns more sales per square meter than any of its stores in the country.

"They are our most productive stores in America," Cornell said.

Other retailers have also slimmed down in ( DG ) has opened DGX, about half of a regular store, in several of the recent years to enter populated areas. cities. Goodyear ( GT ) opened the Roll Showrooms in October next to shopping centers in Washington, DC. And Ikea opens a 17,530 square foot showroom on Manhattan's Upper East Side this spring. Ikea recognizes the need to develop a new strategy to attract younger, urban buyers who may want to visit a store but do not own a car or want to slip out to the outskirts of the cities.

Department chains also try to use their store locations in various ways that more customers use online. Macy's ( M ) and Kohls ( KSS ) have cut down the sizes of some stores while JCPenney ( JCP ) CEO Jill Soltau told analysts last week that the chain looked to reduce the store space.
Kohl has been among the most aggressive retailers who beat down stores and has decided to rent extra space on a handful of outside partners. On Tuesday, Kohl said it would rent space for Planet Fitness ( PLNT ) next to 10 of its stores in 2019.

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