Small Store Formats Have a Big Future in Retail

As shopping habits change, stores must adapt.

February 09, 2021

ALEXANDRIA, Va.—As grocers continue to gravitate toward smaller store sizes, and as we head into 2021, grocers will strive to intelligently implement planning from an omni-retailing stance, influencing the types of stores and how they’re networked, according to Progressive Grocer.

For the past decade, retail footprints have steadily decreased in size. The average grocery store is currently 38,000 square feet, with small formats ranging between 12,000 and 25,000 square feet.

As more consumers work from home, they are expected to do their shopping closer to home, and this shift is an opportunity for grocers to re-evaluate their store portfolio and leverage new real-estate opportunities. Additional factors driving smaller formats include targeting product offerings focused on specific segments, such as everyday low prices and fresh campaigns.

A smaller footprint helps manage cost and profitability. When considering smaller, more flexible stores, keep in mind three critical factors for driving engagement: 

  • Assortment: SKU rationalization—or product optimization—is how grocers evaluate which products are retailed or discontinued based on profitability. It’s an essential for maximizing profitability and merchandising areas required to achieve smaller footprints. Trader Joe’s is well known for its select product offerings and its roughly 4,000 SKUs. The typical grocery store sells between 30,000 and 50,000 SKUs.
  • Value: Brands continued their successful strategy during 2020, including Aldi and Lidl, with limited or no service offerings.
  • Convenience: The basis of store format size is to simplify and expedite the shop. Adding to this basic premise are new technologies to enhance this shopper expectation.  
Smart technologies help deliver a seamless shopping experience. These include: 
  • Frictionless checkout: The checkout process is the number one retail pain point, while a frictionless checkout will transform the shopping experience, bringing the sales area back into the store.
  • Buy Online, Pick up In-Store (BOPIS): Grocers are prepared for the second generation of click-and-collect, implementing multiple options anytime, anywhere.
  • Options for pickup: This can include curbside or dedicated food lockers, such as the multi-temperature smart lockers that are used Europe.
  • Applications for “just-in-time” pickup: Several companies are providing technology that enhances convenience by reducing wait time

In addition, manufacturers are delivering into the market an entirely new generation of equipment. Some are connected to the “internet of things” to monitor operational performance. Some enhance energy efficiency, reduce food prep time and produce higher-quality food offerings. Other equipment is compact and ideal for a reduced retail format.

For more on how the pandemic is reshaping store design, read “Pandemic Pushes Design Rethink” in the December 2020 issue of NACS Magazine.

NACS Research last year released its landmark “NACS Last Mile Fulfillment in Convenience Retail” study, outlining the opportunity for convenience retailers to grow sales and expand customer reach. Download it free here.