Major Retailers Explore Small Format Opportunities

A growing preference among consumers for localized shopping experiences, which gained steam with COVID-19, has bolstered the small-format retail market and prompted some major retailers to branch out into new formats. New data from Placer.ai, which uses location analytics to discover consumer trends based on foot traffic, revealed that smaller format retail locations might be effective at attracting more frequent visits.

Looking to capitalize on this trend, Sprouts Farmers Market, for example, has spent the past 2.5 years cultivating a small-format strategy that includes reducing the chain grocer’s square footage and environmental impact by focusing on smaller, more accessible properties. Its smaller format stores increased by nearly 50 percent since January 2022, which has helped it outpace the overall grocery sector this year.

Other grocers, including Trader Joe’s and Whole Foods, are also targeting smaller locations that are driven by convenience.

Another example is Bloomie’s, the small store format launched by Macy’s earlier this year as part of a turnaround plan. The retailer said it would close nearly a third of its traditional department stores and instead add at least one Bloomie’s store this year.

The concept includes highly curated, small-format neighborhood stores that so far have been deployed in three locations offering a mix of established brands and trendy pop-ups tailored to local tastes. For example the Skokie, Illinois, Bloomie’s offers a product mix that appeals to city dwellers.

BJ’s Wholesale Club launched a small format location called BJ’s Market in April 2022. The Warwick, Rhode Island, store is about half the size of a full-sized BJ’s location. An analysis of its performance revealed year-over-year customer visit growth for the first five months of 2024. In addition, the average visit time was shorter at 21 minutes vs. nearly 31 minutes at full-sized stores, and people tended to visit the smaller format store more often. Fifty five percent of visitors stopped by the small-format location at least twice a month.

These examples could signal a growing consumer preference for quick, efficient, experiential and curated shopping experiences that are highly local and ultimately more convenient for shoppers.