Tops Expects Big Things From Smaller Format
Tops Markets is the latest retailer looking to use smaller
stores to expand into areas it wouldn’t have considered building in before.
A
case in point is a new 27,000 square-foot store in Cheektowaga, NY. The new
store, the first completely new unit built in Buffalo metro region by the chain
since 2003, is half the size of the typical Tops.
“We think this is going to be a big part of our future,” Frank Curci,
president and chief executive officer of Tops, told The Buffalo News. “We
think there are more opportunities for stores of this size.”
The chain
opened its first smaller format store last summer, that one a 40,000 square-foot
unit, and quickly learned that locals wanted all the services offered in a
70,000 square-foot store.Â
“We have some of everything you’ll find in a big store. The trick is
how do you fit it all in,” Mr. Curci told the News. “We didn’t
build this to be a convenience store.”
The chain has discovered that shoppers
at smaller stores spend about the same per visit as its larger locations. The
difference between the two is the number of shoppers they attract.
But don’t
think that fewer shoppers equates to any less satisfaction with the store.
Mary
Holtz, supervisor for the town of Cheektowaga, told The Buffalo News, “This
area really, really needed a store. It just changes the entire neighborhood.”
Discussion Questions
Discussion Questions: What potential do you see for the use of small format stores to fill-in gaps in areas where conventional stores won’t fit? What are the particular challenges of operating smaller stores for retailers used to opening larger ones?
Bravo to Tops. Smaller formats equate to greater individual customer satisfaction.
With this kind of compact format, the customer can have it all: convenience, selection, and value.
If you go into most 70-80K sq. ft. grocery stores today you can shoot a cannon off without hurting anyone. There’s a lot of unproductive floor space in most stores. Make no mistake–this is as much about profit per square foot as it is about a better customer experience.
Smaller concepts however do make sense relative to serving an older consumer and will also allow stores to shoe-horn into urban spaces, where economic and demographic conditions are better for long-term growth.
We all know that yesterday is history, tomorrow is a mystery, today is a gift, and that is why they call it “the present.” And the present seem to showcase smaller stores.
Searching for ways to “fit in” has always been a part of retailing. Remember when box stores were the answer?
After putting smaller stores in previously neglected areas what will be the next opportunity area for retailers? Could that be the $64,000 question we should be pondering?
The big box works in suburbia, and the smaller box works in urban areas where real estate and demographic/lifestyle differences take place.
If the retail merchants in the grocery space are provided with a freer hand in many urban areas, these stores can and do work extraordinarily well. Let the hand of the marketplace work its magic, as opposed to that of cumbersome bureaucracies introduce by local government. In the process, consumers will be the real winners. Businesses will efficiently convert resources of capital, people, and ideas into products and services that make people’s lives better via the big box and the small box.
I agree with Doug on the “older” and “urban” factors that make this a winning strategy for some, especially in grocery. We will also see a movement to smaller formats more broadly across retail due to the “multichannel” factor. What gets stocked in the store vs. what you sell will continue to evolve with less depth and breadth needing to be physically stocked.
Let’s see: the (smaller) stores offer the same services, the shopper behavior is the same…there’s something missing from this story. Actually everything is missing from this story; specifically any discussion of why store sizes have generally grown over time, or what factors need to be considered in determining optimal size.
Glad to see the favorable opinions here on the small store idea. I’m writing a paper just now titled, “If You Build It, They Will NOT Come,” showing that the bigger the store, the less of it that shoppers will shop. On the other hand, if you are the typical merchant retailer that is collecting tariff for warehousing your suppliers stuff, the bigger the better.
There are ways to solve the problems of the huge stores, but building smaller ones, closer to the customer, seriously alleviates the greatest problems.
It is absolutely the right move for Tops and other retailers like them and not so much like them. Say, Walmart? Enough said.
Over the last few years, statistics have been telling us that the average family pantry has been shrinking. People on average are making more “quick trips” to the grocery store and fewer stock-up trips. More and more often we are hearing about smaller formats and fewer SKUs.
Roughly half of all grocery shopping trips result in five or fewer items. This huge group is not a new breed of shopper but rather the stock-up shopper on a different mission. A study I have read about on these “quick trippers” found that 51% were unaware that roughly half of the items they were purchasing were on sale. The discount had no impact on their buying behavior. Of the 49% that were aware of the discounted items, 40% said they would have bought the items anyways, 37% switched from another brand to get the sale item and only 23% purchased a product that they wouldn’t have normally bought.
The small format retailers I believe will do well if they focus on produce, a more limited meat section than larger stores and target the “quick trip” consumer. Special attention will have to be given to not giving up margin dollars unnecessarily while trying to grow that average basket to a few extra items.
Everyone is “trying” this concept in one form or another. The advantages are obvious. More customers, from a smaller footprint, especially in areas where real estate is expensive (read cities) and you have another solution to an age old retailing problem “How can I reach more customers without spending more per customer on doing this?” Great move for Tops and all of the other retailers who are finally starting to recognize this.