Do Small Format Grocery Stores Work?

by Andrew Hoeft | Jan 30, 2020 12:00:00 AM

If you’ve been keeping up with grocery news (here are our favorite places to do so), you’ve likely seen a trend emerging in stories about the format of grocery stores. We’re experiencing a large scale shift in retail as a whole, and it’s only natural that the grocery industry would follow suit.

Traditional retail size and formats aren’t cutting it anymore. We’re seeing the demise of storied department stores like Boston Store and Shopko as retail goes digital and consumers rely on brick-and-mortar retail more for experience than for hefty levels of inventory. It’s simply easier to outfit an online shop with every item that your company carries and shipping directly to customers as-needed  vs. shipping out to stores and hoping items will sell out on your shelves.

You can see that trend emerging in grocery stores as well. Small format stores are becoming a more common occurrence, and we’re wondering as much as anyone – are these curated spaces the grocery stores of the future?

Small format grocery store benefits

The upsides of a smaller format grocery store make sense in this retail environment. They’re great in city neighborhoods where the population is dense and the options for food are scarce. Food deserts can be remedied with small format stores in these locations, and keep residents from having to travel for miles for their weekly shop. 

In addition, shopper behavior has changed drastically over the last 10 or so years. Online click and collect and grocery delivery are becoming popular, and when shoppers are heading to a brick-and-mortar store, they’re coming in more frequently for less items. They’re either stocking up for the week, or purchasing only enough ingredients to make dinner that night.

We’d be remiss to neglect mentioning how small format grocery stores can help with grocery’s narrow margins too. All of the overhead that comes from managing a superstore can be minimized when opting for smaller space.

Who is experimenting with small format grocery stores?

  • Kroger – the grocery giant is dipping its toes into the water with their Kroger Express formats, conveniently located inside a Walgreens location. Their first test is located in northern Kentucky, and offers more than 2,000 items.
  • Whole Foods – Whole Foods Market Daily Shop is a grab-and-go version of a small format grocery store that the health-conscious retailer is testing in New York.
  • Sendik’s – The Milwaukee-based grocer has been experimenting with pairing their small format store with a gas station to offer more convenience to the customer. So far, the test has been highly successful.
  • Giant Foods – Ironically, Giant Foods is getting in on the small format game. They’ve opened a 9,500 square foot Giant Heirloom Market in Philadelphia.
  • Hy-Vee is scaling down with 10,000 square foot Hy-Vee Fast & Fresh locations.

Small format grocery store challenges

Though these stores are definitely bringing something to the table for grocery retail (and adapting to current shopper behavior), these experiments haven’t all been successful. In Austin, Texas, in.gredients, a package-free micro-grocery store closed because of rising rents, and Plenty Grocery & Deli, a Chicago-based store, closed in April 2019.

One Grocery Dive article said it best, “Offering a limited range of products has a quaint appeal, but operating costs in dense areas can be high and consumers looking for a full shop may still opt for a traditional supermarket.”

Smaller format stores are working as a separate offering for many large, well-known retailers, but they do face unique challenges in the shifting retail landscape. You’ll likely see more stories about small grocery store format, as more retailers jump into the ring and try out their chances.

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