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Target is the latest mass retailer to open small-format stores, whose focus on private label could help it provide even more differentiated products.

To-the-point analysis about one of the five important stories from the week.  

What happened

  • Target will open 30 small-format stores—about 26,000 square feet, compared to typical Target stores which are roughly 135,000 square feet—by the end of 2018, and increase that number to 130 by the end of 2019. The stores are meant to target urban, suburban and college markets—notably, the same target consumer as Amazon Prime.

Why it matters

  • Despite Walmart Express, Walmart’s smaller format that was shuttered after five years, smaller format continues growing as larger retailers look to embed themselves in communities as the “local market.” In addition to Target, other mass retailers like Meijer, a chain that sells groceries, electronics, pharmaceuticals and other essentials is following suit, opening six small-format stores by 2021. They join other small-format stores that continue to grow across the U.S., including the German grocery chains Lidl and Aldi—the latter plans to open 900 more 12,000-square-foot stores in the U.S. in the next five years.  
  • What differentiates Target from the Walmart fiasco and Meijer, however, is its huge focus on private label. The active small-format stores illuminate Target’s ties to Casper, as well as many of the 12 private labels Target rolled out last year. This highlights a shift as retailers become brands and brands enter retailer territory; while Target hones in on its private labels and other brands, the brands it works with—which are often digitally native and direct-to-consumer—are gaining from their wholesale relationships.

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