It seems like every big-box retailer out there is looking to size down store sizes in efforts to grow in urban areas. Walmart is focusing on smaller stores. Target kind of has plans to do the same. Home Depot is already incorporating the strategy.
On the surface, it makes sense. Even with higher real estate costs, these chains are moving into high-density areas with significant household incomes.
A Reuters article recently interviews some industry observers who bring up a good point, though: Can Walmart, Target and others execute with smaller stores? The chains “need to figure out how to make money if they cannot stock as many high-profit margin goods, like clothes, to offset brisk sales of low-margin items, like pasta sauce,” the report says.
We would think that companies such as these could make that balance work, but their expansion into urban locales is admittedly slow. Are big boxes on the right track making a push with smaller stores, or are the hurdles too high?