Most people have heard the phrase, “Good things come in small packages.” This phrase does not just direct its meaning towards products, it also applies to the food retail industry as small-format retail stores are rapidly growing.

Small-format stores, such as Lidl and Trader Joe’s, are some of the leading neighborhood stores in the country and have been quite successful in that niche. Other food retail businesses are following suit, hoping to maximize sales and target customers in their locality. But what makes these small-format retail stores so successful, even to the point of outperforming some much larger traditional grocery stores?

Meeting Customers Where They Are

Perhaps one of the key factors that make small-format stores tick is the promise of convenience to customers. At a time when people are prioritizing convenience and wanting to get their groceries wherever and whenever small-format stores check all the right boxes. Neighborhood stores meet customers where they are, allowing them to shop closer to home—whether in rural areas or metropolitan centers like New York where Target opened its 30,000 square foot store in Times Square.

More than just the smaller footprint, small-format stores also enable retailers to localize and personalize their products and services to cater to the needs of their immediate community. Through these targeted products and services and well-curated store space, neighborhood stores have a great advantage in drawing in new customers and keeping existing ones.

The Opportunity to Minimize Costs

Knowing that the capital needed to develop food retail space can get very costly, the shift towards reducing store footprint to manage cost is not just logical, but a smart move. Moreover, due to the recent crises that have affected the food retail industry in more ways than one, downsizing retail space drives the opportunity to minimize costs and recoup past operational losses.

The footprint of a small-format store generally ranges from 12,000 square feet to 25,000 square feet. “Going small” is an effective way to cut costs on infrastructure and fixtures without sacrificing operational performance. With reduced floor space, retailers can invest in equipment, such as refrigeration solutions and display cases that are suitable and designed for small-format applications rather than full-size stores. With the intimate and smaller nature of neighborhood markets, retailers have the upper hand in being flexible with their strategies without going overboard with their budgets or sacrificing product offerings.

Although smaller in square footage than the full-size stores, the neighborhood stores category is projected to grow big in the coming years. The strategic adoption of small-format stores is an ode to our commitment to continuously strive to innovate in the food retail landscape. After all, as food retailers, our impact on the communities we serve is not dependent on the size of our stores, but on the value, we offer our customers.