Grocers find big benefits in small formats
A few major North American grocers are making big moves into small-format spaces as they aim to be more accessible to consumers.
This past May, Loblaw-owned discount banner No Frills opened its first small-format store in downtown Toronto. Two months later, a second location opened in Toronto’s Liberty Village neighbourhood.
At 15,000-sq.-ft, the mini markets are less than half the size of a traditional No Frills store, but customers can still find an extensive selection of grocery items, including fresh produce, meat and baked goods. They stock locally sourced products to meet the preferences of the community, as well as new products like rotisserie chicken and other hot foods.
Melanie Singh, president of hard discount at Loblaw Cos. Ltd., says the company plans to open several small-format No Frills stores in 2024 and in 2025.
“Our smaller format stores give us more flexibility when determining new locations,” Singh tells Canadian Grocer. “Even though it is smaller in size, the customer experience is the same as a larger No Frills store. It even has the same promotions. Whether in urban or rural settings, we can now open stores where Canadians need them most. This means better access to affordable food, helping feed everyone.”
Stateside, upscale grocer Whole Foods Market is testing a similar concept.
The Amazon-owned chain announced plans in March to roll out a new small format designed to provide urban customers with a quick, convenient shopping experience.
The first Whole Foods Market Daily Shop (first piloted in 2019) is slated to open in New York City this fall, with additional stores planned for the city—and across the U.S.
The stores will stock fresh produce, meat and seafood, prepared foods, breads and alcohol, as well as private label products.
Ranging between 7,000 to 14,000-sq.-ft., the Daily Shop stores are roughly a quarter to half the size of a traditional Whole Foods, which paves the way for expansion in dense metropolitan areas, according to the company. In an announcement, the grocer stated: “In bustling hubs like Manhattan where proximity matters, these stores will bring Whole Foods Market closer to existing customers, while extending the company’s reach to others in surrounding neighborhoods.”
Other U.S. grocers are experimenting with small-box stores including Sprouts, which is rolling out its smaller-format concept, at around 23,000 sq. ft.; and Wegmans Food Markets, which has been building smaller-format stores since 2021.
While small-format stores aren’t new, experts say they’re gaining traction because of today’s climate. “Customers are being a little more cautious and more picky about where they’re spending their money,” says Liza Amlani, principal and co-founder of Retail Strategy Group in Toronto.
“The opportunity of shopping small… comes down to building loyalty and trust. This is where a grocer can have more opportunity to build a relationship with their customer, build trust with them, and get insights from them around the product [assortment]. That is the holy grail for anyone in retail: giving the customer the right product at the right time and in the right place.”
It’s also easier to build a sense of community in a smaller, localized store.
“Whether it is experiential, like food tastings or having a cooking class, or seeing if there’s an opportunity to partner with other small businesses in the neighbourhood—that builds community and connection,” she says. “And when customers feel connected, they will continue to shop [there] and put their hard-earned money into a retailer’s pocket.”
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DeAnn Campbell, practice lead, retail at Atlanta-based AAG Consulting, also sees the advantage of more experiential small-format grocery stores. “Having that emotional fulfillment and experiential opportunity to shop is really valuable and important [to build] loyalty,” says Campbell. “That is very different from a lower-cost fulfilment mission where you’re going to Walmart or Costco and you’re just looking for the cheapest thing. You’re buying toilet paper—you don’t care if it’s upscale.”
Another benefit for retailers is cost savings.
“[A small-format store] gives them access to potentially cheaper real estate. It’s very expensive to go into a centre with enough traffic to drive a 150,000-sq.-ft. store—and you’re paying for that,” Campbell says.
“A smaller location gives you a chance to get closer into the neighborhoods… with a bit cheaper rent and you’re not as threatened by competitors.”
