Is the shift to smaller formats finally underway?

Last week I spent a couple of days in the Boston and Portland, Maine, areas. The reason for my visit was to take in recently opened, smaller-format concept stores. Smaller grocery stores have been on the agenda for retailers in the USA for a number of years; but do these latest developments, from two of the major retailers in the market, indicate that the long-awaited shift is starting to happen?

Bfresh winning at the intersection of retail and foodservice

Ahold's bfresh offers high-quality foods to go.

First, some details on the stores. In the Allston district of Boston, Ahold has opened the first of its ‘bfresh’ smaller-format stores. Part grocery store, part food takeaway, at 10,000 square feet this is one of the best examples of format blurring in action. The retailer’s partnership with La Place from the Netherlands has enabled it to present the market with a unique, high-quality food-to-go offer which sets it apart from a number of urban-focused competitors.

Hannaford focused on offering a convenient solution

Hannaford has opened a smaller store near Portland, Maine.

Just outside Portland, Delhaize’s Hannaford has developed a 20,000-square-foot smaller supermarket.  In a more rural location, this store leads with a fresh food offer, with a layout that has been built around offering convenient meal solutions. Merchandising wine next to produce and deli is a relatively unique idea, but one which works really well in this format.

Can things be different this time?

So two great additions to the U.S. grocery sector — but we have been here before, at the dawn of the small-format revolution. Walmart Marketside and Tesco’s Fresh & Easy were two concepts developed by industry leaders that were destined to reshape retail but failed to realise their full potential. But things could be different this time.

Shopping little and often is on the rise

If we look at trends from elsewhere, particularly Europe, shoppers are showing a greater propensity for these types of format than before. Multichannel shopping is on the rise and while we are not seeing the end of the big, weekly family shop, shopping patterns are changing, with more regular, top-up shops becoming part of the repertoire. 

Part of the reason for this is that shoppers are also investing more time and effort in health and wellness, including a switch to more fresh food. Smaller-format stores are well positioned to capitalise on this, providing they can deliver and execute on an offer which meets shopper expectations in terms of range, freshness, quality and pricing.

Convenient pickup points for online orders

One of the biggest drivers of the growth of smaller formats could be online grocery shopping, another key growth channel. In Europe, many retailers are using their c-store formats as pickup locations for online orders. This enables shoppers to top up with last-minute items, while allowing the retailers to deliver their large-format range from a much smaller footprint. Not only is this convenient for shoppers but it also helps to support the economics of small-format retailing for the retailers.

Growing number of smaller-format options

It’s also important to remember that smaller-format stores are already doing really well here. Aldi, through its core hard discount format and Trader Joe’s, continues to see great success in the U.S. market and is building a larger network of stores. Shoppers like the ease of shopping at these formats and the great pricing. This has not gone unnoticed, with both Whole Foods Market and Lidl planning their own assaults on the smaller-format segment. Soon others could be tempted to dust off the small-format playbook and shoppers may have many more convenient options for their grocery needs.

Do you think that these latest developments will be the catalyst for broader, smaller-format developments, or will investments continue to be channeled into larger supermarkets and hypermarkets, ensuring their future relevance?