As competition for share of shoppers’ trips increases, it’s no surprise that big box retailers are experimenting with smaller store formats to meet the varying needs of shoppers. Walmart and Target have been experimenting with multiple formats for the last few years, with Target opening their first TargetExpress this past July.
So, what does this mean for brands?
Marketers need to ask themselves a few important questions to grow their relationships with these retailers and find new opportunities for themselves.
1) “Does my approach to small format stores (like drug and convenience) still work, or do I need a new approach?”
Short answer: Probably.
A brand’s approach to these new format stores should be customized, to say the least. These new formats compete with retailers going after a shopper’s fill-in trip, but also with urban grocery stores. In that respect, a similar approach to small format would work since you’re going after the same shopper. However, a brand needs to remember they are still working with Target and Walmart, which presents both opportunities and guardrails that must be followed. For example, if your brand successfully executes scale programs at a standard Walmart store, this approach may not be viable at a Walmart Neighborhood Market with limited product selection. We need to find new opportunities that appeal to both brand and retailer as the Walmarts and Targets of the world look for brands to step up and contribute to the growth of these new formats.
2) “Are there changes to product mixes and marketing support needed for these new store formats?”
Short answer: Sure, but let shopper behaviors lead the way.
Brands that find success in the new store formats understand the changing landscape for both shoppers and retailers. Walmart and Target realized their shopper has become more of a non-driving city dweller, and these new formats are a way for them to bring back shoppers who have adjusted their shopping habits. Unlike the traditional store, these shoppers look for products that satisfy their fill-in trip needs. They look for quick, easy solutions across a limited number of categories. Brands could capitalize on this by creating marketing communication that is just as specialized as the new stores. For example, a snack bar brand should think about how to appeal to a city commuter who’s looking for a breakfast grab-and-go option. Working with retailers in this way assures a clear path to success.
3) “Can these new small format stores offer new opportunities for testing and learning in new areas?”
Short answer: Yes!
Just as the retailer is testing their store format, they’re looking for brands to come along for the ride. Shoppers view these stores as new, fresh and exciting options they must try at least once. They expect not only a different store feel than the competition, they look for new products and offerings that enhance their experience. These new formats are striving to meet that goal and usually have the infrastructure to support custom initiatives. It’s a bit of investment for a brand, but learnings could be achieved in all areas. Implement beacon technology to announce new products to passers-by. Test digital signage at shelf to measure brand engagement. New flavor SKUs could be “exclusively launched” at new formats to gain shopper feedback.
Big box retailers have seen early success with the new formats; brands should watch how Target and Walmart move forward and plan to create success for themselves. Early investments with retailers in this space may not pay off immediately, but brands must remember: small format test stores may not last forever, but these retailers show no signs of going away anytime soon.
Keith Katona is director, shopper marketing based out of Momentum Chicago