While many retail companies are closing stores or closing up shop altogether, some big-box retailers are boosting business by opening new, smaller stores in strategic locations. Target in particular is finding new customers in places where there isn’t enough space for a warehouse-like big-box store, but where there are plenty of people who appreciate the convenience these stores offer. Target’s new small-format stores are typically in big cities, near college campuses, and in dense suburban spots where space is limited.

Target announced this week that it would open three new small-format stores in New York City – one on the Upper East Side of Manhattan, one in Queens, and the third in Staten Island – over the next two years, and another in Chicago’s Logan Square in 2020. The retailer already has several small-format locations in New York, including Herald Square and Harlem, and says it will have more than 130 small-box stores around the country by the end of 2019.

These new stores are part of a major move into metro areas, particularly Los Angeles, where Target’s small-box Burbank store opened this week; Minneapolis, where the company is headquartered; Chicago, Boston, and New York. Although Target has a huge online business – according to its website, Target.com is the fourth largest retail site on the web – company CEO Brian Cornell has repeatedly stressed that brick-and-mortar remains the cornerstone of its strategy. In a statement in March, he said the company would be “reimagining our network of stores into hubs for commerce and community.”

Typically between 20,000 and 40,000 square feet – compared with as much as 145,000 square feet for a regular Target – the small-box store allows Target to take advantage of previously untapped markets, where it caters to the local clientele. In a new take on hyper-local, Target uses customer data to choose merchandise that is likely to appeal to shoppers in a specific area. The smaller stores are performing well, producing twice the sales per square foot as regular Target stores, and supporting e-commerce by serving as convenient pick-up points for online orders.

In a recent visit to a small-format Target in suburban New York, I found lots of women’s clothes prominently displayed, as well as men’s and children’s clothing, a wide array of cosmetics and other beauty products, and a limited selection of home décor, groceries, electronics, and toys – typical suburban stuff, but no furniture or other large items. In a college town, Target might highlight student essentials, like toothpaste, dorm furnishings, school supplies, and snacks. Target currently operates in about a dozen campus locations, including the University of Maryland, UC Berkeley, and UT Austin.

Kohl’s Downsizes to Grow, Partners with Aldi, Amazon

AP Photo/John Raoux

Like Target, Kohl’s is going small in a big way, albeit with a different approach. Instead of aggressively opening new locations, Kohl’s has been remodeling many of its existing stores, reducing them in size from about 87,000 square feet to about 60,000 square feet and leasing the converted space to the German discount supermarket chain Aldi. This strategy brings in more traffic as people shopping for groceries stop in at Kohl’s to have a look around, and it allows the store to make more efficient use of the space it retains.

Kohl’s has also been testing an even smaller format. The small-box Kohl’s store takes up only about 35,000 square feet and allows Kohl’s, like Target, to experiment with moving into different geographic locations. So far, Kohl’s has not made a big push into urban areas, but with the new format, that would be a possibility. The new small-box Kohl’s carries 60% less merchandise than a traditional Kohl’s location, but like Target, Kohl’s uses analytics to tailor its inventory to the local customer. The company has recently opened new small-box stores in Blue Ash, Ohio; East Windsor, New Jersey; Montebello, California; and North Smithfield, Rhode Island.

The reduction in its physical footprint comes at the same time Kohl’s is flexing some e-commerce muscle. In a classic if-you-can’t-beat-them-join-them move, Kohl’s has partnered with Amazon to accept Amazon returns and to sell Amazon Echo smart-home devices. The company’s strategy seems to be working so far – sales are up and stores are keeping the lights on at a time when many retailers are going dark.