The Future of U.S. Grocery Retail: Smaller Stores

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Last Monday, Whole Foods announced a quick-shop store format called Whole Foods Market Daily Shop. The new stores will be 7,000 to 14,000 square feet, considerably smaller than the average 40,000-square-foot Whole Foods Market store.

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The decision by Whole Foods to open a quick-shop store format follows a growing trend in the U.S. grocery retail sector of smaller grocery stores. Target has more than 170 small-format stores, and Walmart has nearly 700 Neighborhood Markets, described as a smaller-footprint option for communities needing a pharmacy, groceries, and merchandise.

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Why are major U.S. grocery retail players betting on smaller stores?

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• To expand reach in dense metropolitan areas
• To place stores in more affluent areas, potentially increasing the average order value
• To increase personalization

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Notably, the smaller store format reduces the upfront investment cost and allows grocers to personalize their offerings to serve customers better. With real estate, construction, and labor costs increasing in high-traffic metropolitan areas, grocers continue to increase the number of smaller stores in their portfolio.