January 22, 2025
Image Courtesy of NRF Big Show 2025 – Jason Dixson Photography
Are Smaller Grocery Formats Still Where It’s At?
At the 2025 NRF Big Show, the CEOs of Morrisons and Sprouts Farmers Market discussed their pushes to open smaller stores, although each chain is doing so for different reasons.
Morrisons, the fifth-largest supermarket in the United Kingdom, last June announced plans to open 400 of its Morrisons Daily convenience stores, aiming to increase its number of small stores to 2,000 in 2025. The stores range from 2,500 square feet to 4,000 square feet.
At 2025 NRF, Rami Baitieh, Morrisons’ CEO, explained that it’s “harder to open big stores in big cities” and Morrisons is focused on urban centers, as around 80% of the UK population lives in urban areas.
A trend toward smaller households also supports C-stores that carry less product. Baitieh noted that 30% of UK consumers live on their own or are a couple without kids. Finally, the smaller stores support nearby online pickup in city centers. Baitieh said, “We need to get closer to the customer. That’s why we push online. We push the app. We push the proximity.”
Jack Sinclair, CEO of Sprouts, said the Phoenix-based natural and organic grocer’s small-format push involves bigger stores at around 23,000 square feet, down from its traditional store size of around 32,000 square feet.
Sprouts doesn’t target city centers, but its smaller stores enable Sprout to open close to other popular retailers to benefit from their traffic. Sinclair stated, “We’re a complimentary retailer as opposed to a competitive retailer. We love to sit alongside anybody. There’s nobody we don’t want to be right next to because we feel that the offer that we have is so different, and that allows us to be in a position that we create proposition for the customer.”
The low-profile formats, according to Sinclair, can also offer a “differentiated format” experience than larger locations, including “allowing people to see all the way around the store.” Further, the smaller stores are “cheaper to build and cheaper to operate, so that allows you to make return back from the store faster.”
He said the smaller stores still carry a suitable assortment for customers’ daily needs.
In the grocery retail landscape, there’s been a notable shift from large stores to smaller formats that are more accessible to consumers. Grocery Doppio wrote, “Small format stores offer a unique advantage in providing a more personalized shopping experience. With a more limited product selection, they can target specific customer bases, whether it’s health-conscious shoppers, urban dwellers, or those looking for affordable options.”
Among those recently experimenting with smaller grocery formats are Amazon, Whole Foods, Meijer, Wegman’s, Loblaw, and Hy-Vee.
Several grocers are experimenting with a variety of store sizes. H-E-B recently introduced Joe V’s Smart Shop, a mini version of its H-E-B store, at the same time as it opened its largest store, at over 145,000 square feet, in Austin.
Costco is opening slightly larger stores. Meanwhile, Walmart last year began testing two Neighborhood Market locations that span 57,000 square feet of selling space, about 17,000 square feet larger than average to add wider aisles, a Health Services Room to their pharmacies, and additional pickup and delivery space. Publix last year also began experimenting with a larger prototype supporting additional hot food offerings, upstairs and outdoor seating, and a bar.
BrainTrust
Richard J. George, Ph.D.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Jeff Sward
Founding Partner, Merchandising Metrics
Brian Numainville
Principal, The Feedback Group
Recent Discussions
Discussion Questions
What are the primary and secondary factors driving the shift to smaller-sized grocery locations?
Where is the opportunity still in opening larger stores?
Poll
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Saying that small or larger stores is the future kind of misses the point. What most retailers are realizing is that they need a multiformat approach to address different markets and locations. Within this, the universal is that efficiency has become more of a mantra, and that sometimes means streamlining selections and assortments which, in turn, requires less space.
As for Morrisons, the UK has a very different retail structure in grocery compared to the US. There has long been an emphasis on multiformat with retailers like Tesco and Sainsbury’s having a big advantage in smaller stores with their Express and Local concepts. Morrisons is right to look to grow in this space, but it is somewhat late to the party.
Well-executed small store formats could hurt large grocery store foot traffic.
If you shop online for groceries today, you still visit the store for some categories you prefer to buy in person. The grocery store you visit is still large and makes you walk past the 70-80% of items you already bought online to get to the produce, meat, deli, bakery, dairy, etc. that you want to select in person.
Small format stores with differentiated offerings and a focus on perimeter categories could be THE store to visit for online grocery shoppers – which turn out to be everyone’s top shoppers. In and out quickly in a smaller store. Pick up items they can’t or don’t want to buy online. Not a lot of wasted footsteps. A terrific in-store shopping experience.
Another advantage to smaller grocery formats, which isn’t mentioned above – is customers saving time in their shopping experience. An 18,000 sq ft store with fewer SKU’s, smaller carts, and refined product sets is much easier to navigate quickly, shaving 7-10 minutes over a 32,000 sq ft store. If small format grocery planners can design for roughly 80% of the product selection in larger formats to satisfy the customers, but squeeze in a little more variety, they can realize a healthy higher sales $ sq/ft ROI.
The key is, make sure the brand and experience is just as good, if not better for customers and community. There are dozens or more independents all over our country who are doing very well on this, competing successfully against chains.
The development of new, smaller footprint formats by large retailers such as Macy’s, Kohl’s and Target remains challenging for suppliers and competitors.
There has always been an emphasis on bigger in retailing for much of its history. Across the retail spectrum, national chains were seeking ever larger stores, leading to maga-monster stores up to 500,000 square feet in some cases.
In recent years, however, retailers have decided to incorporate more compact footprints into their physical strategies, and I believe this trend will continue for some time to come.
Retailers can reduce costs by making better use of space in compact stores, including leases and utilities. Moreover, they enable retailers to reach a broader customer base by entering urban areas and neighborhoods where larger stores would not be feasible. Additionally, smaller stores can provide a more personalized shopping experience, allowing for curated product selections that cater to local preferences and needs.
Different sizes of grocery stores appeal to different shoppers. Store format should be tailored to the community and market. The best retailers look at the markets and optimize the format to fit the need, and many have a variety of formats. Small stores are one option in the arsenal, but not the only one.
Yes, size matters. However, size is less important than positioning in the market & store assortment. Smaller stores with no focus will suffer the same as larger stores lacking a focus or positive point of differentiation. Going forward food retailers need to match the store size to the target market’s needs, focus & assortment. So the question is not big versus small but targeted differentiation.
100% true! Every store must reflect the community within a 1-mile radius, the household size, likely food spend, interest in quality or price and/or service and/or variety/selection.
Reflecting our discussion from a few days ago about ethnic supermarkets. Focus and expertise in product + convenience of location + cost discipline (not necessarily meaning lowest possible price) service as the community defines it = success vs. superstores.
5 minutes in one direction from my house is Target T1, where I do most of my general shopping including grocery. But 5 minutes in the other direction is Tim & Tom’s Speedee Mart, a 3000-sf gem with an exquisite meat counter, strong European import selection, and lots of locally-produced selections. They’re my go-to when trying new recipes or baking or need just a couple things and not get bogged down in a 45-minute trip.
Size your stores to fit your strategy and your value proposition. Trader Joe’s has proven the benefits of a small, hyper-focused assortment. Their stores are packed, and they balk at the old conventional wisdom about what it takes for groceries to be successful. Sprouts and Fresh Thyme provide high-quality food with tailored assortments that allow their customers to find the things they want quickly and efficiently.
Meanwhile on the other of the space spectrum, Costco and Sam’s Club have massive stores that have a very different strategy in mind, and… are also packed.
Consumers in the US have changed their expectations for groceries. The school supermarket was very efficient from an operational standpoint, which allowed them to drop prices and put the small local store out of business. Today, many consumers want a more curated experience and aren’t interested in massive assortments and endless aisles. My advice to grocers, know your neighborhood and who shops there. That should guide you on what format would make the most sense in any given location.
Smaller and smarter. That’s the demand the current market is making of retailers everywhere. The math cannot be argued with. The $$$ being siphoned off into ecomm are not going to return any time soon, so retail footprints have to shrink to be able to operate efficiently. The convenience of buying Knowns online is irresistible. The innate fun of discovery (Explore + Experiment) means that physical store shopping doesn’t have to be the dreary chore it can sometimes turn into.
Smaller and smarter may be the strategy for new stores, but that leaves a whole bunch of existing stores grappling with the new math of less sales per square foot. Which quickly means less inventory per square foot. Which means store renovation. Several of my local grocery stores have taken substantial amount of shelving off the floor. Poof…tons of shelf capacity has evaporated and has been replaced by…open floor. That open floor is now stocked with random and rotating pallet offerings. Sometimes there are several pallets, and sometimes there are only a couple. Some combination of customer demand and market availability. But it’s not a lot of shelf space demanding to be filled with unproductive inventory. Smaller and smarter.
I would love to see more grocery chains build locations in areas of need, not smaller locations in somewhat close or near proximity to same brand locations. A smaller footprint allows for better control of inventory, selection matched to cultural or demographic preferences in meat, fish, veggies, seasonings, specialty fruit and bakery. Building a stronger store penetration in densely populated areas supports high traffic and meets the convenience needs of shoppers.
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Saying that small or larger stores is the future kind of misses the point. What most retailers are realizing is that they need a multiformat approach to address different markets and locations. Within this, the universal is that efficiency has become more of a mantra, and that sometimes means streamlining selections and assortments which, in turn, requires less space.
As for Morrisons, the UK has a very different retail structure in grocery compared to the US. There has long been an emphasis on multiformat with retailers like Tesco and Sainsbury’s having a big advantage in smaller stores with their Express and Local concepts. Morrisons is right to look to grow in this space, but it is somewhat late to the party.
Well-executed small store formats could hurt large grocery store foot traffic.
If you shop online for groceries today, you still visit the store for some categories you prefer to buy in person. The grocery store you visit is still large and makes you walk past the 70-80% of items you already bought online to get to the produce, meat, deli, bakery, dairy, etc. that you want to select in person.
Small format stores with differentiated offerings and a focus on perimeter categories could be THE store to visit for online grocery shoppers – which turn out to be everyone’s top shoppers. In and out quickly in a smaller store. Pick up items they can’t or don’t want to buy online. Not a lot of wasted footsteps. A terrific in-store shopping experience.
Another advantage to smaller grocery formats, which isn’t mentioned above – is customers saving time in their shopping experience. An 18,000 sq ft store with fewer SKU’s, smaller carts, and refined product sets is much easier to navigate quickly, shaving 7-10 minutes over a 32,000 sq ft store. If small format grocery planners can design for roughly 80% of the product selection in larger formats to satisfy the customers, but squeeze in a little more variety, they can realize a healthy higher sales $ sq/ft ROI.
The key is, make sure the brand and experience is just as good, if not better for customers and community. There are dozens or more independents all over our country who are doing very well on this, competing successfully against chains.
The development of new, smaller footprint formats by large retailers such as Macy’s, Kohl’s and Target remains challenging for suppliers and competitors.
There has always been an emphasis on bigger in retailing for much of its history. Across the retail spectrum, national chains were seeking ever larger stores, leading to maga-monster stores up to 500,000 square feet in some cases.
In recent years, however, retailers have decided to incorporate more compact footprints into their physical strategies, and I believe this trend will continue for some time to come.
Retailers can reduce costs by making better use of space in compact stores, including leases and utilities. Moreover, they enable retailers to reach a broader customer base by entering urban areas and neighborhoods where larger stores would not be feasible. Additionally, smaller stores can provide a more personalized shopping experience, allowing for curated product selections that cater to local preferences and needs.
Different sizes of grocery stores appeal to different shoppers. Store format should be tailored to the community and market. The best retailers look at the markets and optimize the format to fit the need, and many have a variety of formats. Small stores are one option in the arsenal, but not the only one.
Yes, size matters. However, size is less important than positioning in the market & store assortment. Smaller stores with no focus will suffer the same as larger stores lacking a focus or positive point of differentiation. Going forward food retailers need to match the store size to the target market’s needs, focus & assortment. So the question is not big versus small but targeted differentiation.
100% true! Every store must reflect the community within a 1-mile radius, the household size, likely food spend, interest in quality or price and/or service and/or variety/selection.
Reflecting our discussion from a few days ago about ethnic supermarkets. Focus and expertise in product + convenience of location + cost discipline (not necessarily meaning lowest possible price) service as the community defines it = success vs. superstores.
5 minutes in one direction from my house is Target T1, where I do most of my general shopping including grocery. But 5 minutes in the other direction is Tim & Tom’s Speedee Mart, a 3000-sf gem with an exquisite meat counter, strong European import selection, and lots of locally-produced selections. They’re my go-to when trying new recipes or baking or need just a couple things and not get bogged down in a 45-minute trip.
Size your stores to fit your strategy and your value proposition. Trader Joe’s has proven the benefits of a small, hyper-focused assortment. Their stores are packed, and they balk at the old conventional wisdom about what it takes for groceries to be successful. Sprouts and Fresh Thyme provide high-quality food with tailored assortments that allow their customers to find the things they want quickly and efficiently.
Meanwhile on the other of the space spectrum, Costco and Sam’s Club have massive stores that have a very different strategy in mind, and… are also packed.
Consumers in the US have changed their expectations for groceries. The school supermarket was very efficient from an operational standpoint, which allowed them to drop prices and put the small local store out of business. Today, many consumers want a more curated experience and aren’t interested in massive assortments and endless aisles. My advice to grocers, know your neighborhood and who shops there. That should guide you on what format would make the most sense in any given location.
Smaller and smarter. That’s the demand the current market is making of retailers everywhere. The math cannot be argued with. The $$$ being siphoned off into ecomm are not going to return any time soon, so retail footprints have to shrink to be able to operate efficiently. The convenience of buying Knowns online is irresistible. The innate fun of discovery (Explore + Experiment) means that physical store shopping doesn’t have to be the dreary chore it can sometimes turn into.
Smaller and smarter may be the strategy for new stores, but that leaves a whole bunch of existing stores grappling with the new math of less sales per square foot. Which quickly means less inventory per square foot. Which means store renovation. Several of my local grocery stores have taken substantial amount of shelving off the floor. Poof…tons of shelf capacity has evaporated and has been replaced by…open floor. That open floor is now stocked with random and rotating pallet offerings. Sometimes there are several pallets, and sometimes there are only a couple. Some combination of customer demand and market availability. But it’s not a lot of shelf space demanding to be filled with unproductive inventory. Smaller and smarter.
I would love to see more grocery chains build locations in areas of need, not smaller locations in somewhat close or near proximity to same brand locations. A smaller footprint allows for better control of inventory, selection matched to cultural or demographic preferences in meat, fish, veggies, seasonings, specialty fruit and bakery. Building a stronger store penetration in densely populated areas supports high traffic and meets the convenience needs of shoppers.