Thursday, October 6, 2016

Target's Small Box Format

The sun goes down
The night rolls in
You can feel it starting all over again
The moon comes up
And the music calls
You're getting tired of staring at the same four walls
--Glenn Frey

Big box retailer Target (TGT) is experimenting with smaller box stores that cater to urban markets. Graphic shows difference between typical store square footage and the smaller 'flexible format' footprint. 

One strategic concern is that TGT is moving away from the large scale format that makes it dominant in discount retailing. Smaller stores require different resources for merchandising and different supply chain competencies. For example, the article notes that deliveries to the smaller stores must be more frequent. Stocking choices and facility layout are also likely to vary from location to location. 

Such variation conflicts with the factor often associated with success in discount retail: standardization and efficiency.

A fundamental law of operations management is that volume (efficiency) and variety (catering to individual customer needs) are difficult to do together.

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