Dive Brief:

• Meijer will open six small format locations in urban areas by 2021, Meijer vice president of real estate Mike Kinstle told attendees of an International Council of Shopping Centers conference on urban development, according to report from MLive. Meijer did not immediately return Retail Dive's request for more information.

• Two small format stores are already well in the works — the big box grocer’s 40,000 square-foot Bridge Street Market store on the west side in Grand Rapids, MI opens this summer and another in downtown Detroit opens next year, according to the report. A typical Meijer store is closer to 200,000 square feet.

• Those two, which are proof of concept stores that will yield data for future plans, are in mixed-use developments, but others may be stand-alone stores or housed within shopping centers, Kinstle said. None of the stores will be branded “Meijer," according to the report, and operations will include bringing in local products.

Dive Insight:

The company sees the new smaller-format as a complement to its existing approach, which Kinstle said is thriving.

The idea is to cater to younger, more urban consumers, who aren’t leaving city living behind as quickly or as readily as previous generations, even after they’ve bought a home or started families. It’s a good, if unsurprising, one, though the company will need more than six stores to know the format’s impact, according to retail analyst Nick Egelanian, president of retail development consultants SiteWorks International. He called the urban market opportunity, nationwide, "largely untapped."

"As suburban store growth opportunities continue to decline, particularly in lower-growth Midwest markets, I believe that Meijer being very astute in targeting a largely unserved segment of the larger U.S. retail market," he told Retail Dive in an email. "[But] I would not look for these stores to move the needle for overall company momentum much, unless the pace of development is substantially increased."

Target is well past its own pilot change in making a similar move, with plans for 30 such stores in urban, suburban and college markets by the end of the year and 100 within the next three years; three opened just this week. Walmart, by contrast, has scaled back its own smaller Neighborhood Market grocery stores and shut down its smaller Walmart Express stores, which had been positioned to compete with dollar stores. 

Egelanian sees Walmart’s withdrawal as a function of the retail giant’s inflexibility around differences in pricing and merchandising necessary for smaller stores, rather than the format’s potential. As a result, the retail giant is missing out on the underdeveloped urban market that retailers like Meijer are tapping into, and is "quietly under assault by smaller more nimble operations like Dollar General and Family Dollar, [which are] collectively opening over 2,000 U.S. stores annually, and from highly efficient international concepts, Lidl and Aldi, which are opening hundreds of ultra efficient stores."

Walmart CFO Brett Biggs disputed that notion on Thursday, according to a transcript from Seeking Alpha, saying at the UBS Global Consumer & Retail Conference that they "certainly were prepared for the entry of Lidl, they are a fantastic competitor."