Why the best things often come in small packages

Retailers with smaller store formats are expanding aggressively, with Dollar General, Family Dollar and Dollar Tree collectively growing their ranks by 1,296 stores in fiscal 2012, while the number of convenience stores in the US also grew by 1,094, says Packaged Facts.

And while dollar stores traditionally sold mostly non-food items, things are changing rapidly, with sales of food and consumable items now accounting for at least 20%, and up to 66%, of their volume.

Meanwhile, the nation's two largest drugstore chains (CVS and Walgreen's) added a further 300 stores, Aldi (pictured above) is adding 80 new stores a year, and Walmart recently announced plans to open 95 to 115 smaller-format locations in the current fiscal year, accounting for 40% of its new store openings.

"The pendulum definitely is swinging back to smaller store formats.​ [And] data from The Food Marketing Institute confirm the ​direction: after peaking at 48,750 square feet in 2006, the median size of U.S. supermarkets has ​decreased annually, to 46,000 square feet in 2010. Until 1998, the median size of supermarkets ​was less than 40,000 square feet."​

Conventional supermarket numbers in decline​

In contrast, between 2011 and 2012, the number of conventional supermarkets declined by 39 units, according to Nielsen TDLinx data.

Its data supports the findings of a recent report by Willard Bishop, which estimates that traditional supermarkets will continue to lose market share as consumers choose to shop other formats for their grocery needs.

According to Willard Bishop, the dollar market share for the following formats will go UP:​

• Fresh format stores (Whole Foods, The Fresh Market, independents etc) will increase from 1.1% in 2012 to 2.1% in 2017
• Limited assortment stores (Aldi, Trader Joe's and Save-A-Lot etc)  will increase from 2.7% to 3.4% 
• Convenience stores with gas to increase from 12.7% to 13.8%
• Supercenters (Super Target, Kroger Marketplace etc) to increase from 17.3% to 18.2%
• Dollar stores (Family General, Dollar Tree, Dollar General etc) to increase from 2.4% to 3.1%
• Wholesale club stores (Costco, Sam's Club) to increase from 8.7% to 9%

While the dollar market share for the following formats will go DOWN:​

• Mass merchandise stores (Walmart, Kmart, Target etc) will decrease from 4.4% in 2012 to 2.7% in 2017
• Convenience stores without gas will decrease from 2.2% to 2.1%
• Traditional supermarkets will decrease from 39.8% to 36.5% 

Meanwhile, it predicts flat growth growth in market share for Super warehouse stores, drug stores and military stores.