Tiny Target plants bullseye in Dinkytown

Some big box retailers are now wondering what a littler box can do for sales.

Those retailers include Target, which just opened its smallest store Wednesday in the Dinkytown neighborhood of Minneapolis, near the University of Minnesota.

Industry analysts say such downsized stores represent big opportunities to boost sales once they're wedged into urban neighborhoods.

With only about 20,000 square feet of sales space, the Dinkytown TargetExpress store is about one-sixth the size of a typical Target. But it will carry a carefully considered selection of some 16,000 items, from bed sheets and toasters to cell phones and fresh vegetables.

The store's a hit with Linda Koutsky who lives in the neighborhood.

"It's like a full-service Target but smaller. It's got everything and you could whip in and out really fast," she said.

Another curious customer, Brian Rheet, works nearby. He expects the store will be popular with University of Minnesota students.

"When I was at the U, there were small local shops. But nothing where you could get everything going to one place."

Karl Anderson, the manager of the Dinkytown Target, said the store will be a lab for learning how to best serve city-dwellers for whom fast service and convenience are high priorities.

"This is a test for us. We're really excited to learn and grow and figure things out," he said.

It's especially challenging to figure out what to stock. For instance, the store now stocks infant clothes and fish food. Will they stay or be replaced by things that might sell better? Anderson said he'll be watching and listening.

"The biggest trick at this store was how do we still meet everybody's needs but figure out that mix. One of things we're going to do a really job with is talk with the students and community and get feedback. And then we can react quickly to maybe items we don't have or things they'd like to see," Anderson said.

The store will have a much greater proportion than usual of generally less expensive, Target-branded products. And Target will stock items packaged to take up less space.

Planned expansion

Although Target is still in the experimental stage with the store, the retailer is moving ahead with plans for three similar, small outlets next year, one of them in San Francisco and one in Highland Park in St. Paul.

Edward Jones retail analyst Brian Yarbrough calls that a smart move, because "they can go into a lot of smaller markets with these small stores."

Walmart has done that already in the U.S. That retailer has several hundred neighborhood stores of less than 40,000 square feet.

Smaller stores can mean greater profitability for Target, too, retail consultant Howard Davidowitz said. That's because the stores can focus on best-sellers.

"Once you get the assortment edited down, you now have an opportunity for lower investment, faster returns and much higher return on investment," he said.

That's the kind of kick Target needs. Of late, the retailer's sales, profits and customer traffic have been slipping.