A look inside Target's Herald Square store shows why the retailer is thinking small

Target opens small-format store in NYC's midtown
Target opens small-format store in NYC's midtown

If you're one of the 42,000 people that traverse through New York City's 34th Street every day, you've got a new shopping option starting Friday.

Target has taken over a former Foot Locker store, directly across the street from Macy's flagship Herald Square location. It's one of three small format stores opening in and or near New York City, and one of 12 Target stores opening nationwide this week.

The two-story, 43,000-square-foot store — Target's 55th small format store — showcases a key part of the discount retailer's strategy. While other retailers like Macy's and J.C. Penney close stores, Target is leaning into its physical footprint. The big box retailer has plans to open 130 small format stores by 2019.

Target hopes the smaller stores will make it easier for time-pressed shoppers to dart in and out, picking up their purchases. While this Herald Square site won't quite fulfill the "city that never sleeps" slogan, it gets close. It will be open from 7 a.m. to midnight.

The new stores, and remodeling of existing stores, is all part of the retailer's $7 billion, three-year investment strategy to improve its digital and physical store experience and efficiency.

"Our strategy is driving results," CEO Brian Cornell said. "In the first two quarters of the year, our traffic is up, our sales are improving. Because of that we are moving faster and with greater confidence than a few months ago. You will see us accelerate our pace."

Each small format store is quite different, with the merchandise tailored to local shopper demand. But what is consistent is the productivity of the small format stores.

"Easily, sales per square foot [of small format stores], are two-plus-times that of a regular store," said Cornell, speaking to media gathered for a preview of the store.

Here's a peek at what's inside.

Tourist Attractions

Tourists and commuters know 34th Street in Manhattan as a major shopping district. Just inside the doors on either side of the main floor are New York City clothing, hats, and merchandise like coffee mugs and snow globes that cater to tourists. Much of the merchandise is exclusive to Target, and the "Print All Over Me" collection is only available at the Herald Square store.

Targets new small-format store opens in Herald Square, New York City.
Courtney Reagan | CNBC


Apparel is a big focus at this store, as it as in most Target stores, making up around 20 percent of the retailer's sales. The assortment is curated for the smaller space, but there's a decent presence from the retailer's own brands: Goodfellow & Co, A New Day, JoyLab and Cat & Jack.

Cornell said its 15-month-old children's brand Cat & Jack is now a $2.1 billion brand.

Apparel on display at the new Target store in Herald Square.
Courtney Reagan | CNBC

Grab-and-go food

Target is working to improve its food and beverage departments, though Cornell has said it's not his aim for Target to be a traditional grocer.

Like apparel, food makes up about 20 percent of total sales. But the category is an important driver of repeat traffic to the stores. For small format stores located in dense urban areas, grab-and-go food options are increasingly important.

"We continue to make really steady progress on food and beverage," Cornell said Thursday.

The retailer has added executives with expertise in the category and associates that focus on the section in each store. The emphasis is on sourcing quality product, improving the refrigerated supply chain, and ultimately getting the items to stores quicker and more often.

Grab and Go food section at the new Target store in Herald Square.
Courtney Reagan | CNBC


The electronics section is much smaller than at a typical Target store, but you can still buy an Apple watch, smartphones and tablets and other smaller electronics and accessories.

The electronics section at Target's small-format store in Herald Square, New York.
Source: Courtney Reagan, CNBC

Beauty, pharmacy and Harry's

Beauty is an important category for many retailers right now as they try to compete with popular rivals Sephora and Ulta. At Herald Square, a Sephora is right next door.

While most departments are scaled down in small format stores, the beauty department is comparable to a regular-sized Target, said Tony Roman, Target's senior group vice president of stores.

There is also a CVS Pharmacy and a display area for Harry's razors and blades. Harry's and Target have an exclusive partnership so it's the only mass merchant where consumers can buy Harry's products.

Harry's products on display at Target's Herald Square store.
Courtney Reagan | CNBC


There are 16 self-checkouts on the main floor for guests that don't want or need to interact with a store employee, and six regular registers for those that do. There's also an order pickup register for online orders.

The Self Checkout at the new Target store in Herald Square.
Courtney Reagan | CNBC

Same-day delivery

For those who want to buy more than they can carry, Target offers same-day delivery in two-hour windows at the Herald Square store, like it does at the Tribeca store. Based on where you live in Manhattan and what time of day you want it delivered, the cost ranges from $6.95 to $15.95.

The average basket size at the Tribeca store is six-times larger than a typical transaction at that store when shoppers chose same-day delivery, Cornell said.

Same Day Delivery offered at the new Target store in Herald Square.
Courtney Reagan | CNBC