The next frontier for big-box retailers is small-format stores. Walmart and Target last month reiterated their intention to move into that sector of the market, setting up a new battleground for the nation’s two premier discounters.

The next frontier for big-box retailers is small-format stores. Walmart and Target last month reiterated their intention to move into that sector of the market, setting up a new battleground for the nation’s two premier discounters.

Speaking during a conference call with Wall Street analysts to discuss Walmart’s fourth quarter and fiscal 2011 results, Bill Simon, president and chief executive officer of the company’s U.S. operations, noted that the development of a store prototype with a relatively small footprint (reportedly in the 25,000- to 30,000-square-foot range) is ahead of schedule.

"We expect to open our first Walmart Express stores in the second quarter," he said. "This will be a new format for both rural and urban locations."

For its part, Target christened its small-format model CityTarget and, in the process, confirmed where it will be primarily deployed. Although those outlets will be two or more times the size of Walmart Express stores, they will be at least 75,000 square feet smaller than Target’s existing units. "A hallmark of Target is our flexibility in store design, which allows us to bring high-quality products at great value to our urban guests," noted John Griffith, the retailer’s executive vice president of property development, while announcing the company’s plan to open a CityTarget in the landmark building in Chicago designed by Louis Sullivan that once housed department store operator Carson Pirie Scott.

The motivation behind the new prototypes is simple: They are meant to enable Walmart and Target to penetrate markets where either real estate restrictions or community opposition to big-box retailing previously prevented them from doing business. Work on the stores exemplifies the adaptability of companies that have always been committed to staying close to consumers and finding new ways to meet their changing needs.

The exploration of small-format stores will intensify the rivalry between Walmart and Target. Although the companies occupy somewhat different positions in the marketplace, one of the ways each measures its success is by gauging its initiatives in relation to the other.

Competition between them is sure to result in better offerings than would have emerged if either was operating in isolation, and help both of them augment their appeal to convenience-oriented consumers put off by the vast expanses of traditional discount stores or supercenters.