(Oct. 10) Companies that have built their businesses around large discount stores and supercenters continue to build those gargantuan stores at a rapid pace.

But, in the past few years, those companies have ventured into a new retail arena. They have started building smaller niche stores more closely related to the traditional grocery format.

The Bentonville, Ark.-based Wal-Mart Stores Inc., emerged into this new retail arena in 1998 when it opened its first Neighborhood Market store. Now there are more than 30 of them, which range from 42,000 to 55,000 square feet and carry about 28,000 items. In 2000, H.E. Butt Grocery Co., San Antonio, followed suit and opened its first Central Market store, which is patterned after a European market.

And the entrance into this new retail arena appears to be gaining momentum with other companies as well like Costco Wholesale Group. The Issaquah, Wash.-based company announced plans to build a Costco Fresh store.

Costco Fresh will carry gourmet products like dry groceries, perishables, wine and beer, according to the Seattle Times. A 5,000-square-foot garden center, a pharmacy, a café, a photo department and an optical department were included in the plans.

Tim Rose, senior vice president of merchandising, said the Costco Fresh produce department will be between 6,000 and 8,000 square feet and carry about 150 stock-keeping units. He said the company has a general idea about the layout of the store, but officials were still making decisions about item selection.

Rose said the Costco Fresh store would serve as a testing ground for the company’s perishable items.

“It is kind of like a laboratory for us,” Rose said. “We have always done well on the perishables side of the business, and this will help us test new practices and new items.”

Produce represents about 11% of sales in Costco’s wholesale stores, he said.

Construction for the store will take place on an old Kmart site in Bellevue, Wash., close to the company’s headquarters. Costco will tear down the existing Kmart store and build the 105,594-square-foot Costco Fresh store. Costco’s wholesale stores average 148,000 square feet. It is scheduled to open in July or August, Rose said.

The Costco Fresh concept has been around for three years. Rose said Costco had plans to build the smaller gourmet grocery stores in Manhattan, but those plans never became a reality, although the concept for the Manhattan stores is still out there.

“If you can put a store in an inner city and make it like a Balducci’s, that would be very interesting, but it would also be very expensive,” Rose said.