Macy's (NYSE: M) has long been associated with New York City: The department store chain traces its history back to 1858, when it first opened (in a much different form) on the corner of 14th Street and Sixth Avenue.

To this day, it maintains its deep roots in the city with its flagship store in Herald Square, as well as through it's long-standing sponsorship of New York's Thanksgiving Day parade. Now, Target (NYSE: TGT) has decided to invade Macy's turf by leasing a 43,000-square-foot location at 112 W. 34th St., directly across the street from it, The New York Post reported.

The new Target, which is smaller than the chain's usual suburban stores, will have two entrances, according to the paper. The first one, which faces Macy's, will feature fashion as customers walk in, while the second will showcase grab-and-go food as well as a pharmacy.

This is just the latest challenge

A typical Target location has more than 100,000 square feet of space. But as the chain has moved into city environments, it has been testing smaller formats, with merchandise mixes more curated to the needs of the individual neighborhood. By making clothing and fashion a focus at this location, the company is essentially betting that its cheap chic clothes might take some business from Macy's.

In addition to going after New York residents, Target's new location will also take advantage of "the many tourists from around the world" Senior Vice President Mark Schindele told The Post. The company's hoping that tourists who come to window shop at the flagship Macy's may also open up their pocketbooks to buy its generally less-expensive merchandise, or perhaps just a snack.

Target is getting aggressive

Tourists still flock to Macy's in Herald Square, and it's bold of Target to try to benefit from that. This is a case of the chain being more nimble with its smaller-format stores, and being able to deliver a specialized retail experience for the location.

This is still very much a trial concept, but there's reason to believe that the idea of smaller (but still big) city stores will work. In this case, Target is taking that idea a step farther building a neighborhood location that's also a de facto tourist destination (even if tourists were actually looking for Macy's).

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Daniel Kline has no position in any stocks mentioned.

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