Monday, September 29, 2008

Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store

Wal-Mart, Inc. CEO Lee Scott mentioned a rather interesting future U.S. small-format food and grocery retailing possibility for the mega-retailer at the 15th annual Goldman Sachs Global Retailing Conference held earlier this month in New York City.

The new Wal-Mart small-format possibility isn't Marketside, the retailer's new small-format combination grocery and fresh foods stores, the first four units of which are set to open this Saturday, October 4 in the Phoenix, Arizona Metropolitan market cities of Gilbert, Mesa, Chandler and Tempe. Rather, it's a new and second possible Wal-Mart small-format grocery store format for the U.S.

During his speaking time at the conference, Lee Scott discussed format development at Wal-Mart, Inc., including the 15,000 -to- 20,000 square foot Marketside stores, as well as offering some of his views on Tesco and its Fresh & Easy Neighborhood Market format, venture and stores, as we wrote about here.

What was the most interesting part of the Wal-Mart CEO's talk though was when he said this:

"I think there's lots of opportunity for (new smaller) formats (for Wal-Mart) in the U.S. A store that might remind you of a Bodega store is clearly possible." (A Bodega is a small grocery store typically found in Spanish-speaking neighborhoods.)

Yes, Wal-Mart, Inc. is investigating creating and opening small-format, bodega-like grocery stores in selected U.S. market regions -- and not just small grocery stores geared only to Hispanic shoppers -- but a modern version of the corner grocery store positioned to mass consumers of all ethnic backgrounds.

This wouldn't be a new development for Wal-Mart, at least when it comes to its Wal-Mart- Mexico division, where the retailer has opened a number of these small-format bodegas or grocery stores as part of its multi-format strategy which has made Wal-Mart the number one food and grocery retailer in Mexico today.

Additionally, Wal-Mart also has been demonstrably improving and growing its Hispanic and Latino food and grocery category expertise across all store categories over the past decade. Its added Hispanic products (and improved the merchandising) in all of its existing format stores, and as we reported here on May 7, 2008 opened its first large-format store (in Garland, Texas) positioned specifically to Hispanic consumers.

But when Lee Scott uses the term "bodega" he isn't saying exclusively that these small-format U.S. grocery stores would be markets geared only to Hispanic or Latino consumers. Instead, the small grocery stores could be in some cases geared to Hispanic shoppers, and in other cases small grocery markets positioned to the public or consumer base at large. They would be more mainstream grocery stores, unlike having the more upscale combination fresh, prepared foods and grocery format of Marketside.

The inspiration for the discussion of these small-format grocery stores comes from how well the retailers bodegas are doing in Mexico, along with its decision to develop the Marketside stores in the U.S., combined with Wal-Mart's observations about what we call the small-format food and grocery store international revolution going on throughout the world.

Wal-Mart also is looking at opening small-format stores via its Asda division in the United Kingdom. Small-format food and grocery retailing is hot in that nation, where Tesco, Sainsbury's, the Co-operative group, Marks & Spencer, Waitrose, Aldi, Lidl and Netto all operate various styles and format types of small-format stores.

Here's what Wal-Mart CEO Lee Scott said earlier this month at the Goldman Sachs retail conference about Wal-Mart's current and future expansion, including small-format stores, in the U.S.:

"We (Wal-Mart) are going to take the opportunities to expand that are presenting themselves now because of the weakened economy. With prices on fuel and food going up, we now are having an increased number of communities contacting us and asking us to build a Wal-Mart store in their town or state and some of those are the very towns or states you would have read about historically that are not enchanted by a beautiful Wal-Mart store."

Scott also commented at the conference that Wal-Mart's smaller Supercenters, which we've reported on and written about, are doing even better than the company had hoped they would:

"It turns out our move to a capital efficiency (opening fewer new stores than originally planned and opening numerous smaller Supercenters) focus this past year was absolutely the right thing to do. What we're seeing worldwide is those stores closest to the customers seem to be doing the best. In the U.S., we're finding our 100,000-square-foot supercenter in the metro areas being very successful and the 175,000-square-foot store, versus the 190,000-square-foot store, is doing very well."

The fact the smaller Supercenters -- something Wal-Mart avoided doing for decades before trying it a couple years ago -- are doing better than the retailer imagined they would also is stoking the optimism at corporate headquarters in Bentonville, Arkansas over smaller-format retailing in general, particularly in the food and grocery categories. This includes lots of optimism about Wal-Mart's existing 40,000 -to- 45,000 Neighborhood Market supermarkets, along with the soon to open Marketside stores. And like hope springing eternal, such hope, reinforced by reality, also can be the springboard for smaller (format) thinking.

As a result, we've learned the small-format "bodega" or more basic grocery store concept is being discussed and studied extensively at Wal-Mart corporate headquarters, which was why Lee Scott mentioned it as a trial balloon of sorts at the Goldman Sachs retail conference earlier this month.

In fact, there's a growing "Small-Mart" brain trust at Wal-Mart that is studying the U.S. mini bodega/modern version corner grocery store concept, along with a number of other small-formats for both the U.S. and elsewhere throughout the world where the retailer has divisions.


bryangil said...

Keep in mind, "Bodega" means something different in Mexico (where Wal-Mart runs these) than it does in the USA. A Bodega in Mexico is not a corner shop - it's essentially a small, downscale supercenter ranging in size from 35,000-70,000 square feet. It's more like a Food 4 Less with general merchandise...Comercial Mexicana, Soriana and Walmex all run variations of this format there...and this appears to be what Lee was talking about in that transcript.

Fresh & Easy Buzz said...

Actually in Mexico and Latin America the term "bodega" means much more than your narrow definition.

It includes your definition but also applies to small-format stores.

For example, in Mexico, Wal-Mart de Mexico has experimented with the following size bedega-style formast/stores:

>Large: Bodega Aurrera (41,000 sq.ft) to
mid-size stores

>Mid-size: Mi Bodega (16,000 sq. ft) to the smallest of all

>Small: Bodega Aurrera Express (4,000 sq. ft).

In terms of size, Wal-Mart is looking at about 20,00-35,000 square-feet in terms of its current development process regarding the U.S. "bodega." That of course could grow above 35-k.(That's why it called in development)... We doubt it will shrink below 20-k. We also doubt it will get above 40-50-k on the high end.But of course it could.

Lastly, Scott was making it clear (and we know it from one other source as well) that the retailer does not plan to replicate the Mexico stores in the U.S. They provide inspiration but the U.S. version will be designed to appeal to regional and local markets, as well as to American consumers of Latino descent.

Thanks for you input.