Monday, September 15, 2008

Wal-Mart's Chief Merchandising Officer Reiterates CEO's Words that it's 'Keeping Tabs' On Tesco's Fresh & Easy Today at Bank of America Conference

Fresh & Easy Buzz broke a little news on Friday, September 12 when we reported in this piece, "CEO's Can Say the 'Darndest Things': Wal-Mart CEO Lee Scott Says He Has Faith Tesco Will Succeed With Fresh & Easy; It's A Small-Mart World After All, that Wal-Mart, Inc. CEO Lee Scott spoke out about Tesco's Fresh & Easy Neigborhood Market at the recent Goldman Sachs (investment bank) retail conference in New York City, saying the mega-retailer was keeping close tabs on Fresh & Easy and that he has faith Tesco will ultimately succeed in the U.S. with its small-format, convenience-oriented grocery stores.

It appears CEO Scott has taken the leash off (at least by his lead) his senior executives as far as talking about Tesco's Fresh & Easy is concerned at investment conferences. Previous corporate policy has been not to discuss Tesco's U.S. small store convenience grocery venture.

At an investment conference today sponsored by Bank of America, Wal-Mart chief merchandising officer John Fleming repeated a portion of what Lee Scott said at the Golden Sachs conference, which is that Wal-Mart is keeping a close eye on Tesco's Fresh & Easy stores in Southern California, Nevada and Arizona. The Bank of America conference was broadcast over the Internet.

"We have people in those stores (Tesco's Fresh & Easy) every day, every week," Fleming said at today's Bank of America conference. "We continue to monitor the progress that they make." [Fresh & Easy Buzz is well aware of this fact, having run into two Wal-Mart executives once in a Fresh & Easy store.]

Wal-Mart CEO Scott said essentially the same thing at the recent Goldman Sachs retail conference less than two weeks ago.

Is anybody else seeing the beginning of a coordinated Wal-Mart message just weeks before it opens the first four of its Marketside small-format, convenience-oriented combination basic grocery and fresh foods grocery markets in Mesa, Gilbert, Chandler and Tempe, four cities where Tesco has existing Fresh & Easy stores in the Phoenix, Arizona Metropolitan region? The four Marketside stores are located within 1 -to- 2 miles from Fresh & Easy stores in all four cities.

Wal-Mart's John Fleming also made some new news at today's Bank of America conference. The chief of merchandising said Wal-Mart is studying different store formats beyond its Supercenters that combine a full grocery store with general merchandise.

As we've reported, Wal-Mart has converted at least two vacant big box buildings into what we refer to as hybrid Supercenters. These two stores, both in California's Central Valley, one in Sanger near Fresno and the other in Modesto in the Northern San Joaquin Valley, are "hybrid" because at about 100,000 square feet they are 80,000 square feet smaller than the size of the average Wal-Mart Supercenter, and half the size of Wal-Mart biggest Supercenters, which are 200,000 -to- 230,000 square feet.

The Sanger hybrid Supercenter is open. The Modesto store is set to open this fall. Both of the stores feature all of the departments--both in food, grocery and general merchandise--that a larger Supercenter does. They just are scaled back a bit in size to fit the smaller footprint of the stores.

Additionally, we reported in May that Wal-Mart is converting a number of its Southern California Wal-Mart Discount Store format stores that sell general merchandise and a limited assortment of grocery products but no fresh foods, into Supercenters, which do sell fresh foods and offer a full selection of food and groceries. The retailer is adding from 30,000 -to- 50,000 sqaure feet onto these discount format stores, all of the additional square feet being devoted to food and groceries, including fresh produce, meat, deli and bakery departments.

We've also learned Wal-Mart plans to follow this same Southern California plan selectively with other discount format stores in other parts of the U.S. The retailer also plans to find and convert other vacant big box buildings in the 100,000 -to- 125,000 square foot range, like the Sanger and Modesto Supercenters, into hybrid Supercenters in other parts of the U.S., as well.

Additionally, Wal-Mart has created a brand new Supercenter store prototype. That prototype allows the retailer to build smaller sized Supercenters by merely adjusting certain elements of the prototype design. Sort of a "Supercenter in a box," so to speak.

Our information is this new Supercenter prototype will serve and aid Wal-Mart in its development of the new formats to sell groceries and general merchandise in that merchandising chief John Felming mentioned at today's Bank of America conference.

Wal-Mart has become very agile and nimble at new format development of late, including changing its long held views that its Supercenters can't be adaptable in terms of size and product selection.

As we frequently write in Fresh & Easy Buzz, Wal-Mart is creating a multi-format food and grocery retailing strategic dynamo. It's all part of the retailers plans to be the food and grocery category sales market share leader throughout the United States.

Thus far the Wal-Mart multi-format food and grocery retailing juggernaut includes its Supercenters (now including the first of the smaller hybrids), its Sam's Club stores, Wal-Mart Neighborhood Market, its 40,000 -to- 45,000 square foot stand supermarkets, and now Marketside--which are 15,000 -to- 20,000 square foot food stores, and will feature a limited assortment of discount-priced basic groceries, fresh meat, produce, bakery and deli, a small assortment of natural, organic and specialty foods, wines and beers, and in-store fresh, prepared foods. The stores will feature a kitchen in-store, along with a small eat-in area for about 9 -to- 10 shoppers at a time.

Wal-Mart is far from finished with its new format innovation. Stay tuned. Of course, neither is Tesco, which owns and operates Fresh & Easy Neighborhood Market USA.

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