Wednesday, November 19, 2008

Competitor News: Wal-Mart Lowering Prices on Holiday Items and Staples; New Formats Coming; Online Grocery Sales; Hundreds of New Stores FY 2009-2010

Eduardo Castro-Wright, CEO of Wal-Mart USA, was feeling his retailing oats a bit yesterday at the Morgan Stanley retail conference in New York City. He also made news at the conference, which is something he seems to enjoy doing despite Wal-Mart's generally tight-lipped culture. Yesterday's Morgan Stanley retail conference was broadcast over the Internet.

"I've read and heard most of the (retail) industry is struggling," Castro-Wright said to a few laughs from attendees during his presentation at yesterday's retail conference.

"But Wal-Mart is seeing positive trends," the head of Wal-Mart Stores, Inc.'s North American operations told analysts and others attending his presentation . "Customers now are shopping more frequently (primarily because of cheaper gasoline) and there hasn't been a significant change in how much they spend during each visit," he said.

Earlier this month Wal-Mart reported a nearly 10% rise in quarterly profits as consumers appear to have flocked to the discounter's stores. This despite the severe economic recession, and despite the fact other combination grocery and general merchandise mass merchandise retailers like Target and Costco reported losses for their respective most recent quarters.

Holiday food and grocery price reductions every week

Castro Wright said Wal-Mart is rolling back prices on many food and grocery items for the Thanksgiving and Christmas holidays, meaning numerous (particularly holiday-related and staple items) grocery prices in all of the retailer's stores beginning this week are even lower overall than they were last week, he said. The rollbacks will remain in place for the Christmas holidays as well, Castro-Wright said.

In addition, every week between now and Christmas Wal-Mart will do additional price rollbacks on food, grocery, general merchandise and holiday-oriented items and products, Castro-Wright said.

Addressing the current cutback in consumer spending across the board in the U.S., including on food and groceries, the Wal-Mart USA CEO said: "The consumer will spend when you have the right prices and offerings. So with Christmas coming, I thought I would give you a little confidence."

More new formats

Eduardo Castro-Wright also talked about Wal-Mart's expansion in the U.S. for the company's 2009 (current) and 2010 fiscal years at yesterday's Morgan Stanley retail conference.

Breaking a little news he said the mega-retailer is currently working on developing a new "high efficiency" retail format that would have higher sales per square foot than some of its current stores. According to our sources this is a smaller version of the Supercenter.

The executive said Wal-Mart also is looking at using smaller-sized stores to enter markets where it does not have a presence today, this includes its new 100,000 square foot smaller Sam's Club prototype store it's been testing, along with its new small-format Marketside fresh foods and grocery stores (four open so far in the Phoenix, Arizona region as we've reported), its 43,000 square foot Wal-Mart Neighborhood Market supermarkets, and its new hybrid Wal-Mart Supercenters, the first of which opened in Modesto, California last week.

Fresh & Easy Buzz has been writing all year that Wal-Mart will use its new small-format Marketside and other new, smaller-format stores to penetrate market regions such as the San Francisco Bay Area in California, as well as urban regions in the state like Los Angeles and San Diego, where it has little opportunity to locate mega-Supercenters because of both geographical limitations and objections by city governments and community groups to the giant stores. [You can search "Wall-Mart" in the Blog's search box for a selection of those posts.]

At about 100,000 square feet that Supercenters, which is in a remodeled vacant retail building, is about 80,000 square feet smaller than the average-size Wal-Mart Supercenter. It's "hybrid" because it's in a formerly vacant building rather than being built from the ground up which is what Wal-Mart historically does with its Supercenters. Despite the smaller size the Modesto hybrid Supercenter has a full supermarket inside, offering a complete assortment of fresh foods and groceries. About 40,000 square feet of the total 100,000 square feet of the store is devoted to food and grocery items. The remaining 60,000 square feet contains general merchandise products just like a larger Supercenter.

Adding food and grocery items to

Castro-Wright didn't address it during the conference yesterday but Fresh & Easy Buzz has noticed Wal-Mart has listed thousands of food, grocery and non-foods items on its Web site, indicating the retailer will soon be offering food and groceries at its online store, along with all of the other products it sells there.

There are no prices on the food and grocery items at as of yet. However we're told by a good source the prices are coming soon. Our source also tells us Wal-Mart will ship the items via UPS and Federal Express, just like it ships all of the general merchandise products it sells via its Web site. sells a huge selection of food, grocery and beverage products on its Web site, and ships them via these same carriers as well, for example.

Add another national format -- actually more of a product line extension to -- to the mega-retailers multi-format food and grocery retailing empire: online grocery retailing. Its cheap -- no stores, cheaper marketing costs and the like -- and its national. More importantly it will provide Wal-Mart with yet another niche or piece of the multi-format puzzle in its all out battle to dominate food and grocery retailing in the U.S., where it now is the national market share leader.

Hundreds of new U.S. stores in FY 2009 and FY 2010

The Wal-Mart USA CEO also said yesterday despite the fact the company has cut back the number of new stores across all formats it plans to open in the U.S. in its 2009 (current) and 2010 fiscal years, it doesn't mean the retailer plans to be merely playing around the edges in terms of new store openings.

In fiscal year 2009 (the current fiscal year) Wal-Mart plans to launch 191 new stores of various formats -- Supercenters, Sam's Club stores, Neighborhood Market supermarkets, Marketside small-format food stores and others -- according to Castro-Wright. That compares to the 218 new units Wal-Mart opened last fiscal year (2008).

In fiscal year 2010, Castro-Wright said Wal-Mart will launch between 142 -to- 157 new units in the U.S.

Considering the size of most of the Wal-Mart format stores, particularly Supercenters and Sam's Club stores, that's still a whole lots of retail square footage for the 2009 and 2010 fiscal years. Additionally, that's a whole lot of new square footage in what many say is a mature retail market, the United States.

Castro-Wright said Wal-Mart would focus the majority of these new stores on what he called 15 "opportunity markets" in the U.S. that the retailer has identified and says account for nearly 40% of total retail sales. Various market regions in California, Nevada and Arizona, the three states where Tesco operates its 102 small-format, convenience-oriented grocery and fresh foods markets, are included among the 15 "opportunity markets" Wal-Mart is putting its major new store development focus on in the 2009 (current) and 2010 fiscal years.

No comments: