Monday, December 1, 2008

Competitor News: Wal-Mart's Marketside Holds Big, Two-Day Pre-Thanksgiving Holiday Promotion at its Arizona Stores; More, Similar Events to Come

Phoenix, Arizona Metropolitan market region

Wal-Mart's new small-format Marketside grocery and fresh foods markets in the Phoenix, Arizona Metropolitan region cities of Gilbert, Chandler, Mesa and Tempe, held the first major promotional event since the four stores' grand opening events on October 4, when the markets officially opened last month.

Marketside, which operates as a separate division from Wal-Mart, Inc. and has a corporate office in Tempe, Arizona, billed the two-day promotional event, held over the November 15-16 weekend, as its 1rst annual pre-Thanksgiving holiday "Thanksavings Event."

The focus of the two-day promotion at all four Marketside stores was on fresh, quality foods at affordable prices, with an emphasis on the value proposition. The philosophy behind the event being shoppers can buy quality fresh foods and grocery products at the Marketside stores and do so for a reasonable price.

Wal-Mart's Marketside uses the tag line, "Deliciously Affordable" along with its "Marketside" logo. The theme of the promotion then was designed in part to reinforce this positioning, which all promotions should do. The two-day event though was pure soft-sell, full of freebies and light on the selling emphasis.

The two-day weekend promotional event was kicked-off on each day at 7am, with free cups of Peet's Coffee being given to all customers for free.

Beginning at 10am the stores held a turkey coloring book contest for kids, as well as having balloon artists at each store who made Thanksgiving-themed and other balloon creations for the kids. Artists also created washable tattoos (lots of turkey tattoos we are told) for the kids attending the event with their parents. All the children's activities were free.

Not everything was for the kids though. Also beginning at 10am, all four Marketside stores kicked-off an all-day, store-wide food sampling even with a sweet-treat theme, which included free cookies, cakes, pies and other desserts from the markets' in-store fresh bakeries. Each store also featured a professional chef who conducted holiday-themed cooking demonstrations all day on both of the two days until 6pm.

At noon, the Marketside stores held a free Tri-Tip barbecue in the stores' parking lots, featuring the grilled beef and side-dishes prepared by the in-store chefs. The Marketside stores have in-store kitchens where all of the fresh, prepared foods are made.

During the free barbecue, and until 6pm on both weekend nights, the stores featured a live jazz guitarist in the parking lot.

Marketside used the promotional event with all the freebies as a way to introduce new customers to the small-format (15,000 -to- 20,000 square foot) combination basic grocery and fresh and specialty foods stores. The retailer also used the two-day event to promote lots of Thanksgiving holiday food and grocery items in-store with numerous displays and discount priced items.

A Marketside store manager told Fresh & Easy Buzz the free Tri-Tip parking lot barbecue, which the retailer promoted in-store and through the media in advance, drew a large crowd to the store, including many people who said it was their first visit to that particular Marketside unit.

The store manager also said Marketside plans on doing more of these major promotional events throughout next year, particularly around various holidays and similar themes.

The Marketside store manager added that the stores are putting increased emphasis on value, focusing on the message that the stores offer premium quality fresh, prepared foods for affordable prices, as well as basic grocery items competitively priced.

For example, the Marketside stores offered and promoted a value-based prepared Thanksgiving dinner for 4 -to- 5 people which featured a turkey breast, one side-dish, a vegetable and dessert for $20. The stores also offered whole turkeys and more complete full holiday meals, but promoted the more minimal $20 Thanksgiving meal because it wanted to offer a value-based offering in the current recessionary economy, which is hitting the Phoenix Metropolitan region particularly hard.

The Marketside stores also put a focus on offering traditionally-purchased Thanksgiving holiday national brand grocery items like Swanson Chicken Broth, fresh and canned yams, stuffing mix and other key holiday groceries at a discount in the stores in the weeks leading up to Thanksgiving, which was last Thursday.

An employee at the Marketside store in Mesa, Arizona told Fresh & Easy Buzz the kids' events on Saturday and Sunday -- the balloon art, free tattoos and turkey coloring contest -- were popular, as was the Tri-Tip barbecue, adding that a couple customers commented that they hadn't had a free lunch in sometime. Perhaps that goodwill will translate into those "free lunchers" becoming regular customers of the store.

The four Phoenix Metro region Marketside grocery and fresh foods markets opened in early October of this year. In addition to the four stores, Wal-Mart is building a fifth Marketside market in Peoria, Arizona, which also is in the Phoenix region and not far from the existing stores. The Peoria Marketside could open before Christmas. If not it will open in early 2009.

Additionally, as we've reported, Wal-Mart Marketside stores under development in San Diego County in Southern California -- one in downtown San Diego and another in the nearby city of Oceanside. Based on our sources, which have been very good thus far, Wal-Mart has at least an additional three sites in Southern California either locked-in or about to be locked-in for its Marketside markets.

Based on our information, the downtown San Diego and Oceanside Marketside stores will likely open early next year.

Once Wal-Mart has its first 10 Marketside markets open -- the soon to be five in Arizona and five in Southern California -- the retailer plans to look closely at the format and stores' performance to date at that time, make changes if needed, and then go from there with a strategy of either opening additional stores or not.

We do know that Wal-Mart has identified numerous potential Marketside sites -- in Arizona, Southern California, the San Francisco Bay Area in Northern California and elsewhere -- that it can pull the trigger on pretty rapidly if it decides to go forward aggressively (or even moderately) opening additional Marketside small-format grocery and fresh foods markets after it evaluates the first ten next year.

As we've written all along about Wal-Mart's strategy with Marketside, unlike Tesco's with its small-format, convenience-oriented Fresh & Easy grocery and fresh foods markets, it's never been the Bentonville, Arkansas-based retailer's plan to aggressively open hundreds of the small-format "Small-Marts" at a super-rapid pace -- over say a two year period of time. Instead, for Wal-Mart Marketside is a part of the giant retailer's multi-format U.S. food retailing strategy, which includes its Supercenters, Sam's Club stores, Wal-Mart Neighborhood Market supermarkets and other formats in development.

Additionally, the economic recession in the U.S., which we just found out today is (1) an official recession and (2) has been going on since December, 2007, has put the major focus at Wal-Mart Stores, Inc.'s USA division on three things: value, value, value; as customers are flocking to its Supercenters and Sam's Club formats primarily during these bad economic times.

In fact, Wal-Mart is testing a smaller-format Sam's Club, which might even be a non-membership store in its final development, as well as developing another completely new discount food and grocery format store.

As best we can find out thus far, the new discount format store, which would put a major emphasis on selling food and grocery products, is likely somewhere between a Supercenter, Sam's Club and Wal-Mart Neighborhood Market supermarket in terms of format and size. We hope to report additional information about the potentially new format as we learn more.

Meanwhile, as we wrote about last week, Wal-Mart CEO Lee Scott is retiring from his position and will be replaced by Mike Duke, currently the company's head of global operations, at the end of January, 2009. Marketside was developed under Lee Scott's leadership and it will be interesting to see what Duke does with the format once he takes over.

Since he has headed Wal-Mart's international operations for a number of years, Duke is very familiar with small-format stores such as Tesco's Tesco Express in the United Kingdom and Eastern Europe as well as German hard discounters Aldi and Lidl, along with the overall convenience grocery and fresh foods store trend in Europe over the last few years. Therefore he comes to Marketside with an overall understanding of the various varieties of small-format markets both in the U.S. and globally.

But since all along, as we've written about frequently, Wal-Mart's strategy for Marketside has been to get about 10 of the stores up and running, then evaluate the format and store performance, then go from there, it's likely in our analysis Mike Duke will follow that same strategy (full evaluation then decide on a going forward strategy for Marketside) as Wal-Mart's new CEO.

Of course, once that process is completed, his final decision as to if and how to go forward could be a much different one that would have been made by outgoing CEO Lee Scott.

The industry will have to wait for some time for that decision to play out though.

Meanwhile, all indications we have is that Wal-Mart's Marketside division, based out of Tempe, Arizona, plans to continue to focus on its "Deliciously Affordable" position for the Marketside stores, including more promotions similar to the two-day "Thanksavings Event," as well as launching a retail branding and advertising campaign for Marketside, as we reported here.

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