On September 29, 2008 Fresh & Easy Buzz reported on and wrote about in this piece [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 Stores, Inc.'s latest new retail format development project for the U.S. market, a smaller format (about 20,000 -to- 35,000 square foot) "Modern Bodega" format food and grocery market targeted to U.S. Latino consumers.
Additionally, as we mentioned, Wal-Mart is adding a twist to its Hispanic-focused "Bodega-style" format in development for the U.S. market, which is an attempt to appeal as strongly as possible to younger generations of U.S. Latino consumers who have one foot in their home culture of Mexico, Latin or Central America and the other in U.S. mass culture.
We were one of the first publications to report back in September, 2008 on the new Latino retail format being developed by Wal-Mart's development team.
We can tell you today that the development of the "Modern Bodega" store format continues apace at present at Wal-Mart.
We can also report that among the U.S. target markets being seriously studied by Wal-Mart Stores, Inc. for these new format stores once they come online include Arizona, California and Nevada, the three markets where Tesco operates its current 115 small-format Fresh & Easy Neighborhood Market grocery and fresh foods stores, along with Colorado and New Mexico in the Western U.S.
Additionally, Wal-Mart is studying other markets throughout the U.S. with high percentages of Hispanic consumers for the possible opening of the new Latino-focused format stores as well. Two we are aware of are Texas and Florida. Both states have significant Hispanic-American populations, and just happen to be, along with California and New York, ranked as the top four states in the U.S. in terms of total population.
It shouldn't come as a surprise that Wal-Mart is looking west, since the four Western U.S. states we detailed above have among the highest percentages of Hispanic-American residents in the U.S.
Additionally, each of those four states also have a high percentage of younger (18-45) Latino men and woman, who Wal-Mart also hopes to appeal to with as it plans to incorporate elements into the "modern bodega" format stores it believes will have a special appeal to these younger Hispanic consumers.
Below is what then CEO and now chairman of the Wal-Mart board of directors Lee Scott said about the new "Modern Bodega" retail format development from our piece on September, 29, 2008:
"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.)
Lee Scott stepped down as CEO of Wal-Mart at the end of last month, handing over the CEO title and position to the retail chain's former head of global operations Mike Duke. Duke is as high, and perhaps higher, on the U.S.-version of the "Modern Modega" as former CEO Scott, who remains with the company as board chairman and an advisor.
In fact, our analysis is that Duke is even more keen on the new format development since it takes its inspiration in significant part from what Wal-Mart has been doing in Mexico for many years at its Wal-Mart de Mexico division. As the former head of all of the chain's global operations, Mexico, and the Wal-Mart de Mexico division, was part of Mike Duke's senior executive portfolio.
The other part of the "Modern Bodega" format's inspiration comes from Wal-Mart USA's increasing positioning and emphasis on appealing to Hispanic-American consumers across all of its various retail formats, particularly with its combination food and general merchandise mega-Supercenters.
Since about the mid-1990's, when it first started to seriously focus on Hispanic consumers in the U.S., Wal-Mart has progressively become a solid retailer in the Latino consumer segment in terms of its merchandising and marketing, getting a little bit better each year.
Last year the retailer opened its first U.S. Supercenter focused primarily on Hispanic consumers. That store, in Garland, Texas, is called Wal-Mart's "Hispanic Community" store.
The store is actually located in the very first Supercenter opened by Wal-Mart in 1987 (Wal-Mart didn't even use the name Supercenter then. Rather is called the stores, including the store in Garland, Texas converted to the Hispanic store, Hypermarts. The name was eventually changed to Supercenter on all the former Hypermarts.
Wal-Mart gutted and converted that old Supercenter into the Hispanic-focused store, which sells not only food and groceries targeted to the Latino demographic but also general merchandise. The store is serving as a learning laboratory, along with other Wal-Mart stores, for the team designing the new "modern-style" Bodega format.[You can read more about Wal-Mart's first and currently only "Hispanic Community" store here.]
There are many synergies between what Wal-Mart is doing in Mexico, where it today is that country's number one retailer through its Wal-Mart de Mexico division, and what it can do in the U.S. in terms of Latino-focused merchandising and marketing, both at its existing format stores and in new formats like the Garland, Texas "Hispanic Community" mega-store and the "modern bodega" Hispanic format store in development.
After all, in the case of California, Arizona and Texas, for example, the states have a closer geographical proximity to Mexico than they do most other parts (states) of the U.S. And the Latino cultural influence in such states, and throughout the Western U.S., is huge. Least we not forget, most of the Western U.S. was once Mexico.
Additionally, the smaller-format size (20,000 -to- 35,000 square-feet in its current stage of development) of the "modern Bodega" store in development offers a in-fill strategy for Wal-Mart. In practice this means the retailer can pop the stores into market regions with the appropriate demographics in between the locations of its mega-Supercenters and big box Sam's Club membership warehouse stores.
Further, because of the smaller footprint of the stores Wal-Mart can use then in market regions, think highly dense urban areas, for example where there are strong Latino consumer demographics but not enough physical space (real estate) available to build larger stores. This is the stand-alone rather than in-fill aspect or positive utility of such a format.
Last week Wal-Mart de Mexico, Wal-Mart Stores, Inc.'s Mexico division, announced that two-thirds of all its new store openings this year will consist of a relatively new small-format, Bodega-style store that will help them in-fill markets in key regions across Mexico.
Since Wal-Mart already is the largest retailer in Mexico and operates numerous mega-stores in the country, this in-fill strategy makes good sense to us in terms of the current stage of Wal- Mart de Mexico's development in the nation. Frankly, the strategy also is a way for the retailer to defend its dominance in the country.
It's no mere coincidence that Wal-Mart USA is working on its own version of a U.S. "modern bodega" format store at the same time Wal Mart de Mexico is announcing that all bu a fourth of its new stores in Mexico will be of a new "Bodega-style" format store, which likely will be a variation of the various Bodega formats is already operates in the country.
It's also not a mere coincidence that new Wal-Mart CEO Mike Duke is high on the U.S. "modern bodega" format since he was the commander-in-chief of Wal-Mart's global operations that approved the new Bodega-style" stores set to start opening in Mexico soon.
Add this all together, and its our analysis that Wal-Mart's introduction, which will likely come this year, of its first U.S. "modern bodega" Latino format store is going to be the new retail format news of the year. Stay tuned.
Aaron Chio is a senior analyst at the Retail Net Group consulting firm. His focus at the firm is on the development of new research, insights and growth strategies in Latin America. He's also a regular reader of Fresh & Easy Buzz.
Aaron Chio has just written and published a strategy report on Wal-Mart de Mexico and its recently announced plans to make the new Bodega format stores its major new store opening strategy in Mexico for 2009.
In the paper he also discusses the same theme we mention, which are the wider implications beyond Mexico, including in the U.S., for the Bodega concept and format, which we most often refer to as small-format food and grocery retailing. There are some qualitative differences between the two terms -- but also numerous similarities.
The paper, which Retail Net Group senior analyst Aaron Chio shares with Fresh & Easy Buzz offers some excellent insights about not only what Wal-Mart de Mexico is doing with the Bodega format, but also what others are doing with the concept, along with that wider market implications for variants of the format, which we mentioned above.
You can read the paper, Retail Net Group Strategy Alert No. 24: Format Innovation: Bodega Stores. by clicking here. It's Fresh & Easy Buzz suggested reading for our readers.
Suggested Reading II: From Fresh & Easy Buzz
>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
>September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share
>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
>August 8, 2008: Analysis & Commentary: Wal-Mart's Marketside As Part Of it's Multi-Format Category-Killer Strategy Spells Trouble For Tesco's Fresh & Easy
>April 14, 2008: New Multi-Supercenter and Multi-Format Strategies Are Showing Wal-Mart to Be A More Agile Grocery Retailer in the U.S.
>April 25, 2008: Wal-Mart, Inc. Might have Found A Solution or Two to Much of the Opposition to its Mega-Supercenter Stores in the USA
>June 16, 2008: Wal-Mart and Tesco: The Cross-Atlantic Competition Continues to Heat Up; Almost Hot Enough to Make Uber-Cool British Secret Agent James Bond Flinch
>December 1, 2008: Competitor News: Where is 'Wal-Mart America?' A Demographic Look and Analysis
>November 21, 2008: Breaking News: Wal-Mart Stores, Inc. Names New CEO to Replace Lee Scott; USA Chief Castro-Wright Elevated to Vice Chairman Effective Immediatly
>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
>October 2, 2008: Wal-Mart Marketside Countdown: Two Days to Go Until the Mega-Retailer's First Four 'Small-Marts' Open in the Phoenix, Arizona Region
>September 29, 2008: Wal-Mart Offers its Own 'Peek' Inside it's Small-Format Marketside As Part of A One-Week Countdown to the Stores' Oct. 4 Openings in Arizona
>August 11, 2008: Wal-Mart's Small-Format Marketside Strategy is Currently Neither A 1,500 Store, $10 Billion A Year Mega Plan, Nor A Mere Four Store Test