Wednesday, March 9, 2011

Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas


Walmart Stores, Inc. said today it will open its first three smaller-format "Walmart Express" stores in its home state of Arkansas, in the small towns of Gentry, Prairie Grove and Gravette.

The first of the three stores, the unit in Gentry (population 3,100), is scheduled to open in May at the earliest but likely no later than July.

"Walmart Express" is a new format for Walmart, as we've previously reported, although it will incorporate elements of the chain's "Walmart Neighborhood Market" format and its "Neighborhood Market by Walmart" 20,000 square-foot prototype store, which has been open for a couple years in Rogers, Arkansas, near the retailer's headquarters in Bentonville.

According to Walmart spokesman Steve Restivo, the world's largest retailer plans to start construction on its first small-box Express format store, in Gentry, on March 16. The store will be about 14,500 square-feet.

Construction on the other two Arkansas "Walmart Express" stores, in Prarie Grove and Gravette, both which are near Gentry, is scheduled to begin around the end of March or early April, according to Walmart. The two stores will be about the same square-footage as the Gentry unit.

Prarie Grove has a population of about 3,113. Gravette's estimated population is 2,300. The population figures are based on U.S. Census Bureau numbers for 2010.

The "Walmart Express" format stores are food and grocery focused, as we've previously reported, and will also carry a selection of general merchandise items.

Similar to a typical neighborhood grocery market of about the same size, the center (core-of-the-store) of the "Walmart Express" stores will offer grocery items on shelving, comprising 10-12 aisles. The perimeter and back of the Express format stores will feature fresh produce, meats, frozen foods and perishables.

Although Walmart didn't confirm it, as we've previously reported, the Express format stores will also offer a selection of the retailer's "marketside" private brand ready-to-eat and ready-to-heat fresh-prepared foods, as part of an in-store deli configuration of some sort.

The stores also will have in-store pharmacies, something we've previously reported would be the case.

Additionally, according to our sources, Walmart will likely use the "Walmart Express" stores as pickup points for its online retail operation, as it's currently doing in selected other format stores. Shoppers would be able to order anything available on and then pick it up at a "Walmart Express" store. Think of the process as similar to what Sears has been doing in and with its small-format "catalogue stores, particularly in rural communities, for decades.

Not all of the "Walmart Express" stores will be in the 15,000 square-foot range. Depending on the location, some will be up to 30,000 square-feet, which is something Walmart U.S. president Bill Simon confirmed recently. Some also will be smaller, such as those in highly dense cities. Simon has said some of the stores could be as small as 5,000 square-feet.

Earlier this year Walmart said it plans to open 30-40 of the small-format "Walmart Express" stores in 2011.

As we've previously reported, Walmart Stores, Inc. has acquired numerous locations in California which it has slated for the smaller stores. We've identified a dozen such locations in Southern and Northern California thus far.

Walmart also plans to open the smaller food and grocery-focused stores in metro Chicago, Washington D.C. and New York City, along with other part of the U.S.

Additionally, based on source information we have, one or more of the existing four small-for "marketside by Walmart" format stores in four metro Phoenix, Arizona cities - Gilbert, Chandler, Mesa and Tempe - will likely be converted to the "Walmart Express" format down the road. The four Arizona "marketside by Walmart" stores range from 15,000-17,000 square-feet

"Walmart Express" is positioned as both an urban and rural (and in some cases suburban) format, according to Walmart.

The fact Walmart has chosen to open the first three units in fairly rural small towns demonstrates the retailer is serious about attempting a rural strategy with the smaller stores. The fact it chose three towns in Arkansas, all which are fairly close to its Bentonville headquarters, is no surprise. All three towns are within 35 miles of Bentonville.

Many observers and analysts are rushing to say how Walmart's latest small-format move will be a killer application for the retailer, alongside its supercenters.

However, many of these same analysts said the same thing when Walmart launched its "Walmart Neighborhood Market" format (the stores average about 42,000 square-feet) in the 1990's, and did so again when Walmart launched "marketside by Walmart" (at first called just "marketside") in 2008.

To date the neighborhood market supermarkets have been at best mediocre performers, evidenced not only by various metrics but also by the fact that in two decades Walmart has opened only about 200 of the 42,000 square-foot supermarkets in the U.S.

"Marketside by Walmart," the retailer's first small-format experiment can basically be judged to be a failure. As we've previously reported, none of the four stores have hit targeted average sales of $75,000-to-$100,000 per-week, which Walmart determined was the absolute minimum needed to break even. Just one of the four stores is averaging over $60,000 (but well under $75,000) a week. The other four are in the $45,000-$55,000 range in average weekly sales. All four stores are losing money. We've seen the numbers.

Walmart isn't opening any additional "marketside by Walmart" stores. It has 50-year leases on the four Arizona units. (47 years remaining.) The most-likely scenario, as noted earlier, is that one or more of the stores will be converted at some point to "Walmart Express" stores. Just one of the stores, the unit in Gilbert, Arizona, is suitable from a demographic perspective to convert to Walmart's Supermercado de Walmart Latino grocery store format. However, the store is really too small from a physical and carrying-capacity aspect to do so, in our analysis.

The upshot: The jury is still out on how well Walmart Stores, Inc. can do smaller formats in the U.S. (it does them well in Mexico, for example,), particularly when the focus of the smaller-format stores is fresh food and groceries.

A number of the "Walmart Express" locations in Southern and Northern California we've identified are near Tesco-owned Fresh & Easy Neighborhood Market stores. From what we've been learning, the Express stores will be much less upscale and much more price-impact-oriented (although not a hard-discount format) than the "marketside by Walmart" format and stores are, as well as offering a much broader selection of basic groceries than "marketside" does. (Think an edited version of the "Neighborhood Market by Walmart" supermarkets' SKU assortment when it comes to product selection.)

The upshot: Things are going to get even more interesting in highly competitive California when the first batch of "Walmart Express" stores start opening. Stay tuned.

Related Stories

February 22, 2011: Walmart Stores, Inc. Announces the Name For its New Smaller-Format Food & Grocery Stores: 'Walmart Express'

February 22, 2011: The Name Game: Satire Columnist Earl Grey Smells A 'Neighborhood-Express' Conspiracy Involving Tesco and Walmart

January 10, 2011 story: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap

January 11, 2011: 'The Insider' - A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City

October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA

October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community

September 20, 2010: About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010

July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store

September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted

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

1 comment:

Anonymous said...

I think the WM Express concept is long overdue and should be a hit. As energy expenses rise, rural customers won't have to trek miles to a SC. Still, some irony in trumpeting a rollout of small stores in small rural markets. Isn't that the strategy that WMT stated with? Nothing new here, just a testament to Sam's genius. It's about time.