Wednesday, June 1, 2011

Walmart Week 2011 - All Aboard the 'Walmart Express:' First Two Stores Open June 8

The Walmart Express in Gentry, Arkansas [Photo: Justin Wedgworth.]

[Editor's Note: Walmart Stores, Inc. holds its annual meeting, the Superbowl for retail geeks, on Friday. Starting today Fresh & Easy Buzz will be reporting on the mega-event, as well as offering analysis and commentary on the world's largest retailer, which also happens to be the number one seller of food and groceries in America. Below is our first story in the series.]


All aboard the Walmart Express.

The title of this piece and the phrase above have a double meaning this week.

Walmart Express is the name of Walmart Stores, Inc.'s newest U.S. smaller-format (average 15,000 square-foot) convenience-oriented grocery store venture, the first two stores of which are set to open June 8 in the small towns of Gentry (see above) and Prairie Grove, Arkansas, near its corporate headquarters in Bentonville.

It's also "Walmart Week" this week - the annual week long series of events for investors and the media the retailer puts on Sam-Walton-style leading up to its annual meeting, which is on Friday (June 3).

And it's no accident the first two Walmart Express food and grocery markets are set to open a mere five days after the annual meeting on Friday.

Nor for that matter is it a coincidence the first three Walmart Express stores - there's a third unit opening soon in nearby Gravette - happen to be in Arkansas and close to Walmart's Bentonville corporate headquarters.

It's all a part of Walmart's grand plan this time around, which is to hang a big bright lantern on its smaller-format store plans.

This is unlike the last time it launched a small-format chain in the U.S., marketside by Walmart - opening four stores in four metro Phoenix, Arizona cities in August 2008 with little fanfare.

This time Walmart is doing smaller-format up big with Walmart Express, which is a very different format from marketside by Walmart, which as we've reported for some time is history - the four stores remain open for now - but also incorporates a number of the fresh and fresh-prepared foods aspects of those small-format stores, including a significant offering of Walmart's Marketside fresh foods brand, which was developed out of its three-plus year experiment with the namesake food and grocery markets in Arizona.

"Walmart Week" also includes a sneak peek at the two Walmart Express stores opening June 8 in the two small Arkansas towns near Bentonville.

The two stores are about 15,000 square-feet, as will be the size - give or take a couple thousand square-feet in either direction - of all the 'Express' format stores.

In a nutshell, Walmart Express is one-part small neighborhood grocery store, one-part convenience store and another part fresh food market, with a decent sprinkling of general merchandise tossed in. There are also a couple other surprises we'll talk about in a follow up piece.

The Walmart Express stores offer considerably more food and grocery items and general merchandise than Tesco small-format (10,000-12,000 square-foot) Fresh & Easy markets do. They also go head-to-head in the fresh foods category, albeit probably a little less extensively than Fresh & Easy's category positioning. An in-store pharmacy is also included in many of the Walmart Express stores.

Although small-box grocery store economics are extremely challenging - Walmart learned this with its 15,000-16,000 square-foot marketside by Walmart stores, none of which is even doing close to $100,000 in average weekly sales. Just one of the four marketside stores, the unit in Gilbert, is averaging in the $60,000 week range, while the other three marketside units average between $45,000-$50,000 in weekly sales, according to our sources, who are in a direct position to know the sales figures - the once big-box-only (at least in the U.S.) retailer from not-so- big-Bentonville is bound and determined it get it right this time.

Two-pronged smaller-format strategy

Walmart Express is part of the retailers two-pronged smaller-format food and grocery retailing strategy.

The second format is Walmart Market, which in addition to the new name for its existing Walmart Neighborhood Market stores (average 42,000 square-feet), is the name for a bunch of stores the retailer will soon start opening throughout the country, including in California.

The new Walmart Market stores, which will be similar to the existing Walmart Neighborhood Market units except for a few significant twists (see here), average 30,000-60,000 square-feet.

Walmart says it plans to open 30-40 smaller-format stores this year - which means from June -to December - and could have as many as 300-plus Walmart Express and Walmart Market stores open by the end of 2012, although its our analysis that number is overly ambitious.

Like Walmart Express, the mega-retailer plans to locate its new Walmart Market stores in urban rural and selected suburban areas, although the main focus for both smaller formats will be urban, at least in terms of percentage of overall store-count.

Next stop California

California, where Tesco has 126 of its 175 (28 in metro Phoenix, Arizona and 21 in metro Las Vegas) Fresh & Easy Neighborhood Market stores is, as we've been reporting for sometime now, a major focus for Walmart with its two-pronged smaller-format strategy - Walmart Market and Walmart Express.

And, as we've also been reporting for sometime, many of the locations Walmart is locking up in Califonia for both of the smaller-formats are near existing and future Fresh & Easy stores, in Southern and Northern California primarily.

The locations are both urban - metro Sacramento region and San Francisco Bay Area in Northern California; Los Angeles in Southern California, for example - suburban - Southern California's Orange County and elsewhere in the region - and rural, such as in a few small towns near Sacramento and the far southern portion of Southern California, to offer two examples.

Based on our knowledge of both the Walmart Market and Walmart Express formats and now stores - product selection, pricing and other criteria - a store of either format located near a Fresh & Easy fresh food and grocery market is going to put serious pressure on the sales at that existing Fresh & Easy store. And as noted, in California many stores of both of the Walmart smaller formats will eventually be located close to Fresh & Easy Neighborhood Market units.

Walmart is the number one food and grocery retailer in Arizona, based largely on its numerous supercenters in the state, so it's already a key pressure point for Tesco's Fresh & Easy in metro Phoenix - along with Koger's Fry's, Safeway, Albertsons and about five other chains - where Tesco has a mere 28 units.

And in Metro Las Vegas, Nevada, where Tesco has just 21 Fresh & Easy stores, the competition from Walmart and others - Safeway, Kroger, ect. - is so strong Tesco hasn't opened a new Fresh & Easy market in the region for over a year. In fact it closed five stores (along with five in Arizona and one in Southern California) in November 2010.

Fresh competition makes it less easy for Tesco

This leaves California for Tesco, where as we've written about in a serious of stories starting last year and into 2011, the United Kingdom-based retailer is betting the store when it comes to the success of Fresh & Easy Neighborhood Market. With 126 of its 175 Fresh & Easy stores in California, along with California being the near-exclusive focus of new store openings - the 21 Fresh & Easy stores opened so far this year are all in California, for example - it's the make-it-or-break it market region for the retailer.

The competition in the Golden State is already extensive for Tesco, as it tries to stem its losses - $300 million in the last fiscal year which ended February 26, 2011 - and break-even with Fresh & Easy by the end of its 2012/13 fiscal year, which is just 21 months away.

Walmart Express, the first two units of which will be open for business in Arkansas in seven days, and Walmart Market - both California bound, including numerous units in "Fresh & Easy neighborhoods" are going to ratchet up the already heavy competitive pressure on Tesco's Fresh & Easy even further.

And the 15,000 square-foot "Express" stores, with a major fresh and fresh-prepared foods offering combined with a more extensive grocery and general merchandise product selection than the Fresh & Easy format and stores have, will likely in our analysis take a significant number of shoppers from the Fresh & Easy small-format markets in those neighborhoods where the two formats have stores near each other.

If we were Tesco CEO Philip Clarke and his deputy, Fresh & Easy Neighborhood Market CEO Tim Mason, we would have made sure to have bought stock in Walmart Stores' earlier this year.

Then this week - perhaps wearing fake mustaches and using a southern USA accent, along with wearing hats with a "press" card tucked in the brim in order to get into the Walmart Express Arkansas store media tour - they could make their way to Bentonville and attend "Walmart Week," paying special attention (as we are) to every word spoken by Walmart CEO Mike Duke and Walmart U.S. president Bill Simon, as it pertains to the retailer's two-pronged smaller-format store initiative - and particularly as it pertains to California - where Tesco is betting it all with Fresh & Easy, and where Walmart will soon be opening numerous Walmart Express and Walmart Market stores, many eventually coming to a "Fresh & Easy neighborhood.

Related Stories

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

March 9, 2011: Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas

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

January 11, 2011: 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.

October 11, 2010: Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store?

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

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

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

Also see these links - ,  , , , , , , , ,  - for related stories.


Nigel said...

Saw the Express store today. Far superior to a Fresh & Easy in my opinion. Walmart also plans to use its price match in the stores. Fresh foods good. Prices were excellent. Plain box but nice interior.

Anonymous said...

Wallmart's UK subsidiary, ASDA, is also going down the express route. ASDA bought the UK arm of Danish hard-discounter Netto a few months back, which gives them circa 700 small-footprint food locations in the UK (which has a notoriously tough and expensive retail property market).

ASDA is more of a food-focussed, full service supermarket than a traditional Wallmart, although they have a good selection of budget clothing and general merchandise as well.

In essence, ASDA is copying Tesco's great expansion into the Express format of a few years ago; Tesco bought the business of T&S stores (One-Stop), spun out the newsstands and tobacco stores, converted the larger properties to Express, and trades the rump of convenience stores separately as One-Stop. Tesco also bought Adminstore (Europa/Cullens) which gave them about 50 excellent sites in London for the Express format, although these tend to be slightly undersized for Express.

Fresh & Easy Buzz said...

Thanks for the comment anon reader:

We're very familiar with what Walmart's Asda is doing with the former Netto stores in the UK.

The first couple stores have now opened in the UK, in fact.

Some major qualitative differences although vis-a-vis Walmart Express. But yes, small-format none-the-less.