Competitor News: Wal-Mart's Marketside On A Hiring Tear; Getting Closer to Opening Small-Format Fresh Food & Grocery Stores in the Phoenix, AZ Region

Wal-Mart, Inc.'s first four small-format (15,000 -to- 20,000 square foot) new combination fresh foods and grocery markets are getting closer to their upcoming summer opening in the Phoenix, Arizona Metropolitan region market.

As we reported previously in Fresh & Easy Buzz, Wal-Mart set up a new website specifically dedicated to Marketside--which also will have its own office in Arizona rather than being run out of corporate headquarters in Bentonville, Arkansas--and placed ads on the website for store managers and assistant managers for the four Phoenix-area stores in Mesa, Chandler, Tempe and Gilbert.

Wal-Mart has now added job postings for full-time store-level Pantry Controllers and full and part-time Meal Specialists for the four Arizona stores set to open this summer.

In addition to advertising for the positions on its website, Fresh & Easy Buzz reader and correspondent Reno Tom has found ads for Wal-Mart Marketside on job websites like College Recruiter.com, which is targeted to college students, as well as more general online job boards like SimplyHired.com and others.

Reprinted below in italics are the job descriptions from the Marketside website for each of those positions. The job descriptions for all positions are the same for all four stores. They also are the same for the full-time and part-time Meal Specialist positions.

Title: Full Time Pantry Controller

Description: Pantry Controllers work with the management team to provide customers what they are looking for every time they visit. Specifically, Pantry Controllers receive and stock merchandise, reconcile invoices and manage the administrative tasks of ordering and replenishment, actively managing overall inventory levels. In our small store format, Pantry Controllers also have the opportunity to be personally involved in engaging customers, modeling outstanding service and coaching Marketside Meal Specialists.

Location: AZ - Gilbert

About the Organization

Our Culture: We offer fresh product, value and convenience in a brand new way, and this is your opportunity to be a part of it!

The Opportunity includes:
- A chance to truly impact the retail industry
- The sense of pride and stability that comes with being a part of the world's largest retailer - Excellent opportunities for advancement

Title: Full Time Meal Specialists

Description: Meal Specialists work as a team to provide excellent customer service across all operational areas of the store. Their job is varied, including cashiering, food preparation and service, merchandising and store presentation. Perhaps the most fun however is the opportunity for this knowledgeable team to engage with customers, sharing cooking tips or providing recommendations for meal solutions.

Location: AZ - Chandler

About the Organization

Our Culture: We offer fresh product, value and convenience in a brand new way, and this is your opportunity to be a part of it!

The Opportunity includes:

- A chance to truly impact the retail industry

- The sense of pride and stability that comes with being a part of the world's largest retailer - Excellent

opportunities for advancement

Click here to view the ads on the Marketside website.

As you can see by the brief but descriptive enough job descriptions for both positions, the Marketside stores are going to be extremely fresh food-centric, as we've been reporting in Fresh & Easy Buzz since last year, when we were one of the first publications to report on the format development by Wal-Mart.

The Pantry Controllers at the Marketside stores, who will be full-time employees, will be combination store-level buyers/merchandisers and supervisors for the Meal Specialists, along with engaging in customer service activities.

The Meal Specialists will be the primary point-of-contact with customers, doing everything from operating the checkout stands and serving fresh, prepared foods to shoppers, to some stocking and merchandising and other customer service and store-related tasks. There will be a mix of full and part-time Meal Specialists in all four Arizona stores.

As we've reported previously, the Marketside stores will prepare fresh foods in-store for both take out and eating in. There will be a kitchen in each store, along with a small eating or dining area which can seat about 9 -to- 10 customers at a time right in the store.

Fresh & Easy Buzz has learned a number of Tesco Fresh & Easy Neighborhood Market store-level employees are applying for the Wal-Mart Marketside positions in Arizona.

The Phoenix Metropolitan region is one of Tesco's three current markets for its small-format (10,000 -to- 13,000 square foot) Fresh & Easy combination basic grocery and fresh food format grocery stores.

Tesco Fresh & Easy Neighborhood Market store-level employees are all part-time except for the store manager. Even the assistant manager, which Fresh & Easy calls a team leader, is part-time in most of the stores. The store-level workers are paid a starting wage of $10 an hour and get a limited health insurance plan as long as they work at least 20 hours per week. Each Fresh & Easy store employees about 20 workers, according to Tesco Fresh & Easy Neighborhood Market.

According to our Wal-Mart source, a number of Tesco Fresh & Easy store-level employees who want to work full-time, which isn't an option at Fresh & Easy, are applying for the full-time Pantry Controller Positions, as well as the full and part-time Meal Specialists positions. Our source says the full and part-time Meal Specialist positions at Marketside start at about $12 an hour, which is $2 an hour more than Tesco's Fresh & Easy is currently paying.

We've also learned Wal-Mart's Marketside has interviewed more than one former and current Tesco Fresh & Easy corporate employee for its Phoenix, Arizona Metropolitan Marketside buying, merchandising and operations corporate office.

As we reported in this piece, "Competitor News: Wal-Mart Executive in Charge of Small-Format 'Marketside' Format Development Leaving to Join UK Bicycle Retailer Halfords Group PLC," on Friday, June 20, David Wild, Wal-Mart's senior vice president of business development and the company executive who's been in charge of the Marketside development from the start, is leaving the company to become the CEO of Halfords Group PLC, the United Kingdom's largest bicycle retailer. Wild, who is a British native and worked for Tesco PLC for 18 years, will start at Halford's on August 4.

Our source says one of the reasons Wild is waiting until August 4 to start at Halfords is because he wants to remain with Wal-Mart until the first Marketside store opens this summer, which means the first store will likely open before August 4.

The source tells Fresh & Easy Buzz that Wild wants to be around when the first Marketside store opens since he's been leading the format development since day one, as well as wanting to still be in the game so he can see the reaction from his former co-workers at Tesco PLC, Fresh & Easy's parent company.

Competitor News: Wal-Mart Executive in Charge of Small-Format 'Marketside' Format Development Leaving to Join UK Bicycle Retailer Halfords Group PLC

David Wild, Wal-Mart, Inc.'s senior vice president of business development and the company executive who's been in charge of its new small-format Marketside grocery and fresh food format stores, is leaving the world's largest retailer to accept a position as CEO of Halfords Group PLC, the United Kingdom's largest retailer of car parts and bicycles, according to a statement just released by the Redditch, England-based company.

Wild was named to the position of senior vice president of business development at Wal-Mart in January, 2007. He held other executive positions with the company prior to that appointment.

Wild, who spent 18 years with UK-based Tesco PLC, will start his CEO duties at Halfords Group PLC on August 4, according to the statement.

In an interesting twist, he succeeds former CEO Ian McLeod, who left the car parts and bicycle retailer to run Australian supermarket chain Coles Group Ltd. as CEO. Halfords Group PLC apparently likes food and grocery retailing CEO's, as its replacing one, Ian McLeod, with another, David Wild. McLeod and Wild aren't strangers either. Both worked for Wal-Mart in Germany before the mega-retailer exited the German market in 2006.

During his 18 years with Tesco PLC, Wild was heavily involved with the retailer's European expansion, including having a hand in the development of its successful Tesco Express small format combination convenience and grocery stores in Europe.

"He (David Wild) brings over 20 years' retailing experience, gained at two world-leading businesses (Tesco and Wal-Mart), and clearly has the skills and ability to move the company forward,'' Halfords Group PLC Chairman Richard Pym said in the statement. "We are confident that David will add tremendous value to Halfords.''

Wal-Mart put David Wild in charge of spearheading its Marketside small-format combination grocery and fresh foods store development project in part because of his extensive experience at Tesco, which has been an innovator in small format food retailing with its Tesco Express stores in the UK and elsewhere in Europe, and now with its Fresh & Easy Neighborhood Market small-format, convenience-oriented grocery markets in the Western USA.

Wild led the Marketside development team, as we first reported in late 2007, in San Francisco where the group first conducted extensive format and consumer research and planned, developed and honed the concept and format. Wal-Mart has an office near San Francisco where it operates aspects of its Wal-Mart.com business.

Wild has also been the corporate cheerleader for Marketside inside Wal-Mart, Inc., and was the one who championed having the stores' prepare fresh foods in-store in kitchens rather than having the fresh, prepared foods made at a central kitchen and shipped to the stores like Tesco is doing with its Fresh & Easy Neighborhood market stores.

Wal-Mart's first four Marketside stores are set to open in the Phoenix, Arizona Metropolitan region this summer, as we've reported in Fresh & Easy Buzz.

Additionally, as we reported here (just scroll down a bit at the link), Wal-Mart is looking for sites for the small-format Marketside stores in both Northern and Southern California. We also reported here that Wal-Mart is likely to be locating a Marketside store in this new development in Reno, Nevada.

Since the development phase for Marketside is complete, and the first four stores are set to open soon, its unclear if Wild's leaving Wal-Mart will be a setback for the retailer and Marketside. At this point, according to our Wal-Mart sources, operations is taking priority over development with Marketside, as the company has set up an office in Phoenix and is currently hiring managers and assistant managers for the four stores, along with getting the stores ready to open.

As the senior vice president of business development, Wild was preparing to move on to some new ventures in his position at Wal-Mart, therefore his timing in terms of leaving and accepting the CEO position at Halfords isn't likely to create a major shakeup with Marketside, although as the new format's head developer and cheerleader he will obviously leave somewhat of a void.

Wild isn't starting at Halfords Group PLC until August 4. And our Wal-Mart sources tell us in part that's because he wants to be around when the first of the Marketside stores opens in Arizona. In other words--and you read it here first--the first Arizona Wal-Mart Marketside grocery and fresh foods store will open before August 4, 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

Andy Bond, the CEO of U.S.-based Wal-Mart, Inc.-owned Asda, the United Kingdom's second-larget supermarket chain after Tesco, doesn't have a license to kill like the famous British secret agent he shares a last name with, writer Ian Fleming's James Bond, Agent 007 of book and movie fame. But this week Bond (Andy) has earned himself a license to brag.

Last week, on June 11, Andy Bond-led Asda was the first UK supermarket chain to take home three "Grocer 33" awards at the annual "The Grocer Gold Awards," created and produced by the UK supermarket industry trade publication The Grocer.

Wal-Mart-owned Asda took three first place "Grocer 33" awards in three categories: Lowest priced grocery chain, best service, and best availability. It was the 11th year in a row in which Asda won first in the lowest prices category. However, no other UK grocery chain has ever won three firsts until now.

Upon excepting all three awards, Andy Bond, Asda CEO and president, said: "This is an outstanding achievement and a very proud moment. These awards are a real testament to the fantastic work and dedication of all the colleagues across the company."

Bond (Andy) is walking tall this week. The very next day after the awards ceremony, June 12, Bond and company at Asda took out double-truck advertisments in the major UK newspapers touting the retailer's trifecta of first place awards at the the "Supermarket Oscars," which were held on the evening of June 11 at the swank Dorchestor Hotel in London.

Additionally, word is that in the modestly decorated halls of Wal-Mart, Inc. headquarters in Bentonville, Arkansas, Andy Bond is on his way to becoming Wal-Mart CEO Lee Scott's favorite Bond. It's known Scott has always enjoyed the James Bond movies, but sources now say he has a growing preference and like for international Wal-Mart division CEO's named Bond, even over highly popular but fictitious secret agents with the same last name.

Here's the thing about the UK food and grocery retailing "Oscar's" though: just like the real Oscars, the Academy Awards held each year in Hollywood USA, the winners of "The Grocer Gold Awards" also are chosen not by the people (consumers) but by a panel of industry experts and members of the staff of The Grocer magazine. In other words, like the Academy Awards, the winners are chosen by members of their own industry.

Except for one award that is. That award, "Britain's Favorite Supermarket," is chosen based on a survey of UK consumers conducted by The Grocer. And the winner is: Tesco. Yes, according to The Grocer, Tesco was chosen as "Britain's Best Supermarket" by a poll of consumers, which when it comes to sales is probably the best award of the night that any food retailer could receive.

Tesco also won a "Grocer 33" award (voted on by the experts) for being the UK's best online retailer.

The overall "Grocer of the Year Award," which honors the best across all categories, went to the UK's fourth-largest (in market share) supermarket chain Morrisons, largely the judges said based on its successful integration of the Safeway chain which it aquired two years ago and Morrison's turning in a sterling performance, becoming the highest market share percentage gainer in the industry last year.

The big loser at the modestly refered to red carpet grocery industry "Oscars" at the Dorchester on June 11 was Sainsbury's, the UK's number three (and a very close number two to Asda) supermarket chain. The panel of judges comprised of The Grocer staffers and food and grocery industry experts didn't give one "Grocer 33" "Oscar" to the food retailer. This is odd in many ways in that Sainsbury's regularly receives top marks across the board from UK consumers. Of course, the Dukes of Hazzard movie was a major box office success in the U.S., but didn't fair too well (zero mention let alone an award) at the Academy Awards in Hollywood that year none-the-less.

The "Grocer Gold Awards," which were started by The Grocer in 2003, and now are sponsored by corporations Sony, Barclay Business Bankcard and Reach, Inc., had a brand new category this year, reflecting the industry's increased emphasis on green or environmental retailing. The winner of the new category, "Green Retailer of the Year," was the UK Co-operative Group, which operates food and grocery stores throughout the UK, with an emphasis on sustainability.
The event also awarded numerous other retailer's "Grocer 33" awards in various other categories, along with offering awards in the wholesaler and manufacturer sectors as well. You can view a complete list of the awards and winners here.

Despite losing the coveted "Best Grocer" award as judged by the UK consumers surveyed to Tesco, Asda CEO Andy Bond has earned at least a week's worth of walking on air and bragging rights. After all, even though the Wal-Mart-owned British supermarket chain is number two in UK market share, (it's share a little over 16%), it's market share remains nearly half that of leader Tesco, which controls about 31% of the UK food and grocery market. Therefore, in "if size matters" terms, Asda acheived quite well, according to the Uk industry experts who voted on the winners.

But Asda, which Wal-Mart acquired not all that long ago, has struggled for years to make its mark on UK food and grocery retailing (as well as other forms of retailing as it's a hard and soft goods retailers as well as grocery retailer like Tesco is) and finally seems to be getting its groove on a bit. In fact, just a few years ago there was serious talk by Wal-Mart of selling Asda. However, Wal-Mart CEO Lee Scott has decided against that, and Wal-Mart now is in the midst of a major expansion program for Asda, which includes opening numerous new stores in the UK, as well as remodeling and upgrading many existing ones.

Additionally, the Tesco vs. Wal-Mart competitive battle has taken on new dimensions with Tesco's launch last November of its first small-format Fresh & Easy Neighborhood Market grocery stores in the Unted States.

Even though he won't publicly say so, Wal-Mart CEO Lee Scott does not want Tesco to become a major player in U.S. food and grocery retailing; even a major regional player. That's why in part Wal-Mart is building even more Supercenters and Neighborhood Markets of its own in California, Nevada and Arizona, the three states where Tesco currently has its 61 combination basic grocery and fresh foods small-format (10,000 -to- 13,000 square feet on average) grocery stores.

Additionally, as we've reported on Fresh & Easy Buzz, Wal-Mart starts opening the first four of its own small-format (15,000 -to 20,000 square feet on average) combination basic grocery and fresh foods Marketside grocery stores in the Phoenix, Arizona Metropolitan region this summer.

The Marketside small-format grocery stores have numerous qualitiative or format differences compared to Fresh & Easy: they will be more upscale; the fresh foods will be prepared in-store in a kitchen, as well as having in-store seating for a limited number of shoppers to eat-in as well as pick up take out; price won't be as big a focus as Tesco is putting on it at Fresh & Easy; along with a few other key differences.

However, make no mistake about it: combined with its huge Supercenters and it's 45,000 square foot Neighborhood Markets, there will be a Wal-Mart effect on Fresh & Easy in markets such as the Phoenix, Arizona Metro region, as there is and will continue to be on all retailers in the market, and elsewhere in the U.S.

Wal-Mart currently has 70 Supercenters which average about 180,000 square feet in Arizona, about 20 of its 45,000 square foot Neighborhood Markets (about the same as Tesco's current Fresh & Easy store count), and of course four initial small-format Marketside stores on the way. Wal-Mart is building and opening more Supercenters and Neighborhood Markets in the state, and will likely open far more than just four Marketside stores down the road.

Meanwhile, Wal-Mart's Lee Scott has a renewed interest in building the Asda chain in the UK, some say in part because Tesco has come to Wal-Mart country--the U.S. But of course that's secondary. Primary is simply Wal-Mart's imparitive to be the biggest retailer everywhere, which is the same imparitive which got it to be the world's largest corporation and retailer today.

Scott also reportedly has lots of confidence in Andy Bond, which we are told has been reinforced by winning the trifectra of awards at the June 11 supermarket Oscars in the UK. Of course Wal-Mart's Scott is a numbers and sales man. Industry awards are fine, but for about a day to Scott. But they also indicate forward progress for Asda as judged by vendors and other peers in UK food and grocery circles, which Scott likes to hear, since vendors are a big part of the Wal-Mart international value proposition.

So, this week Andy Bond, unlike his namesake James, gets to step out rather than spend his time out in the cold like Agent 007 did most of the time. Of course Bond (James) had many a lovely companions to spend his spy time out in the cold with, so please to feel sorry for the secret agent.

Awards from ones peers are nice. Just ask the Hollywood stars who win Oscars, despite the films they win the statues for having tanked at the box office in many cases.

But like in Hollywood, the food and grocery retailing business is all about bottom line numbers in the final analysis. Big box office means strong sales and profits in the retail grocery business. Major growth means increased market share.

Wal-Mart-owned Asda has a long ways to go before it will make inroads on market share leader Tesco in the UK. And with UK "Grocer of the Year" Morrisons on a market share roll, Asda, and Bond's (Andy) task is even more formidable. Not to mention Sainsbury's, which dispite scoring goose eggs at the awards ceremony from the industry experts, has been turning in some pretty good performance of it's own to date. In fact, if Asda doesn't play hardball in the James Bond style, it might find Sainsbury's overtaking the Wal-Mart-owned retailer for the number two market share spot in UK food and grocery retailing.

Like the spy world inhabited by James Bond as depicted by author Ian Flemming, namesake Andy Bond lives and works in a near-equal world of intrigue: food and grocery retailing.

There are spys, counter spys, friends and foes alike. The stakes aren't as high as giving ones life--after all Andy Bond has yet been given his license to kill by the Queen--but from a a business standpoint they couldn't be higher. Each additional share of market represents big bucks. And, after all, big bucks--in the form of sales, profits and market share--are the industry's primary scorecards. And like James Bond's famous boss Q., Wal-Mart CEO Lee Scott can be a tough task master.

At home and abroad respectively, Wal-Mart and Tesco are keeping their cool in a way that would make the unflappable James Bond proud. But make no mistake about it, the competition is just heating up in such a way that it could even make the normally super-cool Agent 007 flinch.

While at home in the UK Tesco remains "Goldfinger" with the midas touch, the retailer has heavyweights in the form of Wal-Mart-owned Asda and fellow British supermarket giants Sainsbury's and Morrisons nipping at its market share heels, not to mention that German panzer division, in the form of German discount grocers Aldi and Lidl, both which are gaining significant market share during these tough economic times in the UK.

In the U.S., Wal-Mart's three format press in the Arizona market--Supercenters, Neighborhood Markets and soon small-format Marketside--will test Tesco's fledgling Fresh & Easy stores big time.

None-the-less, Tesco is pressing on and will start opening many more Fresh & Easy stores in Arizona, Southern California and Nevada beginning on July 2, after taking a three month new store opening pause. Further, anybody who rules Tesco out in the U.S. does so potentially at their own peril, even Wal-Mart when it comes to the long term.

Not only is the cross-Atlantic competition heating up, it's nearly as exciting as an Ian Fleming James Bond thriller. Stay tuned.

Is A Wal-Mart 'Marketside' Small-Format Grocery and Fresh Foods Store Coming to Reno, Nevada?

Fresh & Easy Buzz roving correspondent Reno Tom reports he's been told by a Wal-Mart Supercenter employee that the mega-retailer plans to locate one of its new small-format Marketside grocery and fresh foods stores at Plumb Lane and Virginia Street in Reno, Nevada.

When he isn't traveling the U.S., Reno Tom's home base is Reno. He reports that yesterday while he was shopping in his local Wal-Mart Supercenter, he was having a conversation with a store employee he knows. Reno Tom was telling the Wal-Mart employee about the new Whole Foods Market coming to town, and they were discussing it along with other related food and grocery store news and information.

While discussing the new Whole Foods Market natural foods superstore soon to open in the city, and the effect if any it might have on the Wal-Mart Supercenter, Reno Tom says the Wal-Mart employee told him the company plans to open a Marketside grocery and fresh foods store at the location of the city's old Park Lane Mall at Plumb Lane and Virginia Street. The mall has recently been demolished to make way for a brand new mixed-use development.

The new mixed-use development, where the Wal-Mart employee told roving correspondent Reno Tom the Marketside store will go, is to include retail shops, residential housing and public venues in a new-urbanism-style village design.

The area around the old mall and new development in Reno, which has a population of about 200,000, is undergoing much change and gentrification. New urban residential housing including lofts and condominiums are going up nearby and a new public market, perhaps similar to the famous Pike's Place Public Market in Seattle, Washington, is being planned for nearby.

Locating a Marketside small-format grocery and fresh foods store in such a development would make sense, since as we reported here a part of Wal-Mart's strategy with the food stores is an urban one. Over time there is going to be lots of foot traffic in this Reno neighborhood, including thousands of new residents.

Wal-Mart currently has eight stores in the Reno Metropolitan region, which has a population of about 410,000, according to 2007 U.S. Census Bureau statistics.

Seven of the stores are Supercenters ,and one store is a Wal-Mart discount store, which sells a limited assortment of dry and perishable food and grocery items (no fresh produce or meats though) and lots of non-foods like cleaning products and other household items, in addition to general merchandise, hard goods and soft goods

Three of the seven Supercenters (as well as the Wal-Mart discount format store) are in Reno; two Supercenters are in Carson City, one is in next door Sparks, and one is in Fernley.

As we reported here on May 22, Tesco plans to open its first small-format, convenience-oriented basic grocery and fresh foods Fresh & Easy grocery store in northern Nevada in the Silver State shopping center center at Prater Way and McCarren Blvd. in Sparks, which is next door to Reno.

Tesco also is in the process of negotiating for other Fresh & Easy sites in Reno and the Metropolitan region. For example, according to Karen Melby of City Works Department, Tesco Fresh & Easy representatives are interested in at Sparks Blvd. and Los Altos in an area called Spanish Springs in Sparks.

Fresh & Easy Buzz Reno area sources also tell us other potential locations include South Reno, other parts of Reno, Carson City and Fernley. Additionally, they've mentioned Incline Village in Lake Tahoe as a location Tesco Fresh & Easy representatives are looking at.

Meanwhile, if Wal-Mart locates a Marketside store in Reno, this will be the first outside of the four set to open this summer in the Phoenix, Arizona Metropolitan region.

As we reported here, Wal-Mart is looking in Southern and Northern California for sites for its small-format grocery and fresh foods Marketside stores.

The Sacramento Metropolitan region and the Reno Metro region are considered generally as part of the same food and grocery market region in terms of market share numbers and advertising buys. Therefore, locating one or more Marketside stores fits in well with the strategy to open stores in Northern California (and Southern), as well as in Arizona, for Wal-Mart.

After all, this is part of the same logic and strategy Tesco is using by opening 19 stores in the Sacramento market, which will start opening early next year, then looking for locations in the Reno Metro region market.

Wal-Mart also has eight Supercenters in northern Nevada, which is a pretty high concentration based on the region's population.

By eventually opening say three -to- four small-format Marketside stores in the Reno Metropolitan area, Wal-Mart could focus on that "fill-in" shopper strategy Wal-Mart USA chief Eduardo Castro-Wright discussed in this piece we published earlier today, while preventing any cannabalization of the Supercenters because unlike Tesco's strategy of being grocery stores for all consumers (supermarkets in the pure definition of the term), Wal-Mart's focus with Marketside is more narrow as we described here.

Wal-Mart USA Chief Eduardo Castro-Wright Confirms Fresh & Easy Buzz Reportage on 'Marketside,' Adds Information From the WM Corporate Side

Eduardo Castro-Wright, chief executive of Wal-Mart, Inc.'s United States operations, confirmed a number of developments we've been reporting on about the mega-retailer's new small-format Marketside grocery stores, the first four which are set to open this summer in Arizona's Phoenix Metropolitan region--which is one of Tesco's current three key market areas, along with Southern California and the Las Vegas, Nevada Metropolitan region--today at the company's annual shareholder's meeting in Arkansas. Fresh & Easy Buzz had a correspondent at the shareholders meeting and at a press conference Castro-Wright participated in afterwards.

Castro-Wright said Wal-Mart's retail positioning in the Arizona market with the 15,000 square foot Marketside stores is primarily as a grocery shopping "fill-in" venue, along with being a store where shoppers can buy fresh, prepared foods for tonight's dinner and tomorrow's lunch.

Wal-Mart's theory behind Marketside for the Arizona market is that shoppers might shop at a Wal-Mart Supercenter once a month, shop its 45,000 square foot Neighborhood Markets supermarkets say every two weeks, and use Marketside--which will offer a limited assortment of grocery products and have a focus on fresh foods--for fill-in shopping, as well as for what will be its extensive selection of fresh, prepared foods made right in the store.

Wal-Mart currently has about 70 Supercenters in Arizona, ranging in size from about 170,000 square feet to 200,000 square feet, and is opening and building more. The mega-retailer also has about 20 of its 45,000 square foot Neighborhood Markets in the state, the majority of which are in the Phoenix area, with three more to be opened this year.

Additionally, the brawny big box retailer (and now small box too) from Bentonville (Arkansas)has a number of its discount format stores, which sell a limited assortment of grocery items including perishables in them, in the state. However, it isn't building more of these stores in Arizona. Rather, the focus is on more new Supercenters, Neighborhood Markets and now the Marketside stores. That's a pretty strong three-format food retailing strategy in a market.

As we've reported, the Marketside stores also will have an in-store seating area next to the kitchen where the foods will be prepared, with room for about 10 people at a time, where customers can sit and eat-in. Take out will be the primary focus, and potential sales generator, for the stores' fresh, prepared foods offerings though.

This fill-in shopping strategy might not be the case in other market regions however. For example, in parts of Southern California and the San Francisco Bay Area (where we reported here Wal-Mart is scouting sites for Marketside stores) which are areas Wal-Mart has few Supercenters or Neighborhood Markets, the small-format Marketside stores could take on more of a primary and secondary shopping positioning focus, especially in higher density urban locations.

Castro-Wright wouldn't confirm or deny a question asked by the Fresh & Easy Buzz correspondent, which was: "Has Wal-Mart found any locations for the Marketside stores yet in Southern California or the San Francisco Bay Area that it's ready to announce?" The Wal-Mart chief said no; but our correspondent said he smiled when he gave the two word answer.

Castro-Wright said today Wal-Mart doesn't talk much about its Marketside stores. He did confirm those first four stores will be opening this summer in the Phoenix Metro market, as we reported here though.

The Wal-Mart USA head also confirmed the Marketside stores will offer a limited assortment of grocery items, even compared to its 45,000 square foot Neighborhood Market stores, and will put a major focus on fresh foods--produce, meats, perishables and especially the in-store fresh, prepared foods.

Castro-Wright offered the retailer's positioning for Marketside in a sentence: "The neighborhood market for busy people with a taste for fresh and delicious food."

"The intent is to capture more of the quick trip customers," he added.

This is a much different strategy than Tesco has with its Fresh & Easy grocery stores, which the retailer is positioning as primary, and to a limited extent secondary, neighborhood grocery stores for "everybody." In other words, while Wal-Mart seems intend to be happy if it can garner the "quick trip" and "fill-in" business, Tesco's strategy as we often discuss is to get as much of a shopper's food and grocery dollar as it can in its Fresh & Easy grocery stores.

Of course, Wal-Mart has a multi-format strategy--food and general merchandise Supercenters which average about 180,000 square feet, Neighborhood Markets of about 45,000 square feet, Wal-Mart discount stores which sell lots of food and grocery products in them, ranging from 75,000 -to- 130,000 square feet, and now Marketside--while Tesco currently has a single-format food retailing strategy in the Western U.S.

Wal-Mart's Marketside stores though are intentionally striking at the heart of Tesco's two-pronged merchandising focus--a limited assortment of store brand and national brand basic groceries at everyday low prices, combined with fresh, prepared foods (and other fresh foods) produced at a central kitchen and shipped to the stores.

Marketside's fresh, prepared foods focus--which differs from Fresh & Easy's in that the foods will be prepared right in the store--could eat into the fresh, prepared foods focus of Tesco's, which is central to the Fresh & Easy stores positioning and merchandising. It's sort of a half grocery store, half fresh foods market, to put it simply.

We expect Wal-Mart to make a very big deal about the fact Marketside's fresh, prepared foods will be made in-store rather than at a central kitchen and shipped to the stores like is the case with Tesco's Fresh & Easy. One isn't superior to the other merely on the face of it though. For example, if Marketside's in-store fresh, prepared foods don't taste as good as Fresh & Easy's, the point of differentiation won't exist. Further, since Wal-Mart isn't known as a fresh foods expert retailer--they have brought some in for Marketside though--it will be interesting to assess the quality of the in-store prepared foods when the first Marketside store opens in Arizona.

However, American consumers generally show a preference for fresh, prepared foods made in-store vs. those prepared at a central facility and shipped to the stores, even if shipped daily. Although taste and quality--including no or few artificial preservatives, additives, colorings and the like--are what's key.

You can see this "super fresh" positioning for Marketside in that one sentence positioning statement though. And, of course, Wal-Mart is attempting to make that same statement in the Marketside logo, with the FRESH produce vertically stacked next to the text.

Where Tesco's Fresh & Easy is more related to Trader Joe's in terms of its design, look and feel--both are fairly no frills, both use warehouse type shelves, F&E is modeling itself a bit on TJ's quirky look and feel--and to a certain extent merchandising--TJ's doesn't sell basic grocery items like Fresh & Easy does, nor are fresh, prepared foods a central part of its merchandising, but there are many similarities in the store brand and specialty focuses--we believe Marketside will be more kin to Safeway Stores, Inc.'s new "The Market" format, the first store of which opened on May 15 in Long Beach, in Southern California. [You can read about that store, "the Market by Vons" here.]

Safeway's "The Market" doesn't prepare most of its fresh, prepared foods in-store though. Rather, the fresh entrees and side dishes--which were developed at Safeway-owned Citron restaurant in Redwood City in the San Francisco Bay Area--are prepared at a central facility like Fresh & Easy's. The first (and currently only) store though, "the Market by Vons" in Long Beach, does have a wood burning hearth in it, which is used to bake fresh breads, pizzas and a few other prepared foods items in-store. We're told this will be a feature in all of the retailer's small-format "The Market" stores.

If anybody doubts there's a small-format grocery store revolution brewing in the U.S., they haven't talked to Tesco (world's third-largest retailer), Wal-Mart (world's and U.S.'s largest retailer) or Safeway (number three supermarket chain in the U.S.).

For that matter, they also haven't talked with SuperValu, the second-largest supermarket chain in the U.S. after Kroger Co. SuperValu has about 1,500 of its small-format (about 15,000 square feet) discount Sav-A-Lot grocery stores already in the U.S., and is opening more, including franchising more of them to independent operators.

There's also Germany's Aldi, which is one of the fastest-growing grocers in the U.S. Aldi USA currently has about 900 of its small-format (13,000 -to- 15,000 square feet) Aldi discount grocery stores in the U.S. and is building nearly 100 of the little price-impact grocery stores in America each year for the next five years. Members of the family who own Aldi International based in Germany also own Trader Joe's, which like Tesco's Fresh & Easy USA is based in Southern California.

Although Wal-Mart's Castro Wright wouldn't speak to it at the shareholders meeting or press conference after, Fresh & Easy Buzz has it on pretty good authority "source-wise" that Marketside is a national strategy for the mega-retailer rather than merely a limited store test in one market--the Phoenix Metropolitan region.

This information is backed up by various commercial real estate agents we've talked with who have told us about Wal-Mart's looking for Marketside store sites in Southern California, Northern California, Nevada, Utah, the Pacific Northwest and elsewhere.

We are unable to confirm it yet, but we have two sources telling us the first of the four Phoenix Metro region Marketside stores could open as early as shortly before the July 4 Independence Day holiday. We continue to try to further confirm that information.

Wal-Mart isn't announcing any opening dates yet, as can be expected since the retailer has been very quiet, like Castro-Wright himself admitted at today's shareholders' meeting--about Marketside. Officially of course. However, that soon will be a moot point as summer is upon us.

Wal-Mart Looking For Sites in California For it's Small-Format 'Marketside' Grocery Stores

As we reported late last year and have followed up on throughout this year, Wal-Mart plans to open an initial four of its small-format (about 15,000 square foot) Marketside grocery markets this summer in the Arizona cities of Mesa, Gilbert, Chandler and Tempe. Tesco Fresh & Easy stores are located nearby the Wal-Mart Marketside locations in each of these cities.

As we previously reported, the small-format Marketside stores will be similar to Fresh & Easy grocery markets in that they will offer a limited assortment of discount-priced food and grocery items and fresh foods like produce, meats and other perishables.

In the category of fresh, prepared foods however, Marketside will differ from Fresh & Easy in that the Wal-Mart-owned small-format grocery stores will have kitchens in-store, along with small eating counters, where all of the fresh, prepared foods will be prepared right in the stores. Fresh & Easy's fresh, prepared foods are produced in a kitchen at the Southern California distribution center and delivered to the stores.

The Marketside kitchens will prepare foods for customers to "eat-in" at seating that holds about 9-10 customers at a time, but more importantly for take-out, which will be the majority of the stores' business in terms of the in-store kitchen created prepared foods.

The four Arizona stores could open as early as next month, but no later than August, Fresh & Easy Buzz has learned. Wal-Mart is currently hiring for store managers and assistant managers on this website: http://www.workformarketside.com/.

Wal-Mart looking to California for Marketside

Fresh & Easy Buzz also has learned Wal-Mart executives have been seriously looking for sites in both Southern and Northern California for the small-format Marketside stores, which will put a major emphasis on fresh, quality foods, along with offering new store branded food and grocery products in them.

As we've reported before, Wal-Mart has trademarked the brand names "City Thyme" and "Field and Vine." We expect to see food and grocery products under these store brands in the Marketside stores, along with perhaps another.

Our sources, who've been very good thus far, tell Fresh & Easy Buzz Wal-Mart is looking at both urban and suburban locations in Southern and Northern California for the Marketside stores.

Wal-Mart has had a difficult time getting approval for its Supercenters in California because of widespread opposition--and even laws prohibiting them--from counties, cities and community groups.

The retailer believes it will have no such problems with the 15,000 square foot Marketside stores, as they are the opposite in every way to the huge Supercenters, thereby making the arguments if they do come up anti Wal-Mart rather than anti-Supercenter, which is an argument the retailer thinks it can win.

According to our sources, Wal-Mart is particularly interested in using the Marketside format as an urban strategy in California, in big, dense cities like San Francisco, San Jose, Los Angeles and a few others.

Wal-Mart has little or no presence in food and grocery retailing in places like the 7-million resident-strong San Francisco Bay Area, and wants to use Marketside to create that presence. The same is the case in Los Angeles, as well as in San Jose and San Diego, since between space (real estate)limitations and political opposition it's nearly impossible for Wal-Mart to locate Supercenters in these cities, along with many others in California.

The retailer also sees Marketside as part of a multi-format strategy in California. For example, in the Golden State Wal-Mart has focused primarily on its discount store and Supercenter formats. However, having so many cities reject Supercenter permit applications has actually helped make Wal-Mart more creative from a multi-format perspective.

For example, it put a smaller-version (about 100,000 square feet compared to the average 180,000 square feet a Supercenter is) in a renovated big box building in Sanger, a suburb of Fresno last year. Wal-Mart is in the process of renovating a building of the same size in Modesto, California currently. It will be the retailer's second shrunken Supercenter in the state when it opens at the end of this year or early in 2009.

The retailer faced strong opposition in the past when it tried to build 200,000 square foot brand new Supercenters in both cities. However, since all that's required to buy and renovate and old buildings like the two mentioned above is to get the proper permits, neither Sanger or Modesto could prohibit Wal-Mart from renovating the empty buildings like they can in the case of new construction.

Wal-Mart also is adding square footage on to a number of its discount format stores in Southern California. The additions--of about 25,000 -to- 50,000 square feet--will all be used for food and grocery products, turning these stores into hybrid Wal-Mart Supercenters similar to the Sanger and Modesto stores. Rather than ranging from 180,000 -to- 200,00 square feet like the typical Supercenter, these Southern California hybrids will range from about 100,000 -to- 120,000 square feet.

These strategies still don't solve all of Wal-Mart's problems in California. In fact, for whatever reasons, the retailer hasn't proposed building very many of its average 45,000 square foot Wal-Mart Neighborhood Markets in the state as well historically.

That's changing as well. Along with the Supercenter hybrid strategy, and the new Marketside format, Wal-Mart plans to open more of the mid-range "Neighborhood Market " stores in California as well.

But Marketside isn't just a alternative, smaller format strategy for the retailer. It's also entirely new positioning--fresh, prepared and specialty foods and groceries combined with basic grocery items at discount prices. Sounds a little like Tesco's Fresh & Easy, doesn't it.

The format is after new customers--fresh food and quality food shoppers- for example--as well as new markets.

Based on our information, the Marketside stores' design will be more upscale than Fresh & Easy's, but they won't be fancy food shops. Wal-Mart wants an upscale look and feel, but also for the format's discount price and value messages to be reflected in the design.

In California, as in Arizona, Wal-Mart hopes the stores will get them more of the higher-income shopper dollar. That's another reason the San Francisco Bay Area looks so good to Wal-Mart. The region has about the highest average income of anywhere in the Golden State; and its residents spend a higher percentage of their income on food and related products overall than people who live in the other regions of California.

Wal-Mart's Marketside development team spent lots of time in the Bay Area while they were creating the format. This included studying the regions grocers--from Safeway to upscale single store independents with superior fresh, prepared foods' operations.

This time in the Bay Area also gave the team time to scout out various locations where they believe the Marketside stores will do well. This includes in the city of San Francisco proper.

A Bay Area commercial real estate agent told us late last year, and again earlier this year, that Wal-Mart representatives have talked to landlords and developers about various potential sites for the Marketside stores in the Bay Area.

We've been told the same from a Southern California source. Both sources said they have no idea if Wal-Mart has signed any leases for sites in California, but describe the conversations they are aware of as "serious" ones, rather than mere inquiries.

Tesco plans to start opening 18 Fresh & Easy stores in the Bay Area early next year, along with 19 in the Sacramento region. Safeway also will likely open up to four of its new "The Market" small format grocery stores in the Bay Area beginning this summer. As we reported Thursday, the first store in the format, the "Market by Vons," opened Thursday in Long Beach in Southern California.

Regarding Southern California, that's Tesco Fresh & Easy's home turf and number one target market. The retailer's corporate headquarters and distribution center is in Riverside County in the region, and about half of its current 61 small-format grocery stores are located in Southern California, with Arizona next and Nevada third in terms of store counts.

Southern California also is home to the original small-format success story, Trader Joe's. Trader Joe's was founded in Southern California and its corporate headquarters--along with operating numerous stores--remains in the region, even though the chain is owned by German family members who also are majority owners of Aldi International, based in Germany.

With Safeway, which operates hundreds of supermarkets in Southern California under the Vons and Vons Pavillions banners, dipping its small-format food retailing toes in the water in Southern California with its "The Market" format stores, and the high probability of Wal-Mart coming to the Golden State in the not so distant future with Marketside--as well as Trader Joe's opening more stores in the region--Tesco will find itself with some heavy small-format food and grocery retailing competition in the market.

Safeway also operates a large supermarket division in Arizona, and it's likely we will see "Market by Safeway" stores open there as well. Safeway is pursuing two strategies with its small-format operation: putting the stores in converted supermarkets deemed too small to convert to its Lifestyle format, which it is converting all of its U.S. supermarkets to, and building new stores from the ground-up.

We believe the new stores, however, will come later; that the focus right now is on putting "The Market" format in any smaller, older supermarkets the grocer has already decided to not convert to Lifestyle format supermarkets, assuming the stores are in neighborhoods with the proper demographics and other characteristics for the small-format grocery stores.

There are a few smaller, older stores in Arizona which meet this criteria. Therefore, we wouldn't be surprised to see some of those supermarkets become the "Market by Safeway" small-format stores in the near future.

Beginning in as little as a month, and at least by August, we will see the already hot Arizona market heat up even more when the four initial Wal-Mart Marketside stores open in the respective cities. All four stores are fairly close to Fresh & Easy stores, so that should make for an interesting--and convenient--store-to-store comparison.

Even more interesting will be when Wal-Mart starts inking some deals for locations in California. The mega-retailer has long been frustrated about not being able to get a stronghold in the state's huge food and grocery sales market. It just could use Marketside in part to attempt to grab a big chunk of the Golden State market as part of its growing multi-format strategy.

Note: For more information, details and some additional analysis about Wal-Mart's Marketside, we suggest this recent story in the food and grocery industry blog Natural~Specialty Foods Memo.

The blog also is running what it's calling a "small-format food retailing special feature." There are a number of pieces, ranging from a story about French retailer Carrefour's small-format stores in Asia and a piece on Fresh & Easy, to a story about small-format natural foods' retailer Sprouts Farmers Markets, which is a fast-growing discount natural foods grocer with stores in Arizona, Southern California and elsewhere in the Western U.S.

Food Retailing in the USA: Wal-Mart Opens the First of its new 'Hispanic Community' Format Stores Today in Texas

As we've reported in Fresh & Easy Buzz, Wal-Mart, the world's largest corporation and retailer--as well as being the number one food and grocery market share retailer in the U.S.--has developed a small-format grocery store concept of its own, similar to Tesco's Fresh & Easy Neighborhood Market USA.

The new Wal-Mart small-format food and grocery store--the first units of which are set to open this summer in the Phoenix, Arizona Metropolitan region where Tesco currently has 18 of its Fresh & Easy Neighborhood Market stores open and operating--will be an approximately 15,000 -to- 20,000 square foot grocery store featuring a mix of basic food and grocery items at low prices, along with an assortment of fresh, prepared foods items under at least one and possibly two new Wal-Mart store brands.

But the small-format Marketside isn't the only new food and grocery store format the U.S-based international retailer has created.

Today, in the Texas city of Garland, Wal-Mart is opening its first "Hispanic Community" store. That store is in a converted Wal-Mart Supercenter that was the retailer's very first Supercenter prototype (called Hypermart USA when it opened in 1987) in the world.

Wal-Mart's "Hispanic Community" store is designed to target and cater to Hispanic consumers. It includes aisles of authentic Mexican, Latin and Central American fresh food and packaged grocery products, perishables and non-foods, among other features geared to Hispanic consumers and shoppers.

The 100,000 thousand-plus square foot store also is designed and merchandised to celebrate the centrality of the family, which is an important aspect in the lives of Hispanic Americans.

The food and grocery industry publication Natural~Specialty Foods Memo has a piece today in which it describes the ethnic retailing format and the new "Hispanic Community" store opening today in Garland, Texas.

The piece also looks at Wal-Mart's emergence as a multi-format and niche-oriented retailer.

Read the piece about Wal-Mart's new "Hispanic Community" store format and the store opening today in Texas here.

Going Smaller: Wal-Mart Might have Found A Solution or Two to Much of the Opposition to its Mega-Supercenter Stores in the USA

Mega-retailer Wal-Mart may have found a solution (or two) to all the community-based opposition in many parts of the U.S. to the retailer's building of its supercenter stores.

Last month, the brawny big-box bruiser from Bentonville (Arkansas) decided to kill 47 new supercenter store projects it had on the books for a variety of reasons, all having to do with either opposition to the stores from city and country governments or community-based groups in the cities and neighborhoods where the respective stores were to be built.

Don't feel sorry for Wal-Mart though. The world's and United States' largest retailer will still open at least that many (47) new supercenters in the U.S. this year, plus a handful more.

The municipal government and community-based group opposition is a serious impediment to Wal-Mart's supercenter growth plan in the U.S. however. But it's not a new problem. It's been going for for years.

However, what is new is Wal-Mart's response to the opposition, which historically has only been one-dimensional: To lobby city governments and community groups, trying to change their minds, or to fight the opposition in court.

Until now, that is.

The Modesto CA supercenter strategy

In the Central Valley city of Modesto in Northern California, Wal-Mart is gutting an old 90,000-105,000 square-foot (about 75,00-80,000 square-feet of selling space) vacant big-box retail building, which most recently was divided in half and housed a store belonging to the now gone local discount warehouse grocery chain SavMax in one half of the building and a Rite-Aid drug store in the other half.

Wal-Mart is turning the vacant building into a scaled-down version of its supercenter format store. The Modesto supercenter, which is located at 3848 McHenry Blvd., a popular shopping street in the city of about 210,000, will have all the departments--fresh produce, meat, perishables, dry grocery and the like--that its larger supercenters have, which average about 185,000 square feet, and run as big as 225,000 square feet.

The only difference between the more petite Modesto supercenter and nearly all of the retailer's other, larger supercenters, is that those departments will be scaled down and the store's overall product selection will be a bit less expansive than in the traditional supercenters.

To compare the size difference of this new supercenter in Modesto to Wal-Mart's other stores of the same format, lets compare it to the retailer's Wal-Mart discount store format stores, one of which the retailer has in Modesto. That store, like all the Wal-Mart discount format stores, carries only a limited assortment of grocery products in a few aisles plus some basic frozen and perishable foods. However, it's still 115,000 square-feet without the supermarket inside, which makes it considerably larger than the new full food and grocery "hybrid" supercenter set to open early next year on Modesto's McHenry Avenue.

The main reason Wal-Mart is doing this supercenter scaling-down in California, and especially in the Central Valley, is because the state as a whole and the region particularly, has been one of the most difficult places in the U.S. for the mega-retailer to get approval to build it's 185,000 -to- 225,000 square-foot new, from the ground-up supercenters.

For example, Wal-Mart planned to build a roughly 200,000 square-foot supercenter in a shopping center in Modesto in 2001. However, after a couple years' of battling with the city planning commission and city council, as well as opposition from numerous small business groups, it abandoned those plans.

In 2004, Wal-Mart proposed building a brand new 225,000 square-foot supercenter in Turlock, which is a city of about 75,000 residents located just 10 miles from Modesto. The Turlock City Council not only rejected Wal-Mart's proposal - even though the retailer already had a Wal-Mart discount store in the city and promised to keep it open along with the new supercenter - it ended up passing a big-box ordinance, which prohibited any retailer from opening a store of at least 100,000 square-feet, that devoted at least 5% of its floor space to grocery items.

The supercenter ban was specifically designed to prevent Wal-Mart from locating a supercenter in the city. However, through its language it left the door open for big box retailers like Costco Wholesale and even Wal-Mart's Sam's Club.

Wal-Mart filed a lawsuit against the city of Turlock in February 2004, one month after the city council passed the ban legislation. The case was in the courts for two years. In 2006 the court ruled in favor of the city and Wal-Mart announced it would no longer try to build a supercenter in the city.

Big box bans like Turlock's are common in California. Two other cities in the area, Oakdale which is next door to Modesto, and Patterson, which is about 25 minutes away from Modesto, have both passed laws similar to Turlock's, designed specifically to keep Wal-Mart supercenters out of their respective cities.

Wal-Mart pulled the plug on a supercenter in another nearby city in 2006, when the city of Ripon, just a few miles from Modesto, fought against the retailer's proposal to locate a supercenter in the community. At the time the issue of contention was over where the supercenter would be located in Ripon. Wal-Mart announced it would not build on the site but would look for a more suitable location in the city. That was two years ago and the retailer is yet to announce a site in Ripon.

Last year, Wal-Mart did get approval to build a 225,000 square foot supercenter in Ceres, which is right next door to Modesto. However, the community of about 45,000 was far from the retailer's first or second choice in the region. But since the city is aggressively seeking retail and streamlined the permit process, Wal-Mart went forward with the proposal. The Ceres, California supercenter is currently being built - not without community protest of sorts - and is scheduled to open in 2009.

Bay Area and Southern CA tough for supercenters

Its not just the Central Valley that opposes Wal-Mart supercenters so strongly. In fact, the nine county San Francisco Bay Area, which is about 90 minutes from Modesto, opposes the mega-stores as much or even more than the valley's municipalities and communty groups do.

Wal-Mart has only a couple supercenters in the 7-million population-strong Bay Area. Those stores are out in the fringes of the region where opposition and the need for tax dollars of any kind are far more desired than in the major Bay Area cities and suburbs. As a result, opposition to the supercenters is less intense.

Try as it might, Wal-Mart has failed to build numerous new supercenters its proposed in many of the most desirable Bay Area cities; cities where it wants to be with that format.

Wal-Mart hasn't had much better luck in the Southern California region, where more than half of California's residents live. It has some supercenters in the region, but nowhere near the number it wants - or has tried to get approval for.

In fact, it's in Southern California where Wal-Mart has come up with phase two of its plan to open more supercenters in the Golden State, albeit somewhat smaller than average like the Modesto store.

The retailer just announced plans to add an additional 25,000 -to- 50,000 square feet on to a number of its Wal-Mart discount stores in Orange County, thereby turning them into hybrid supercenters.

According to John Mendez of Wal-Mart, the stores will have all the same departments and sell the same food and grocery products that a standard, larger supercenter does. The departments will just be scaled-back and have a more limited overall product assortment.

Wal-Mart's discount stores sell perishable items like milk, juice and eggs, have some frozen foods, and contain aisles where a limited assortment of grocery products are offered.

The expanded discount stores would still retain all the non-foods departments they currently have but would add a smaller-version of a full-fledged Wal-Mart supercenter-style supermarket inside.

Wal-Mart becoming more agile

These two developments, along with Wal-Mart's new, small-format (about 15,000 -to- 20,000 square feet) Marketside grocery markets, which will make their debut this summer in the Phoenix, Arizona Metropolitan region, are showing that a mega-retailer can also be a nimble one when it comes to format adjustments and creations.

By choosing a supercenter strategy which includes remodeling vacant, smaller buildings like in Modesto, and adding on square-footage to Wal-Mart discount stores like the retailer plans to do in Orange County, Wal-Mart is showing a new adaptability after years of sticking with the single supercenter mind set and format.

As a result, the retailer will be able to garner much more of the grocery dollar market share in states like California where the opportunity is there but the jumbo-sized singular supercenter format has proven a barrier to entry.

Additionally, the small-format Marketside stores will give Wal-Mart an urban strategy for city's like San Francisco, Oakland, San Jose and Sacramento in Northern California, and Los Angeles and San Diego in Southern California, if it chooses that strategy.

For example, it's impossible for Wal-Mart to get approval, even if it found the space, to built a supercenter in politically-charged San Francisco. However, it's likely it could get approval - with a bit of a fight still - to build a 15,000 -to- 20,000 square-foot Marketside store, or two in the highly dense city.

The same is the case in urban Los Angeles and San Diego. In terms of the Modesto model of locating a supercenter in a smaller, existing building, doing so makes it difficult for a city to stop Wal-Mart because the application and permitting process is much different than when building a new store from the ground up. Essentially, a city like Modesto can't prevent Wal-Mart from putting whatever type of store it desires in an existing building like the Modesto location, as long as it files the proper paperwork and meets existing city laws.

It's the same for the square-footage additions the retailer plans to do with some of its Orange County Wal-Mart discount stores. Should the respective cities in Orange County try to hold up or prevent Wal-Mart from adding the additional square footage to those stores, the retailer would easily win in court, since such additions are done by retailers of all types regularly, and preventing Wal-Mart alone from doing it would likely be ruled discriminatory.

Localizing and shrinking new supercenters

Another strategy Wal-Mart is employing is to design its supercenter to fit in with a local city's geographic location, setting, culture and history. For example, the brand new Wal-Mart supercenter in Austin, Texas pictured at the top of this piece, sure looks different than the typical Wal-Mart square, big box supercenter, doesn't it? It's designed to fit into the more hip, upscale style that is Austin.

The retailer has designed similar "local" supercenters in Colorado that fit in with the regions rugged mountains and woods, using different roofing and siding on the buildings, in addition to numerous other local touches. One supercenter in Colorado even has a complete bicycle shop in the store, and Wal-Mart built and paid for bike paths and bike racks on land around the store because the community is a major bicycling area.

These localization design strategies also include shrinking the supercenters a bit if need be. Wal Mart has built a couple of brand new supercenters so far that are in the 130,000 square foot range rather than the average 185,000 size.

Market share is key regardless of format

Last year Wal-Mart overtook Kroger Co. as the number one grocery sales market share leader in the U.S. It's a close race between the two retailers though.

What Wal-Mart seems to have finally figured out with its new format flexibility as detailed in this piece, is that grocery market share is king, and it doesn't have to just come from a 185,000 -to- 225,000 square-foot supercenter.

In addition to putting the scaled-down supercenters in vacant big-box buildings like the retailer is doing in Modesto, adding the additional square-footage for groceries onto the existing discount Wal-Marts in Orange County, plus introducing the new, small-format Marketside grocery stores this summer in Arizona, Wal-Mart also is building more of its average 40,000-45,000 square-foot Neighborhood Market supermarkets this year and next than it has in many years.

This new, multi-supercenter and multi grocery store format strategy should give Wal-Mart additional market share, allowing it to increase its lead over Kroger. The main reason this should be the case is because these strategies will allow it to increase its grocery sales square-footage in places like California where it currently has a minimal food and grocery retailing presence because of the inability to open any where near the number of traditional, new supercenters it has wanted to for over a decade.

The mega-retailer plans to use its "hybrid" Modesto supercenter strategy and the Orange County add-on discount store strategy in other parts of the U.S. in which gaining approval for new, built from the ground up supercenters is a problem.

The Modesto supercenter strategy also will be used in places like urban areas, where space is of a premium and the idea of acquiring an empty big box building and turning it into a Superstore is a good option.

Further, expect to see Wal-Mart add additional square-feet onto other discount stores in other parts of the U.S. this year and beyond. Food and grocery sales are what's allowing the retailer to post strong sales and profit gains like its recently released quarterly profits.

Wal-Mart wants to be able to sell more food and grocery products in all categories in all of its stores--as well as in more places in the USA. As a result, the strategies detailed in this piece will be implemented, along with the building of new supercenters, wherever the brawny big box retailer from Bentonville thinks they make sense.

Wal-Mart to Open Two More New 'Neighborhood Market' Stores in the Phoenix Metro Region; Still On-Track to Open New Marketside Stores This Summer

Wal-Mart, Inc., the world's largest corporation and retailer as well as being the number one national grocery sales market share leader in the U.S., plans to open two more of its approximately 45,000 square foot Wal-Mart Neighborhood Market supermarkets in the Phoenix, Arizona Metropolitan region this year and next.

Both of the new Wal-Mart Neighborhood Market supermarkets will be built in the city of Chandler, which is a suburb of Phoenix, and has about 240,000 residents. The Phoenix Metropolitan region of which Chandler is a part, is a contiguous metropolitan area, in which one city essentially runs into the next.

The two new store sights are at the southwestern corner of McQueen and Warner roads and at the northwestern corner of Chandler Blvd. and Cooper Road, according to Delia Garcia, a Wal-Mart spokeswoman. The stores also will be open 24 hours a day.

Tesco has Fresh & Easy Neighborhood Market stores located nearby the two new Wal-Mart Neighborhood Market locations.

The Wal-Mart Neighborhood Market format supermarkets, which are smaller than the average new supermarket being build by most U.S. retail grocery chain's today which average about 55,000 -to- 65,000 square feet, feature a complete range of food, grocery and non-foods' offerings, with a special focus on fresh produce and meats.

The produce, deli and bakery departments (above) inside a Wal-Mart Neighborhood Market supermarket.

Despite being about 10,000 square feet smaller than the average new supermarket being build today across America, Wal-Mart's Neighborhood Markets' still compare with the variety and product range selections these competing supermarkets offer.

The smaller-sized, neighborhood-oriented supermarkets are a part of the giant retailer's multi-format retail strategy, which includes its huge Supercenters, which average about 185,000 square feet and offer a complete selection of food and groceries as well as products in every category imaginable, its Wal-Mart basic discount stores, which on average are about 90,000 -to- 100,000 square feet and sell a limited selection of grocery products and perishable goods but no fresh meats or produce, and its soon to be opened brand new Marketside small-format (about 15,000 -to- 20,000 square feet), convenience-oriented grocery stores.

The first four or five Marketside stores, which Wal-Mart corporately says aren't designed to counter Tesco's small-format 10,000 -to- 13,000 square foot Fresh & Easy Neighborhood market grocery stores, but were indeed developed primarily for that purpose, are still on track to open this summer in the Phoenix Metro area, according to a Wal-Mart executive who asked we not use his name.

Wal-Mart currently operates nine of its 45,000 square foot Neighborhood Market supermarkets in the Phoenix/Easy Valley region. Additionally, three new stores are set to open soon. As a result, with the two new stores set for Chandler, that will bring the total number of Wal-Mart Neighborhood Market format supermarkets in the area to 14.

The Phoenix Metro region was one of the initial test market regions for Wal-Mart's Neighborhood Market smaller-footprint supermarket when the retailer created the format about seven years ago. Arizona also is one of the top three or four-best market regions regarding overall per-capita sales in the U.S. for Wal-Mart.

Tesco currently operates 17 of its average 10,000 -to- 13,000 square foot basic grocery and fresh foods-oriented Fresh & Easy grocery markets in the Phoenix/East Valley region. The retailer plans to open as many as 15 more of the grocery stores in Arizona before the end of this year.

Wal-Mart has been opening numerous new Supercenters and Neighborhood Markets in Arizona for the last couple years because it is one of the retailer's best U.S. market regions, as we mentioned above.

The region also is one of the fastest-growing areas in the USA. There's a demographic population shift in the U.S. from regions like the Eastern USA, to the sunbelt states like Arizona. Additionally, since Arizona shares a border with Mexico, it's growth is further being increased by immigration (documented and undocumented) from nearby Mexico.

Hispanics make up about 34% of Arizona's population, based on the latest data available from the U.S. Census Bureau, and it's the fastest growing ethnic group in the state.

Therefore, these are the primary reasons for Wal-Mart's strong growth and store expansion in the state, and especially in the Pheonix Metropolitan/East Valley region, where most of the state's population is concentrated.

In other words, the focus of Wal-Mart's Arizona expansion has little to do with any cause or effect from Tesco's big push into the state with its Fresh & Easy stores.

The one exception is the new Wal-Mart Marketside small-format grocery store venture. Based on extensive research and good sources, we believe the primary reason for creating the format was to serve as a check on any possible sales effect from the Fresh & Easy stores, which thus far hasn't occurred in the Phoenix Metro market, according to numerous sources, as we reported and laid out here on Wednesday.

We also believe Wal-Mart has increased it time-table for building and opening more of its 45,000 square foot Neighborhood Market stores in the region based on Tesco's entry--and rapid new store building program--into the market with its Fresh & Easy stores.

It's no mere coincidence that a number of these new supermarkets are being located not too far away from a Fresh & Easy grocery store. In addition, the four -to- five new Marketside grocery markets set to open in the region are all close to existing Fresh & Easy stores.

Regardless of the primary reasons for, or Wal-Mart's Phoenix Metro region growth strategy origins and timetables, the effect of the mega-retailer's actions in the market region will end up putting a retail "squeeze" effect on Tesco's Fresh & Easy Neighborhood Market grocery stores.

Here's why: First, Wal-Mart is super-popular in Arizona and especially in the Phoenix Metro/East Valley region. Its the only grocery retailer who is currently challenging local market share leaders Bashas' and Safeway Stores, Inc. for their respective market share dominance. Those two supermarket chains have been in the regions for decades before Wal-mart even entered with its first Supercenter. It's also the only grocery retailing player who has these two chains worried. In other words, the Wal-Mart brand is popular and solid in Arizona.

Second, Wal-Mart has opened a number of its mega Supercenter stores in the region in the last two years. These stores which average about 180,000 square feet and often are as big as 225,000 square feet, devote nearly 100,000 square feet of their space to food and grocery products in many cases. The Supercenter concept has proven to be a popular primary grocery shopping venue in Arizona, with many shoppers leaving their former supermarkets to shop at the stores. The Wal-Mart Supercenters have already started to create a tipping of the retail format shopping balance in the region.

Third, add to the Supercenter factor, the "Wal-Mart Neighborhood Market effect." The reason Wal-Mart is in the process of completing the building of three new Neighborhood Market supermarkets and planning to built two more in the region, is that because unlike is the case in many other parts of the U.S., the stores are doing very well in Arizona, particularily in the Phoenix Metro region. Along with the Wal-Mart Supercenters, they're taking market share away from Bashas' and Safeway.

Lastly, enter the new, small-format Marketside banner grocery stores. Combined with the Supercenters and Neighborhood Market supermarkets, these new 15,000 -to- 20,000 square foot, convenience oriented grocery stores will give Wal-Mart one more strategic bullet in its food and grocery retailing arsenal in the market region.

For example, the Supercenters serve a more regional or larger geographic area strategy. It takes shoppers coming from miles around the mega-stores to make them successful. As a result, there are just so many of the big-box stores Wal-Mart can open in a given market region; and the retailer has been pushing that envelope already in the Phoenix Metro area.

However, the 45,000 square foot Neighborhood Market supermarkets allow Wal-Mart to extend its retail brand--and number of stores--because the population requirements needed to make these stores successful are far-lower than those of a Supercenter. In part that's why they are named Neighborhood Markets. Therefore, Wal-Mart can use these stores as an in-between strategy, adding them in a neighborhood they think will work for this format but not a Supercenter.

Now, along comes Marketside, an even smaller-format grocery store at about 15,000 square feet than the Wal-Mart Neighborhood Market supermarkets are at about 45,000. The stores also will have some added twists, such as lots of fresh, prepared foods. Look for mini health and wellness centers in the stores possibly as well.

The addition of the Marketside format will allow Wal-Mart to fill a third niche as they warrant, which is the ability to pop a "little" Marketside grocery store in neighborhoods the retailer doesn't thing a Wal-Mart Neighborhood Market will do that well in but a Marketside grocery store might. The reasons for this could range from population size to demographics.

This combination of three formats for Wal-Mart in the Phoenix/Easy Valley market region in Arizona has the potential to really put the squeeze on Tesco's Fresh & Easy grocery stores in the market which currently aren't performing very well anyway.

There is a "Wal-Mart Effect" in every region where the giant retailer goes in the U.S. That's one of the reasons so many communities do everything they can to keep the retailer's Supercenters out of their respective towns and neighborhoods. The main opposition argument to the stores is that they hurt local businesses, which includes regional and local chain-owned supermarket stores.

Based on our analysis, the Phoenix Metropolitan/East Valley region is shaping up to be just about the most competitive grocery retailing region in the USA. Since this is Tesco's number-two most important target market for its Fresh & Easy Neighborhood Market grocery stores (Southern California which is nearly as competitive is number one), Tesco will have to sharpen its pencils, make some changes in the Fresh & Easy format, its merchandising, marketing and operations, if the retailer wants to succeed in this highly and increasingly competitive grocery market, in our analysis.

Tesco's Fresh & Easy Surpasses Competing Phoenix, Arizona Area Small-Format Grocers in Total Store Count...But Not in Sales and Market Share

Although it's first units in the Phoenix, Arizona Metropolitan and East Valley region only opened a little over three months' ago, the number of Tesco's Fresh & Easy Neighborhood Market small-format, convenience-oriented grocery stores has now surpassed those of four other grocers who operate smaller-format style grocery markets in the region.

Since December 7, 2007, 15 Fresh & Easy grocery stores have opened in the Phoenix Metro and Easy Valley region counties of Maricopa and Pinal. And, as we reported last week, the grocer has plans to open at least another 10 Fresh & Easy grocery markets in the region this year. [You can view the location of the two counties on the Arizona county map above.]

The other four grocers in the region who operate smaller-format grocery stores are: Wal-Mart's Neighborhood Market, which currently has 13 locations in the area; A.J's Fine Foods, which is the upscale banner of Arizona-based Basha's (14 stores); locally-headquartered Sprouts Farmers Market, which currently operates 14 stores in the region; and specialty grocer Trader Joe's, with 10 of its small-format specialty grocery markets in the area.

When it comes to market share however, Tesco's Fresh & Easy isn't number one in the Phoenix region, despite having the highest store count of the five operators. Maricopa and Pinal counties combined have the most people of any region in Arizona.

Local industry analysts tell us its a close market share battle between Wal-Mart's Neighborhood Market, A.J's Fine Foods and Trader Joe's, for the top three slots in terms of market share and gross annual sales.

Most peg Wal-Mart's 45,000 square foot Neighborhood Market as number one, with A.J's Fine Foods very close behind as number two. A.J's stores are upscale. The markets' sell an extensive assortment of specialty, gourmet and natural foods, including in-store homemade prepared foods. They are about the same size as the Wal-Mart Neighborhood Market stores, which are more basic supermarkets. Since both grocers have 14 stores in the region, they offer a good match-up.

Most local analysts put Trader Joe's in a near-tie for second place among the five smaller-format food retailers, even though it only has 10 stores in the region, compared to Fresh & Easy's 15, Wal-Mart's (Neighborhood Market) 13, and A.J's and Sprouts' 14 Phoenix Metro and East Valley area stores.

Trader Joe's stores average about 10,000 square feet. However, nationally in the U.S., the specialty grocery stores do double the sales per-square foot as the supermarket industry average.

Sprouts Farmers Market is right in the ball game, according to local industry analysts. They say the numerical differences between Sprouts' and the others aren't that significant however. It's Sprouts' that Tesco's Fresh & Easy is likely to first surpass if it improves sales in its existing stores, along with the addition of the new stores as they come on line this year.

Tesco's Fresh & Easy Neighborhood Market currently comes in fifth place in this five smaller- format grocer horse race, according to the local analysts. The local industry analysts suggest the 10,000 square foot -to- 13,000 square foot Fresh & Easy grocery stores are doing about half the sales per-square foot as the 10,000 square foot Trader Joe's stores are doing in the region.

The local analysts also tell us they believe Wal-Mart's Neighborhood Market and A.J's Fine Foods also are doing close to 50% more per square foot on average than the 15 Fresh & Easy grocery markets are. Lastly, they estimate the Sprouts Farmers Market stores are doing at least 25% higher sales per-square foot than Tesco's Fresh & Easy Neighborhood Market stores are at present.

Sprouts Farmers Market stores sell natural and organic foods, groceries and non-foods products. At about 25,000 square feet in size, they are sort of a mini-Whole Foods Market. Sprouts puts an emphasise on offering natural and organic products at lower retail prices than Whole Foods. The stores also have in-store cafes and dining venues, and offer lots of healthy prepared foods items to go.

In fairness to Tesco's Fresh & Easy, it's the new grocer on the block in the Phoenix Metropolitan and East Valley region. As mentioned earlier, its first stores in the area have only been opened a little over three months. Half of the stores on average have only been open for a month. As a result, we believe the stores' overall success or failure shouldn't be taken too seriously until the beginning of next year. In our analysis, that should have given the retailer enough time to have either made a good go of things in the region, or not.

Of course, between now and January, 2009, competition is only going to heat up in the Phoenix Metro region. Locally-based Sprouts Farmers Market plans to open at least one more new store in the area this year. Additionally, Wal-Mart is opening a 14th Neighborhood Market in the region this year, as is Trader Joe's.

Wal-Mart also plans on opening four or five of its brand new, small-format "Marketside" grocery stores in the Phoenix Metro region this summer. The region will be the debut area for the new stores, which will average about 15,000 square feet -to 20,000 square feet, and offer a selection of basic groceries, lots of fresh, prepared foods, fresh meats and produce and other grocery products.

The "Marketside" stores, which look to be very similar to a Tesco Fresh & Easy, will be located in neighborhoods in the Phoenix Metro region which are fairly close to where a number of the existing Fresh & Easy stores are currently located.

Combined with its current 13 (and one more on the way), 45,000 square foot Neighborhood Market stores, the initial four or five "Marketside" stores will give the mega-retailer 18 or 19 smaller-format stores in the Phoenix Metro and Easy Valley region, to compete with Tesco's planned total of at least 25 stores in the area by the end of this year.

Wal-Mart also has a number of Supercenters in the Phoenix area, and is building more in the region. Arizona is one of the retailer's top 5 markets in the U.S.

And, of course, we're only discussing five grocers that operate smaller-format stores in the Arizona region. The area's grocery market share leaders are Safeway Stores, Inc., Basha's, with its Basha's banner supermarkets. Add in Albertsons, Costco Wholesale, Whole Foods Market, Inc., Sunflower Farmers Market, Wal-Mart's Sam's Club and a few others--including some very aggressive ethnic retailers and independents--and you get one very competitive retail grocery market. In fact, some analysts say it might currently be the most competitive market in the U.S.

We do have one question though: Does the term "possibly over-stored" come to anyone else's mind besides ours?