Wal-Mart Marketside Countdown: Two Days to Go Until the Mega-Retailer's First Four 'Small-Marts' Open in the Phoenix, Arizona Region

Wal-Mart Marketside, Arizona - Continuing Coverage & Analysis

As we've been reporting and writing about in Fresh & Easy Buzz, Wal-Mart, Inc. is set to open its first four small-format combination grocery and fresh foods Marketside stores in just two days, on Saturday, August 4, in the Phoenix, Arizona East Valley region cities of Gilbert, Chandler, Mesa and Tempe.

As we've been reporting for months now, Wal-Mart will place a heavy emphasis on convenience, freshness and low price in the Marketside stores.

The Marketside concept and store format is very "food-centric."

For example, the fresh, prepared foods will be made in kitchens located right in the stores. There also will be seating areas in the markets where about 9 -to- 10 customers at a time can eat-in. Take-out is the major focus of the Marketside prepared foods category though.

The prepared foods sold in Tesco's Fresh & Easy stores are made at a central kitchen facility in Southern California, then shipped to the stores in Southern California, Southern Nevada and Arizona.

Fresh produce, meats and deli will be featured in the Marketside stores as well, just as they are in Fresh & Easy markets.

Nearly all of the fresh produce in Fresh & Easy grocery stores are pre-packaged in plastic tubs or plastic bags.

Wal-Mart's Marketside stores will merchandise a mix of bulk and pre-packaged produce, similar to what Safeway Stores, Inc. does in its small-format "the market by Vons" store in Long Beach, California, which is about 15,000 square feet.

On the grocery side, national and regional brand items and some store brands will share space in the Marketside stores with natural, organic and specialty products.

Marketside will have far more skus of nationally and regional branded items than Fresh & Easy stores do however. About 60-65% of the items sold in Fresh & Easy markets are under the fresh & easy store label.

Additionally, since the Marketside stores range from about 4,000 -to- 6,000 square feet (the four Arizona stores are from 15,000 -to- nearly 18,000 square feet respectively, compared to 10,000 -to- about 13,000 square feet for Fresh & Easy stores), Wal-Mart's small-format markets will carry more total skus across all categories than Tesco's Fresh & Easy stores do. Wal-Mart's Amee Chande, vice president of strategy and marketing for Marketside, says the stores carry in the neighborhood of 7,000 -to- 10,00 skus, which is considerably more than Fresh & Easy stores merchandise.

Additionally, as you can see in the Marketside, Arizona interior store photograph directly above, the Marketside stores use more traditional high profile shelving with attractive wood-trimmed end-cap units, again similar to what Safeway is using in its "The Market" format, rather than the utilitarian warehouse-style shelving used by Fresh & Easy and Trader Joe's, for example.

Another difference between the Marketside stores and Tesco's Fresh & Easy is that while both small-format markets sell beers and wine, Marketside also will sell spirits, which could help the store in terms of increasing its average ring or market basket size since spirits generally are higher-ticket items. Fresh & Easy stores don't offer spirits.

Wal-Mart's Chande also confirms the Marketside stores will be full-service-oriented, which we've been saying for sometime in the blog. For example, the markets will offer full-service checkout and bagging at the front-end unlike Fresh & Easy stores which feature customer self- checkout and bagging, although if asked a store clerk will assist shoppers with checkout.

That full-service model obviously also extends to the Marketside prepared foods category since the foods will be prepared by a chef in the in-store kitchen (some items will be prepared ahead and packaged for quick take-out of course) and additionally the stores have the full-service eating area in them.

Among the features of the in-store kitchen include a wood burning open hearth oven for baking breads, pizzas and related items.

As we've reported, the Marketside store format is divided into sections with names like The Deli, The Bakery, The Garden (fresh produce), The Butcher Shop (meat department) and so on.

Lastly, Chande confirms what we've been reporting since we first wrote about Marketside last year, which is that although the store prices may not be as low overall as at the retailer's Supercenters, the focus is on competitive prices across all categories, including offering 6 -to- 12 basic items like milk, eggs, butter and the like at what Wal-Mart is calling "the lowest" everyday prices.

Below are a few Marketside items and prices Wal-Mart's Amee Chande has released:

Prepared meals and side dishes:

>Family-size chicken tamales over Spanish-style rice, $8
>Family-style penne pasta with sliced grilled chicken breast in creamy alfredo sauce, $8 >Classic-style meat lasagna with ground beef, ricotta, mozzarella and parmesan cheeses, $6 >Garlic mashed red-skin potatoes, $4
>Coconut curry pilaf with mild yellow curry, apricots and almonds, $4.

Ready-to-Eat Sandwiches, burritos and wraps:

>Pepperoni and salami with provolone and balsamic vinaigrette, $4
>Fire-grilled chicken burrito with cilantro rice, black beans, chicken and cheddar cheese, $4

Grocery

>Marketside brand fresh ground Ccffee, $4.98 per pound
>Black Angus choice beef rib-eye boneless steak, $10.98
>Ready-to-steam baby green zucchini, $4.48 (8 oz)
>Mixed fruit bowls, $2.98 (10.5 oz)

Looking at the prices, they aren't "door openers" by any means. The prepared foods item prices are good, especially if they taste as good as the descriptions of them and ingredients in them would suggest.

However, the "grocery items" prices are comparatively on the high end, particularly the $10.98 per pound choice beef rib-eye steak and the $4.48 (8oz) baby green ready-to-steam zucchini. All zucchini is essentially ready-to-steam. You just wash it and steam it.

This week numerous supermarkets throughout the Western U.S. have non-baby zucchini on sale for 99 cents -to- $1.19 per pound. Paying an over $3 premium for baby zucchini seems a bit odd in this current economy, especially considering how well Wal-Mart knows what the market will bear at present.

The sample size of the items and prices is tiny though. Therefore we will wait and see further what the overall pricing scheme is when we are able to survey the Marketside stores.

Meanwhile, as we reported earlier today, Tesco opened two more Fresh & Easy markets in the Phoenix area today, bringing its store count in the region up to 26. The grocery chain has confirmed it plans to open at least 37 Fresh & Easy stores in the Phoenix and Valley regions.

The clock is ticking with only two days until the opening of the first four Marketside food and grocery stores in Gilbert, Chandler, Mesa and Tempe, Arizona -- all of which are only about 1 -to- 2 miles from Fresh & Easy markets in each of those cities, by the way.

It will be interesting to see if Arizona shoppers who are used to Wal-Mart as a "Mega-Mart" retailer decide to spend their money at what now also is a "Small-Mart" retailer.

Perhaps with everything else in life shrinking -- the paycheck, the savings and checking accounts, the size of automobiles -- consumers also will decide its time to "get small" when it comes to grocery shopping. If so, Arizona will be ground-zero for the battle of the "Small-Marts" -- not just between Tesco and Wal-Mart either -- but also Trader Joe's, and perhaps soon Safeway with its first "The Market" format store in the state.

Below are the addresses of the four Marketside stores opening on Saturday, October 4:

>Gilbert: northwest corner of Elliot and Cooper roads
>Chandler: southwest corner of Ray and McQueen roads
>Mesa: northwest corner of Sossaman and Baseline roads
>Tempe: northeast corner of Rural and Elliot roads

Click here for map directions for each store location.

Resources:

Related stories from Fresh & Easy Buzz:

October 2, 2008: Arizona Market Report: Fresh & Easy Opens Two New Stores; Marketside Opens in Three Days; Analysis of One Of the Most Competitive Markets in the U.S.

October 1, 2008: 'The Promotional Pundit:' Fresh & Easy Buzz Analyzes, Offers Suggestions and Grades Tesco Fresh & Easy's Bi-Weekly Advertising Flyer

September 30, 2008: News & Analysis: Tesco Reports Half-Year Financials; Reports Loss For Fresh & Easy USA and Sales Per Square Foot Averages

September 29, 2008: 'Will it Play In Peoria?' Wal-Mart Will Open its Fifth Arizona Marketside Store Later This Year in Peoria, Arizona

September 29, 2008: Wal-Mart Offers its Own 'Peek' Inside it's Small-Format Marketside As Part of A One-Week Countdown to the Stores' Oct. 4 Openings in Arizona

September 29, 2008: Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store

September 26, 2008: Real Estate Group Selling the Four Wal-Mart Marketside Small-Format Grocery Stores Set to Open on Oct. 4; Plus Data on the Store's Exact Sizes

September 26, 2008: Fresh & Easy Buzz Gets A Peek -- And it Was Only A Peek -- Inside One of the Four New Wal-Mart Marketside Stores Opening in Arizona On October 4

September 26, 2008: News & Analysis: Employees At Two More Fresh & Easy Grocery Stores Could Soon Request UFCW Union Recognition From Tesco's Fresh & Easy

September 24, 2008: Breaking News: Wal-Mart to Open its Four Marketside Food and Grocery Markets in the Phoeniz, AZ Metropolitan Region on October 4

September 23, 2008: Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market

September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share

September 15, 2008: Wal-Mart's Chief Merchandising Officer Reiterates CEO's Words that it's 'Keeping Tabs' On Tesco's Fresh & Easy Today at Bank of America Conference

September 12, 2008: Thinking Out Loud: We Reply to A Reader's Request About Retail Strategy; Tesco's Fresh & Easy and Wal-Mart's Marketside

September 12, 2008: CEO's Can Say the 'Darndest Things': Wal-Mart CEO Lee Scott Says He Has Faith Tesco Will Succeed With Fresh & Easy; It's A Small-Mart World After All

September 10, 2008: Fresh & Easy Planning to Introduce Over 200 New Store Brand Items By the End of the Year; Prepared Foods, Coffees and Teas, Snacks Among the Selection

September 10, 2008: Financial Times Follows Fresh & Easy Buzz's Lead in Reporting on Wal-Mart's Plans to Open Marketside Stores in Southern California

September 7, 2008: Analysis & Commentary: Should Tesco's Fresh & Easy Put An Asterisk Next to its Motto? Yes; Unless it Corrects Four Operational Omissions

August 27, 2008: Wal-Mart's Four Phoenix Metro Arizona Small-Format 'Marketside' Community Grocery Stores Nearing Completion; Openings Just Weeks Away

August 17, 2008: Special Report: Tesco Fresh & Easy Neighborhood Market Experiencing A Category Manager and Buyer 'Brain Drain'

August 11, 2008: Arizona Region Market Report: Which Food Retailer Will Seize the Opportunity Offered by the Lack of a Grocery Store in Downtown Tempe, Arizona?

August 11, 2008: Wal-Mart's Small-Format Marketside Strategy is Currently Neither A 1,500 Store, $10 Billion A Year Mega Plan, Nor A Mere Four Store Test

August 9, 2008: Proximity Matters: More On the Upcoming Tesco Fresh & Easy-Wal-Mart Face Off in the Metro Phoenix, Arizona Market

August 8, 2008: Analysis & Commentary: Wal-Mart's Marketside As Part Of it's Multi-Format Category-Killer Strategy Spells Trouble For Tesco's Fresh & Easy

August 7, 2008: Pie in the Sky or Pie in the Face to Tesco's Fresh & Easy: Does Wal-Mart, Inc. Plan to Build A $10 Billion A Year 'Small-Mart' Empire?

July 29, 2008: Metro Phoenix Arizona Market Report: Tesco Opens Store Number Twenty in Phoenix Market; We Use That Milestone to Offer A Market Overview and Analysis

July 25, 2008: Metro Phoenix Arizona Market Report: Tesco Opens Store Number Twenty in Phoenix Market; We Use That Milestone to Offer A Market Overview and Analysis

June 26, 2008: Phoenix, Arizona Metro Market Report: More Competition in an Already Hot Market as Pro's Ranch Markets Plans Two New Stores in Phoenix Metro Market

June 24, 2008: Competitor News: Wal Mart Launches New 'Marketside' Website; Announces First Four Stores in Arizona to Open in the Fall Rather Than Summer

June 23, 2008: 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

June 20, 2008: Competitor News: Wal-Mart Executive in Charge of Small-Format 'Marketside' Format Development Leaving to Join UK Bicycle Retailer Halfords Group PLC

June 16, 2008: Wal-Mart and Tesco: The Cross-Atlantic Competition Continues to Heat Up; Almost Hot Enough to Make Uber-Cool British Secret Agent James Bond Flinch

June 8, 2008: Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market

June 6, 2008: Wal-Mart USA Chief Eduardo Castro-Wright Confirms Fresh & Easy Buzz Reportage on 'Marketside,' Adds Information From the WM Corporate Side

May 18, 2008: Wal-Mart Looking For Sites in California For it's Small-Format 'Marketside' Grocery Stores

February 12, 2008: Wal-Mart's New Logo For It's 'Marketside' Small-Format Grocery Stores Unveiled

January 18, 2008: Wal-Mart and Safeway vs. Fresh & Easy

January 16, 2008: Wal-Mart and Safeway Stores Could 'Box' Tesco in With New Small Format Stores

January 14, 2008: Citigroup Supermarket Industry Analyst Confirms Wal-Mart Small Marts in Arizona

January 14, 2008: Wal-Mart Confirms it Will Test New Small Store Format Later This Year

January 13, 2008: The Battle of the Retail Titans Begins: Wal-Mart to Open Small Format Stores in Arizona

{Photo credit: photo second from the top: Andrea Bloom, Tribune.com.]

'Will it Play In Peoria?' Wal-Mart Will Open its Fifth Arizona Marketside Store Later This Year in Peoria, Arizona

With still a week yet left until it opens its first four small-format combination grocery and fresh foods Marketside stores in the Phoenix, Arizona Metro region cities of Gilbert, Chandler, Mesa and Tempe, Wal-Mart already is preparing another store to open later this year in the Arizona city of Peoria, Fresh & Easy buzz has learned. [The Mesa Marketside store is pictured above.]

The Peoria, Arizona store will be Wal-Mart's fifth Arizona Marketside store thus far.

Two new additional Marketside stores in Southern California, one in San Diego and the other in nearby Oceanside (both which we've reported on), are scheduled to open this year before the Peoria, Arizona store does, according to Amee Chande, vice president of strategy and marketing for Wal-Mart, Inc.

Additionally, as we've previously reported, Wal-Mart has identified other Arizona and Southern California locations for its Marketside stores, as well as looking for locations in Northern California, primarily in the San Francisco Bay Area.

Peoria, which is located in the Northwest Valley region in the Phoenix Metropolitan area, is Arizona's ninth-largest city with a population of about 153,592 (2007) residents.

Wal-Mart chose Peoria as the location for its fifth Marketside location based on research and demographic data the retailer has collected due to its extensive retail presence in Arizona with its Wal-Mart Supercenters, Sam's Club stores and Wal-Mart Neighborhood Market supermarkets, which all offer food and grocery items, according to a Wal-Mart source.

Peroria has a mix of residents including young professionals and high-income retirees. Wal-mart believes the community offers a good consumer base for its Marketside stores, which will offer about 5,000 -to- 10,000 ingredient skus (shelf-stable groceries, beverages and fresh foods like meat, produce, dairy and the like) and ready-to-eat and ready-to-heat fresh, prepared foods items made right in the stores.

Wal-Mart is referring to all of the food and grocery items the stores will offer as ingredients, positioning the Marketside stores as "food-centric," yet affordable combination fresh food and ingredient (read grocery) markets.

Marketside stores will offer basic groceries and natural, organic and specialty products; fresh produce, meat and bakery; beers, wines and spirits; and fresh, prepared foods, featuring an in-store kitchen and even a small sit-down eating area for customers to have breakfast, lunch or dinner at in the store.

Resources:

Recent related stories from Fresh & Easy Buzz - Wal-Mart and Marketside

Wal-Mart Offers its Own 'Peek' Inside it's Small-Format Marketside As Part of A One-Week Countdown to the Stores' Oct. 4 Openings in Arizona

Fresh & Easy Buzz Gets A Peek -- And it Was Only A Peek -- Inside One of the Four New Wal-Mart Marketside Stores Opening in Arizona On October 4

Real Estate Group Selling the Four Wal-Mart Marketside Small-Format Grocery Stores Set to Open on Oct. 4; Plus Data on the Store's Exact Sizes

Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store

CEO's Can Say the 'Darndest Things': Wal-Mart CEO Lee Scott Says He Has Faith Tesco Will Succeed With Fresh & Easy; It's A Small-Mart World After All

Wal-Mart's Chief Merchandising Officer Reiterates CEO's Words that it's 'Keeping Tabs' On Tesco's Fresh & Easy Today at Bank of America Conference

Wal-Mart Offers its Own 'Peek' Inside it's Small-Format Marketside As Part of A One-Week Countdown to the Stores' Oct. 4 Openings in Arizona

In this September 26 piece, "Fresh & Easy Buzz Gets A Peek -- And it Was Only A Peek -- Inside One of the Four New Wal-Mart Marketside Stores Opening in Arizona On October 4," we shared with our readers what we were able to see inside one of the four Wal-Mart Marketside combination grocery and fresh foods markets set to open on October 4 in the Phoenix, Arizona Metropolitan region cities of Glibert, Chandler, Mesa and Tempe.

Today Wal-Mart is offering a "preview peek" of its own into Marketside, having added a new section to its Marketside website here.

Just seven days before the first four Marketside stores open, Wal-Mart is pulling back the figurative window shades a bit to reveal, as you can see at this link, the floor plans, departments, some of the products, and a few of the prices at Marketside.

The Marketside stores will be divided into 11 sections or departments, according to Wal-Mart. Among those sections or departments include: The Corner Deli, The Bakery, The Butcher Shop and The Garden (produce). Click here to learn more about the Marketside departments.

Additionally, as we've been reporting, the Marketside stores' grocery selection will include basic food and grocery items, along with specialty, natural and organic items. There isn't a mention of store brand food and grocery items in the new website section. But the stores will have them. Look for the store brands "Field & Vine" and "Wild Thyme" (and perhaps others)when the markets open on October 4, for example.

Further, as we've reported previously, Wal-Mart confirms on the website the Marketside stores will sell a selection (about 200 they say) of domestic and imported craft beers and wines. All of the wines will be $10 or under, according to Wal-Mart.

The Marketside stores also will sell a selection of spirits. Tesco's Fresh & Easy Neighborhood Market stores sell beer and wine but not spirits, making the fact the Marketside stores do so a point of differentiation between Wal-Mart's and Tesco's respective small-format grocery store offerings.

As we've reported all along on Fresh & Easy Buzz, a major offering of the small-format Marketside stores will be in-store fresh, prepared foods prepared in an in-store kitchen.

The new Marketside website section offers a sampling of the types of in-store fresh, prepared foods the stores will offer. These ready-to-eat and ready-to-heat foods include prepared meals like chicken tamales with Spanish rice and steak fajitas with grilled onions and red rice, which range in price from $6 for single-sized entrees to $8 for family-sized entrees. They also offer $4 appetizers and $2 side dishes like salads.

Marketside stores also will offer different weekly complete ready-to-eat or take home and heat meal solutions at affordable prices, like the two family meals here; one for $14 and the other for $18, along with lots of other grab-and-go, lunch, dinner, side dish and related prepared foods offerings.

As we've reported previously, the Marketside stores have in-store kitchens, along with an in-store eating area that can seat 9-10 customers/diners at a time. The major focus of the stores' prepared foods offering though is take home.

Having in-store kitchens where the food is prepared right in the store, along with offering the in-store eating area, is another point of differentiation between Wal-Mart's Marketside and Tesco's Fresh & Easy.

All of the Fresh & Easy prepared foods are made at a central kitchen in Southern California then delivered to the stores in Southern California, Nevada and Arizona. There currently are 87 Fresh & Easy combination grocery and fresh foods markets in those three states.

Wal-Mart also has added an expanded "Who We Are" section on the Marketside website, describing a bit more from a marketing standpoint what the store format is, as well as discussing the store associates, the food-oriented mission of the stores, and related topics. [Click here to view that new section.]

Wal-Mart also is using its http://www.marketside.com/ website to conduct a "countdown" between now and October 4 regarding the four stores opening on that date in Chandler, Mesa, Gilbert and Tempe, Arizona. View the bottom of the screen here [The map locations and addresses of the four stores are here.]

Wal-Mart's Marketside team has been taking a leaf from Tesco Fresh & Easy Neighborhood Market's marketing playbook, having it's headquarters and store associates visit residents in the neighborhoods where the four Marketside stores will open on October 4, handling out brochures, store coupons and welcome bags full of free Marketside store products to the residents. Wal-Mart has a separate office for Marketside in Tempe, Arizona where operations will be run out of.

This is the text of the letter or brochure the members of the Marketside team are giving neighborhood residents along with the free goodies, coupons and related promotional materials as they go door-to-door in the neighborhoods.

Each of the four Marketside stores, in each of the four Arizona cities, are located about 1 -to- 2 miles from a Fresh & Easy grocery market. In other words, those Marketside team members are going door-to-door in basically the same neighborhoods where Fresh & Easy does its neighborhood-oriented promotion.

We've also learned the Marketside stores will have food sampling stations set up throughout the markets. Prepared foods and other food and grocery items sold in the stores will be sampled throughout the day and evening at the stations.

Wal-Mart's philosophy behind doing this is it wants to catch shoppers where there are at the point-of-purchase in the store -- the produce department, meat department, bakery and the like -- so they can generate impulse sales right there rather than have shoppers go to a central area in the store for product samples like is the case at Fresh & Easy stores.

In each Fresh & Easy store there is an in-store sampling area or station called "The Kitchen," where various prepared foods are offered for customer sampling. The shoppers have to go to the area to sample though, rather than having the samples come to them like is the case with the sampling stations located throughout the Marketside stores.

Most U.S. food and grocery stores do the same as Wal-Mart plans to do with Marketside, offering sampling throughout the various store departments.

Wal-Mart also has added a new tag-line to its Marketside logo. That tag-line, as we reported the retailer would be doing in its marketing and positioning for the small-format chain, emphasises the stores' value proposition as well as its focus on food. It reads: "marketside: deliciously affordable."

Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store

Wal-Mart, Inc. CEO Lee Scott mentioned a rather interesting future U.S. small-format food and grocery retailing possibility for the mega-retailer at the 15th annual Goldman Sachs Global Retailing Conference held earlier this month in New York City.

The new Wal-Mart small-format possibility isn't Marketside, the retailer's new small-format combination grocery and fresh foods stores, the first four units of which are set to open this Saturday, October 4 in the Phoenix, Arizona Metropolitan market cities of Gilbert, Mesa, Chandler and Tempe. Rather, it's a new and second possible Wal-Mart small-format grocery store format for the U.S.

During his speaking time at the conference, Lee Scott discussed format development at Wal-Mart, Inc., including the 15,000 -to- 20,000 square foot Marketside stores, as well as offering some of his views on Tesco and its Fresh & Easy Neighborhood Market format, venture and stores, as we wrote about here.

What was the most interesting part of the Wal-Mart CEO's talk though was when he said this:

"I think there's lots of opportunity for (new smaller) formats (for Wal-Mart) in the U.S. A store that might remind you of a Bodega store is clearly possible." (A Bodega is a small grocery store typically found in Spanish-speaking neighborhoods.)

Yes, Wal-Mart, Inc. is investigating creating and opening small-format, bodega-like grocery stores in selected U.S. market regions -- and not just small grocery stores geared only to Hispanic shoppers -- but a modern version of the corner grocery store positioned to mass consumers of all ethnic backgrounds.

This wouldn't be a new development for Wal-Mart, at least when it comes to its Wal-Mart- Mexico division, where the retailer has opened a number of these small-format bodegas or grocery stores as part of its multi-format strategy which has made Wal-Mart the number one food and grocery retailer in Mexico today.

Additionally, Wal-Mart also has been demonstrably improving and growing its Hispanic and Latino food and grocery category expertise across all store categories over the past decade. Its added Hispanic products (and improved the merchandising) in all of its existing format stores, and as we reported here on May 7, 2008 opened its first large-format store (in Garland, Texas) positioned specifically to Hispanic consumers.

But when Lee Scott uses the term "bodega" he isn't saying exclusively that these small-format U.S. grocery stores would be markets geared only to Hispanic or Latino consumers. Instead, the small grocery stores could be in some cases geared to Hispanic shoppers, and in other cases small grocery markets positioned to the public or consumer base at large. They would be more mainstream grocery stores, unlike having the more upscale combination fresh, prepared foods and grocery format of Marketside.

The inspiration for the discussion of these small-format grocery stores comes from how well the retailers bodegas are doing in Mexico, along with its decision to develop the Marketside stores in the U.S., combined with Wal-Mart's observations about what we call the small-format food and grocery store international revolution going on throughout the world.

Wal-Mart also is looking at opening small-format stores via its Asda division in the United Kingdom. Small-format food and grocery retailing is hot in that nation, where Tesco, Sainsbury's, the Co-operative group, Marks & Spencer, Waitrose, Aldi, Lidl and Netto all operate various styles and format types of small-format stores.

Here's what Wal-Mart CEO Lee Scott said earlier this month at the Goldman Sachs retail conference about Wal-Mart's current and future expansion, including small-format stores, in the U.S.:

"We (Wal-Mart) are going to take the opportunities to expand that are presenting themselves now because of the weakened economy. With prices on fuel and food going up, we now are having an increased number of communities contacting us and asking us to build a Wal-Mart store in their town or state and some of those are the very towns or states you would have read about historically that are not enchanted by a beautiful Wal-Mart store."

Scott also commented at the conference that Wal-Mart's smaller Supercenters, which we've reported on and written about, are doing even better than the company had hoped they would:

"It turns out our move to a capital efficiency (opening fewer new stores than originally planned and opening numerous smaller Supercenters) focus this past year was absolutely the right thing to do. What we're seeing worldwide is those stores closest to the customers seem to be doing the best. In the U.S., we're finding our 100,000-square-foot supercenter in the metro areas being very successful and the 175,000-square-foot store, versus the 190,000-square-foot store, is doing very well."

The fact the smaller Supercenters -- something Wal-Mart avoided doing for decades before trying it a couple years ago -- are doing better than the retailer imagined they would also is stoking the optimism at corporate headquarters in Bentonville, Arkansas over smaller-format retailing in general, particularly in the food and grocery categories. This includes lots of optimism about Wal-Mart's existing 40,000 -to- 45,000 Neighborhood Market supermarkets, along with the soon to open Marketside stores. And like hope springing eternal, such hope, reinforced by reality, also can be the springboard for smaller (format) thinking.

As a result, we've learned the small-format "bodega" or more basic grocery store concept is being discussed and studied extensively at Wal-Mart corporate headquarters, which was why Lee Scott mentioned it as a trial balloon of sorts at the Goldman Sachs retail conference earlier this month.

In fact, there's a growing "Small-Mart" brain trust at Wal-Mart that is studying the U.S. mini bodega/modern version corner grocery store concept, along with a number of other small-formats for both the U.S. and elsewhere throughout the world where the retailer has divisions.

Real Estate Group Selling the Four Wal-Mart Marketside Small-Format Grocery Stores Set to Open on Oct. 4; Plus Data on the Store's Exact Sizes

Santa Ana, (Southern) California retail real estate development company Red Mountain Retail Group (RMRG), which owns the four former drug store buildings in Mesa, Chandler, Gilbert and Tempe, Arizona that Wal-Mart has turned into its small-format Marketside food and grocery stores which are set to open on October 4, has sold one of those buildings and has the other three on the market. (The Mesa Marketside store is the one pictured above.)

Red Mountain, which acquired the four drug store buildings in Arizona along with three others in a seven unit purchase, has sold the Wal-Mart Marketside store building at 910 East Elliot Road in Tempe, Arizona for $6,061,604 at a 6.3% cap rate, according to a Red Mountain group executive. The deal closed on September 19. It was arranged by Kevin Boeve of the Marcus & Millichap real estate firm. The Tempe Marketside store is 16,480 square feet.

RMRG, which has offices in Phoenix, Arizona and the Central Valley, California city of Clovis near Fresno, as well as having its headquarters office in Santa Ana, also has the other three Wal-Mart Marketside store buildings -- the stores in Mesa, Chandler and Gilbert -- up for sale, according to Pete Oakley, who is handling the sale out of the firm's Santa Ana office.

Below are the locations, square footage and asking prices (in millions) of each of the remaining three Wal-Mart Marketside store buildings:

>Mesa, Arizona: 7561 E Baseline. Mesa, AZ 85209. Store Size: 16,516 square feet. Selling price: $6,516,000 at a 6.00% cap rate.

>Chandler, Arizona: 950 N McQueen Rd., Chandler, AZ 85225. Store Size: 17,075. Selling price: $6,602,000 at a 6.00% cap rate.

>Gilbert, Arizona: 838 West Elliot Road, Gilbert, AZ 85233. Store Size: 14,841 square feet. Selling price: $5,738,000 at a 6.00%.

The store sales information data provides us with the exact size of each of the Wal-Mart Marketside stores set to open on October 4., which is information no publication has previously published to date.

The Gilbert, Arizona Marketside store is the smallest of the four units, at 14,841 square feet, which is just slightly below the 15,000 -to- 20,000 square foot range we've said the stores will fall into.

The other three Marketside stores are closer to the same size. From least -to- most square feet they are: Tempe at 16,480; Mesa at 16,516; and Chandler at 17,075, which has the most square footage of the four stores.

Red Mountain Retail Group was founded in 1999. The group says it currently has a retail portfolio consisting of 75 centers in seven U.S. states. According to the company, that portfolio totals 4,860, 568 square feet of retail space worth about $1 billion.

The retail real estate firm focuses on acquiring distressed or challenged shopping centers and buildings in those centers, rehabilitating the centers, and then finding new tenants, which is what it did in working with Wal-Mart to locate its first four Marketside stores in the Phoenix Metro region in the vacant, former drug store buildings.

RMRG also buys selected portfolios of retail real estate, with an eye towards those it thinks have untapped opportunity if rehabilitated and then marketed properly, as well as participating in other facets of the commercial retail real estate industry

Michael Mugel, the founder and CEO of Red Mountain, says the deal with Wal-Mart to convert the four former drug stores into the small-format Marketside food and grocery markets was a "short notice, thrill ride."

"We are thrilled to have had the opportunity to work with Wal-Mart in the opening of their first Marketside stores in the nation," Mugel says. "We enjoy short notice, thrill ride opportunities like this where we can serve our client's needs by matching our core values (relationships first, execution second and the belief the 'Anything is Possible') with their ever expanding concept requirements."

In other words, Wal-Mart didn't spent lots of time in the location phase of the development process for Marketside in terms of wondering where its first stores would go. It knew where it wanted the first four Marketside stores -- in four cities where Tesco has existing Fresh & Easy stores, along with at locations in those cities close to existing Fresh & Easy markets -- and then found a real estate firm to find it four locations within 1 -to- 2 miles from Fresh & Easy store locations in each of those four cities, which is the geographical case of each of Wal-Mart's first four Arizona Marketside stores.

Selling the first of the four Marketside store buildings, along with putting the three others on the market, isn't being done by RMRG for any other reason other than the fact that's what the company does -- acquires centers and buildings, improves them sometimes, then finds a tenant for the buildings, as it did with Wal-Mart for its Marketside stores.

Once that cycle is completed, the firm, like most others in its business, then sells the buildings for a profit since the buildings not only now have a tenant in them but also come with the improvements done to them by that tenant. This adds value and creates a profit. The firm can then use that cash flow generated from the sales to purchase other "challenged" properties it can improve, find tenants for, and then turn over.

Leasing rather than owning the buildings also provides many cash-flow and other advantages to Wal-Mart, not the least of which includes not laying out upfront cash to own the store buildings of what is a brand new format, Marketside, for the retailer.

Don't be surprised if additional Wal-Mart Marketside stores open in Arizona -- and in California -- in centers and buildings acquired, owned and rehabilitated by the Santa Ana, California-based retail real estate development company.

Fresh & Easy Buzz Gets A Peek -- And it Was Only A Peek -- Inside One of the Four New Wal-Mart Marketside Stores Opening in Arizona On October 4

Fresh & Easy Buzz was able to get a peek inside one of the four new small-format combination grocery and fresh foods Marketside stores Wal-Mart will open in the Phoenix, Arizona Metropolitan region cities of Chandler, Mesa, Gilbert and Tempe on October 4, just nine days from today.

And it was just a peek. The store windows were mostly covered, which meant we had a limited viewing opportunity. People were working in the store. And there was lots of stuff all over inside making it difficult to get a full perspective. Despite these challenges, we did get a look inside. We're hoping to get a better look prior to October 4.

What we were able to see of the Marketside store's interior confirms much of what we've been writing since December, 2007 about the format's interior design and look.

Here's what we were able see from our tiny viewing point:

>The Marketside store interiors use muted colors, like those you can see on the outside of the store pictured above, which is the Mesa Marketside unit, along with those type colors used in its Marketside logo. The design statement trying to be made inside the store is: FRESH foods and ingredients in a warm and comforatble (but not lavish) retail environment, in our analysis.

>The floor is of polished concrete. No tiles. It looks utilitarian yet attractive. It looks similar to what Whole Foods Market, Inc. does (polished and sometimes colored concrete floors) in most of its natural foods supermarkets. It's also similar to the floors in Fresh & Easy stores.

>Stylistic fresh foods and meal solution-oriented graphics are depicted in a couple places inside the store.

This is part of Wal-Mart's visual attempt to reinforce its "What's For Dinner" meal solutions positioning of the Marketside stores in our analysis. Wal-Mart's answer to that question is the Marketside stores' offering of in-store fresh-prepared foods, along with a limited assortment of basic, natural and specialty food and grocery items, fresh meats and produce (including value-added offerings), other perishables, and items in a couple of other categories featured in the 15,000 -to- 20,000 square foot stores.

>We were able to see a tiny portion of what looked like the store's "eat-in" seating area but couldn't view it completely. This is the small area in the Marketplace stores we've written about previously in which about 9 -to -10 customers can sit and eat prepared foods at in-store. The stores also have in-store kitchens. Further, from what we could see, there's a counter-like eating area. It looks attractive but not something one would describe as "gourmet" or "lavish."

>Some of the trimming and fixtures inside the Marketside are of polished blond wood, lending a slightly upscale look to the store interior.

>The store shelving isn't "warehouse style" like it is in Tesco's Fresh & Easy stores or like in Trader Joe's markets. Rather, it's more conventional food store shelving, more similar from a small-format perspective to what Safeway is using in its first and currently only "The Market" format store, "the market by Vons," in Long Beach, California.

Unfortunately, the shelving was blocked by various items and boxes. So between that fact and our tiny window of viewing opportunity we can't report much more on the look of the shelving than what we were able to see based on those conditions.

Overall, we would describe the interior of the Marketside store as attractive; a slightly upscale but still utilitarian look. It's not the super high-end look of a Bristol Farms in Southern California or newer Whole Foods Market upscale store, for example.

But it is more upscale in design and look than a Fresh & Easy store and slightly more so than a newer Trader Joe's small-format market. However, from what were able to view, it looks to us to be a bit less upscale in design than Safeway's "the market by Vons" in Long Beach, California and SuperValu-owned Jewel-Osco's new "Urban Fresh by Jewel," small-format grocery store which just opened in Chicago.

Reader Request

If any Fresh & Easy Buzz readers have gotten a closer view of one of the four Marketside stores in Chandler, Mesa, Gilbert and Tempe, Arizona set to open on October 4, please feel free to share what you saw by using the comments box below. Of course, any and all other comments regarding Wal-Mart's Marketside (as well as Fresh & Easy) also are welcomed. Just click the comments link below -- and write.

Breaking News: Wal-Mart to Open its Four Marketside Food and Grocery Markets in the Phoeniz, AZ Metropolitan Region on October 4

As we've been reporting on Fresh & Easy Buzz for months, Wal-Mart, Inc. has planned an early Fall, 2008 opening of its small-format, combination grocery and in-store fresh, prepared foods Marketside stores in the Phoenix, Arizona Metropolitan region.

Wal-Mart has now announced and confirmed on its http://www.marketside.com/ website the specific date the four Marketside grocery markets will open in the Phoenix Metropolitan region cities of Gilbert, Mesa, Chandler and Tempe.

All four Marketside stores are set to Open on Saturday, October 4, just 11 days from today, according to the announcement on the Marketside website. [Click here to see the announcement (look in the right corner) on the website. Click here for maps showing the location of each store in the four Arizona cities.

Wal-Mart is planning to hold grand opening day celebrations at each of the four Marketside stores -- which as we've previously reported don't use the Wal-Mart name on them just as Tesco does not use its corporate name on its small-format Fresh & Easy stores -- according to a spokesperson at Marketside's corporate office in Tempe, Arizona, where one of the four stores is located.

Earlier this year Wal-Mart set up a separate office in Tempe, Arizona where it will run operations and related functions for Marketside. The retailer has been using the office in Tempe to interview corporate and store-level employees to work for Marketside.

Workers and vendors are still busy today getting the four Marketside stores ready to open on October 4, according to a Fresh & Easy Buzz correspondent who visited two of the store sites -- in Gilbert and Mesa -- today.

Additionally, a vendor who has been doing business with Wal-Mart's Marketside said their was much activity at the Tempe location yesterday.

Also, Mike Thomas, who is the store manager of the Marketside store in Chandler, reports activity is frenetic at his store in preparation for the October 4 opening.

Thomas also confirms something we've been writing about Wal-Mart's Marketside stores since we first reported on the development when Fresh & Easy Buzz was started in December, 2007. That is that the Marketside stores will offer basic groceries and its other goods at affordable and even discount prices.

There's been much talk in various publications that Marketside would be "upscale" both in look and price. based on our source information all along we've disagreed with that assessment.

Instead, we've suggested Wal-Mart plans to not only offer up-market products like in-store, fresh, prepared foods and specialty items in the Marketside stores -- along with a limited assortment of basic grocery items -- but plans to do so at affordable prices. This strategy has only gotten stronger at Wal-Mart since the U.S. economy has continued to worsen and food price inflation has continued to soar.

"Our pricing is going to be very competitive and accessible to everybody," Chandler Marketside store manager Mike Thomas says.

Thomas adds that Wal-Mart's message with Marketside, which we've reported before in Fresh & Easy Buzz, is an answer to the question "What's For Dinner." His answer to that question: "We're providing a meal solution for people on the go, people who want something that's convenient, fresh and affordable," adding he believes shoppers will like how "What's For Dinner" is priced at the Marketside stores. We will find out if that's the case in 11 days.

Wal-Mart is playing up this particular theme with signs it has on the windows of the four Marketside stores set to open on October 4. The signs announce the store openings on that date, along with having additional illustrated signage depicting a table place-setting with the text: "Marketside: Recommended by food critics and financial planners. Come shop with us," The "food critic" message on the sighns is the culinary message, the "financial planners" message being the value proposition to go along with it in terms of marketing.

As we've previously reported, all four of the Arizona Marketside stores, which average 15,000 -to- 20,000 square feet, are located in buildings which housed former drug stores. That's the model Tesco has used for many of its current 83 Fresh & Easy Neighborhood Market grocery stores.

Tesco's Fresh & Easy markets, which average 10,000 -to- 13,000 square feet, offer a limited assortment of basic grocery products (about 65% under its fresh & easy brand and the remaining 35% (give or take a few percentage point either way) being national and regional brands), fresh produce, meat and bakery goods, craft beers and specialty wines, a small assortment of non-foods, and a significant selection of fresh, prepared foods.

The Marketside stores essentially offer a similar assortment of products in a slightly bigger store -- 15,000 -to- 20,000 square feet for Marketside vs. 10,000 -to- 13,000 for Fresh & Easy.

A key merchandising element of both Tesco's Fresh & Easy and Wal-Mart's Marketside is a substantial offering of fresh, prepared foods.

The Marketside stores will differ in the category however. Fresh & Easy makes all of the ready-to-eat and ready-to-heat prepared foods items at a central kitchen at its distribution center in Riverside County, (Southern) California and then delivers the products to the stores in Southern California, Nevada (Las Vegas Metro area) and Arizona (Phoenix Metro region).

Wal-Mart's Marketside stores on the other hand will make the fresh, prepared foods right in-store. Each store has a kitchen in it, along with a small "eat-in" area that can seat about 9 -to- 10 customers at any given time. Like Fresh & Easy though, the major thrust of Marketside's prepared foods merchandising will be "to go" sales to shoppers.

Wal-Mart believes the Marketside in-store prepared foods offering -- including having a kitchen right in the store, along with the eating area -- gives the stores a significant point of differentiation vis-a-vis Tesco's Fresh & Easy, along with helping to create more of a culinary, fresh food-oriented image for the chain as part of answering that "What's For Dinner" question it's using in Marketside's positioning.

David Wild, who headed the Marketside format development team as the mega-retailer's former director of new business development, told us this while he was still with the company, saying he felt it's a key point of differentiation for Marketside. Wild left his position with Wal-Mart earlier this year to accept the job of CEO of Helfords, the United Kingdom's leading automotive parts and bicycle-making company.

Wal-Mart Marketside also has been conducted consumer "taste-test" panels of its fresh, prepared foods offerings in Arizona for a number of months now, using the data to refine its in-store prepared foods, along with using the information from the particiapants as a guide in pricing the various items.

We will be able to observe if this indeed is a point of differentiation for Marketside over Fresh & Easy beginning on October 4.

Tesco has Fresh & Easy markets in all four of the Arizona cities -- Gilbert, Mesa, Chandler and Tempe -- where Wal-Mart will open its Marketside stores on October 4.

Additionally, Wal-Mart has located each of those four Marketside stores, in each of the cities, within 1 -to- 2 miles from a Fresh & Easy small-format grocery store. Wal-Mart also has Supercenters, Sam's Club stores and Wal-Mart Neighborhood Market (40,000 -to- 45,000 square feet) supermarkets all over the region.

With the close proximity of the Marketside and Fresh & Easy stores in those four cities, the similarities in merchandising and product offerings of both formats, along with the resources of both Wal-Mart (number one global retailer) and Tesco (number three global retailer), beginning in 11 days small-format food and grocery retailing is going to get even more interesting than it already is in the Phoenix, Arizona Metropolitan market. Stay tuned.

Wal-Mart's Chief Merchandising Officer Reiterates CEO's Words that it's 'Keeping Tabs' On Tesco's Fresh & Easy Today at Bank of America Conference

Fresh & Easy Buzz broke a little news on Friday, September 12 when we reported in this piece, "CEO's Can Say the 'Darndest Things': Wal-Mart CEO Lee Scott Says He Has Faith Tesco Will Succeed With Fresh & Easy; It's A Small-Mart World After All, that Wal-Mart, Inc. CEO Lee Scott spoke out about Tesco's Fresh & Easy Neigborhood Market at the recent Goldman Sachs (investment bank) retail conference in New York City, saying the mega-retailer was keeping close tabs on Fresh & Easy and that he has faith Tesco will ultimately succeed in the U.S. with its small-format, convenience-oriented grocery stores.

It appears CEO Scott has taken the leash off (at least by his lead) his senior executives as far as talking about Tesco's Fresh & Easy is concerned at investment conferences. Previous corporate policy has been not to discuss Tesco's U.S. small store convenience grocery venture.

At an investment conference today sponsored by Bank of America, Wal-Mart chief merchandising officer John Fleming repeated a portion of what Lee Scott said at the Golden Sachs conference, which is that Wal-Mart is keeping a close eye on Tesco's Fresh & Easy stores in Southern California, Nevada and Arizona. The Bank of America conference was broadcast over the Internet.

"We have people in those stores (Tesco's Fresh & Easy) every day, every week," Fleming said at today's Bank of America conference. "We continue to monitor the progress that they make." [Fresh & Easy Buzz is well aware of this fact, having run into two Wal-Mart executives once in a Fresh & Easy store.]

Wal-Mart CEO Scott said essentially the same thing at the recent Goldman Sachs retail conference less than two weeks ago.

Is anybody else seeing the beginning of a coordinated Wal-Mart message just weeks before it opens the first four of its Marketside small-format, convenience-oriented combination basic grocery and fresh foods grocery markets in Mesa, Gilbert, Chandler and Tempe, four cities where Tesco has existing Fresh & Easy stores in the Phoenix, Arizona Metropolitan region? The four Marketside stores are located within 1 -to- 2 miles from Fresh & Easy stores in all four cities.

Wal-Mart's John Fleming also made some new news at today's Bank of America conference. The chief of merchandising said Wal-Mart is studying different store formats beyond its Supercenters that combine a full grocery store with general merchandise.

As we've reported, Wal-Mart has converted at least two vacant big box buildings into what we refer to as hybrid Supercenters. These two stores, both in California's Central Valley, one in Sanger near Fresno and the other in Modesto in the Northern San Joaquin Valley, are "hybrid" because at about 100,000 square feet they are 80,000 square feet smaller than the size of the average Wal-Mart Supercenter, and half the size of Wal-Mart biggest Supercenters, which are 200,000 -to- 230,000 square feet.

The Sanger hybrid Supercenter is open. The Modesto store is set to open this fall. Both of the stores feature all of the departments--both in food, grocery and general merchandise--that a larger Supercenter does. They just are scaled back a bit in size to fit the smaller footprint of the stores.

Additionally, we reported in May that Wal-Mart is converting a number of its Southern California Wal-Mart Discount Store format stores that sell general merchandise and a limited assortment of grocery products but no fresh foods, into Supercenters, which do sell fresh foods and offer a full selection of food and groceries. The retailer is adding from 30,000 -to- 50,000 sqaure feet onto these discount format stores, all of the additional square feet being devoted to food and groceries, including fresh produce, meat, deli and bakery departments.

We've also learned Wal-Mart plans to follow this same Southern California plan selectively with other discount format stores in other parts of the U.S. The retailer also plans to find and convert other vacant big box buildings in the 100,000 -to- 125,000 square foot range, like the Sanger and Modesto Supercenters, into hybrid Supercenters in other parts of the U.S., as well.

Additionally, Wal-Mart has created a brand new Supercenter store prototype. That prototype allows the retailer to build smaller sized Supercenters by merely adjusting certain elements of the prototype design. Sort of a "Supercenter in a box," so to speak.

Our information is this new Supercenter prototype will serve and aid Wal-Mart in its development of the new formats to sell groceries and general merchandise in that merchandising chief John Felming mentioned at today's Bank of America conference.

Wal-Mart has become very agile and nimble at new format development of late, including changing its long held views that its Supercenters can't be adaptable in terms of size and product selection.

As we frequently write in Fresh & Easy Buzz, Wal-Mart is creating a multi-format food and grocery retailing strategic dynamo. It's all part of the retailers plans to be the food and grocery category sales market share leader throughout the United States.

Thus far the Wal-Mart multi-format food and grocery retailing juggernaut includes its Supercenters (now including the first of the smaller hybrids), its Sam's Club stores, Wal-Mart Neighborhood Market, its 40,000 -to- 45,000 square foot stand supermarkets, and now Marketside--which are 15,000 -to- 20,000 square foot food stores, and will feature a limited assortment of discount-priced basic groceries, fresh meat, produce, bakery and deli, a small assortment of natural, organic and specialty foods, wines and beers, and in-store fresh, prepared foods. The stores will feature a kitchen in-store, along with a small eat-in area for about 9 -to- 10 shoppers at a time.

Wal-Mart is far from finished with its new format innovation. Stay tuned. Of course, neither is Tesco, which owns and operates Fresh & Easy Neighborhood Market USA.

Thinking Out Loud: We Reply to A Reader's Request About Retail Strategy; Tesco's Fresh & Easy and Wal-Mart's Marketside

We received a note via email earlier today from a regular reader who's an executive in the food and grocery industry. The reader has been following our coverage of Wal-Mart's new small-format Marketside store development, including the comparisons and contrasts we've made between the two global retailers' (number one, Wal-Mart, and number three, Tesco) small-format food and grocery retailing concepts, Tesco's Fresh & Easy Neighborhood Market and the yet but soon to open (in the Phoenix, Arizona Metropolitan region) Wal-Mart Marketplace stores.

In the note, among other comments and questions, the Fresh & Easy Buzz reader and industry executive asked us to write about a strategy we would use were we running Wal-Mart's Marketside division, with a focus on keeping Tesco's Fresh & Easy from being successful in Southern California, the Las Vegas, Nevada Metropolitan region, and the Phoenix Metro region in Arizona, where its stores (currently 78) are located.

We accepted the challenge.

Here is one strategy we would potentially use, keeping in mind our focus if we were running Marketside for Wal-Mart would not be one primarily focused on attempting to prevent Tesco's Fresh & Easy from succeeding, although defense has its place as part of a comprehensive success strategy.

The strategy: Background

Tesco's Fresh & Easy Neighborhood Market is conducting a strategy based on rapidly opening stores for three main reasons:

1. It's strategy with Fresh & Easy is based on having a critical mass of stores open close to each other (about 1.5 -to- 2 miles) in its selected market regions. This is based on the Fresh & Easy stores being "neighborhood" markets, along with making it cost effective to advertise, as well as using the stores themselves as the most important marketing medium of all. The medium (store) is the message. Its what we call the Tesco Fresh & Easy "critical mass" strategy.

2. Fresh & Easy is currently a single banner and format strategy for Tesco. Therefore it needs numerous stores as rapidly as possible to build critical mass and sales.

3. Tesco's low frills store design (low overhead), everyday low price strategy with Fresh & Easy requires sales volume. One has to have lots of stores as fast as possible to have a chance of achieving this sales volume (plus high volume for the low margins during the start up years) in order to feed what Tesco has created in terms of its model and infrastructure.

One result however of Tesco's rapid store opening program, 78 stores in a mere 10 months so far, is that in our analysis many of the store locations are poor ones. These include numerous Fresh & Easy stores that are in former Albertsons, Ralphs supermarket and Rite Aid drug store buildings that those respective retailers vacated for various reasons, among those reasons being store sales underperformance at the locations.

It's possible Tesco can succeed in many of those stores where the others didn't because of Fresh & Easy's small-format and operating model. However, its also likely down the road a bit Tesco will evaluate many of those "shotgun opened" locations for underperformance.

This is where our strategy comes in, following our readers request and guideline.

The strategy

Using its own scan-based and proprietary data, along with other available outside data and market intelligence that's available for the Southern California, Metro Las Vegas and Phoenix Metropolitan region markets, we might develop a very well detailed matrix mapping the estimated sales of each Fresh & Easy store by location in each region.

Once completed, this would be our blueprint for where we locate Marketside stores. Using the old rule that 80% of sales come from 20% of the locations (its a bit too high but is illustrative which is why its been in use for so long), we might then strategically place the Marketside stores, which are a bit larger than the Fresh & Easy Markets (10,000 -to- 13,000 for Fresh & Easy, 15,000 -to- 20,000 for Marketside), in such a way so that one Marketside store could potentially do as much in weekly sales (remember they are about 5,000 -to- 6,000 square feet bigger in size) as two or three Fresh & Easy stores (remember Tesco's strategy is to locate the stores 1.5 -to- 2 miles away from each other).

Using this strategy, 50 Marketside stores strategically placed/located against existing Fresh & Easy stores (which is an advantage Wal-Mart has since 78 Fresh & Easy's already exist) could potentially equal the sales of 100 -to- 150 Fresh & Easy Neighborhood Market grocery stores using our theory, if such a strategy worked.

The strategic placement in this way of the Marketside stores also would if successful render numerous Fresh & Easy stores (remember the critical mass strategy of locating the markets 1.5 -to- 2 miles from each other) to be sales underperformers because of the placement/locational effect of the Marketside stores. If one Marketside store could equal the sales of three Fresh & Easy stores in an area, something would have to give, such as eventually closing at least one of the three Fresh & Easy stores since it would be impossible for all three to survive under the strategic theory.

Additionally, keep in mind we are just running Marketside, and not all of Wal-Mart, only per our readers request and guidlines. Having all of Wal-Mart in our strategic sphere of influence would broaden our strategical arsenal dramatically.

In the real world, Wal-Mart, Inc. has its combination grocery and general merchandise Supercenters, its Sams' Club warehouse stores, which sell a full complement of basic groceries and fresh foods, and its 45,000 square foot Neighborhood Market supermarkets to use along with Marketside in a strategic methodology like we describe above. It's all about sales, not the size, format, store banner or number of stores you have.

For example, place a Supercenter four miles from four Fresh & Easy stores. Put a Sam's Club store in the same general area. Locate a 45,000 square foot Wal-Mart Neighborhood Market say just 1 -to- 1.5 miles from two of those three Fresh & Easy stores. Then put a Marketside unit about 1 mile away.

Because the four Wal-Mart formats are different enough, and in the case of the Supercenter and Sam's Club also have extensive general merchandise offerings, it isn't likely the various Wal-Mart formats would cannibalize each other. But they could have negative effects on sales at the four Fresh & Easy stores. Or two out of the four, which achieves the strategic objective of the plan. [By the way, this is the multi-format food and grocery retailing strategy we believe Wal-Mart plans to plug Marketside into.]

We have no inside knowledge that Wal-Mart is following such a strategic plan vis-a-vis Tesco's Fresh & Easy. What we do know, and have reported on, is that Wal-Mart's first four Marketside stores, which open in just a few weeks, will be located in four cities in the Phoenix, Arizona Metro area: Gilbert, Chandler, Mesa and Tempe.

What we do know is the Wal-Mart Marketside stores are within 1 -to- t2 miles from existing Tesco Fresh & Easy grocery markets in each of the four cities. In addition, Wal-Mart has Supercenters, Sam's Club stores and Neighborhood Market supermarkets in and around these four cities. They are strategically located vis-a-vis both the Marketside stores and the Fresh & Easy stores. Additionally, Arizona happens to be one of Wal-Mart's top three new store growth markets in the U.S. for its Supercenters, Sam's Club stores and Neigborhood Market supermarkets.

Further, as we've previously reported, Wal-Mart plans to open a Marketside store in San Diego, California (it is rather close to a Fresh & Easy store in the city) and a store in nearby Oceanside, which also is fairly close to a Fresh & Easy market.

And, as we've also reported, Wal-Mart is very carefully and selectively searching for Marketside store locations in other parts of the Phoenix Metropolitan region, in Nevada, and in Southern and Northern California. We say selectively searching because Wal-Mart does not plan to open Marketside stores at even a rate one-half that in which Tesco is opening Fresh & Easy stores in its first year.

So, based on what we've reported, as you can see, Wal-Mart looks like it may be planning a strategy similar to the one we merely cooked up to accept our loyal reader's challenge, along with hopefully providing some strategic thinking in the minds of our readers as a whole.

As we said at the start of this piece, the strategy is more of a conceptual or academic one designed to offer an idea for our reader and to our readership using the question as the premise of the strategy. However, like so often is the case, it's interesting to watch how observable facts can often seem to look very much like conceptual strategies, at least in part.

CEO's Can Say the 'Darndest Things': Wal-Mart CEO Lee Scott Says He Has Faith Tesco Will Succeed With Fresh & Easy; It's A Small-Mart World After All

Art Linkletter, the creator and host of what arguably is considered the most successful TV show in American broadcasting history, the long-running but not around anymore Art Linkletter's House Party, decades ago wrote a best selling book (which is still in print) as a companion to his TV show. The book's title: "Kids Say the Darndest Things."

A regular feature of Art Linkletter's TV show was having a panel of kids on each episode. The host would ask the kids various questions, many of them serious in nature. And true to the book's title, those kids would indeed nearly always say the "darndest things." We are reminded of this because in the world of business, corporate CEO's sometimes say the "darndest things." That of course is in the eye of the beholder.

And Wal-Mart, Inc. CEO Lee Scott (pictured above at the top) said what many in an audience full of investors and retail industry analysts at last week's Goldman Sachs (investment bank) annual retail industry conference tell Fresh & Easy Buzz was in their view the "darndest thing." We don't think it is all that "darned" ourselves. But we'll explain that later.

During his presentation at the Goldman Sachs conference, Wal-Mart CEO Scott was asked about his thoughts on Tesco's Fresh & Easy Neighborhood Market, the United Kingdom-based global retail chain's small-format food and grocery retailing venture in the Western U.S. states of California, Nevada and Arizona, which is now up to 82 stores in only 10 months of store operations.

Answering the question, Scott said he has heard mixed reviews about how Tesco's Fresh & Easy Easy was doing, and that he wasn't paying all that much attention to it on a regular basis, two sources who attended the retail conference told Fresh & Easy Buzz.

However, he then said: "The thing that bothers me is Tesco is a very good retailer. I have a lot of faith that they will find their direction and it is something we need to pay attention to," our sources said.

Why don't we think Wal-Mart CEO Lee Scott's "endorsement" of Tesco's Fresh & Easy is saying the "darndest thing?" Because it's essentially what Fresh & Easy Buzz has been writing since last December; 'that those who rule out Tesco's overall performance as a top-notch global retailer which has the corporate ability to course correct under current CEO Sir Terry Leahy, do so at their own peril.'

Of course, just because Lee Scott is saying it doesn't mean he is right. And, just because Tesco has been a success most elsewhere in the world where it has ventured, doesn't mean it will succeed in the U.S. with Fresh & Easy. Other strong British retailers like Sainsbury's and Marks & Spencer have met their respective Waterloos in the United States after all. And finally, just because we believe Tesco has the ability to succeed over time in the U.S. with Fresh & Easy if it makes the right changes doesn't make it so either. The jury is still out, in other words.

However, just as Wal-Mart got to be the world's number one retailer through incremental steps and improvements, so too has Tesco followed a similar path in becoming the world's number three retailer, after France's Carrefour Group. Never rule Tesco out.

This is not to say Tesco doesn't have numerous problems with both its Fresh & Easy format, operations, marketing and sales, as we point out in the blog regularly.

Further, it remains our analysis that many of these problems, such as a lack of a clear retail format positioning for the Fresh & Easy stores, lack of a proper focus on local merchandising, mediocre marketing and promotion, and a few other key factors must be corrected if Tesco is to succeed with Fresh & Easy. But as we've also pointed out, there is time to fix these and other problems. It isn't even one year out since the first store opened after all. That comes in late October of this year.

The problem is thus far we've observed a less than willingness by Fresh & Easy's senior management team in the U.S. to course correct in ways that could solve many of these problems and put the retailer on a much faster course towards success. Of course, that is our analysis.

There have been some positive changes. And these changes, such as improving the interior decor in the stores, adding some additional local products and a few others, have not only improved the stores but also have impacted the stores' positively in gaining increased sales. But more is needed.

Average weekly sales

Beginning in January until about mid-April, our estimates based on information from sources was that the Fresh & Easy stores were doing average gross sales per-store, per-week of between 70,000 -to- 100,000. Based on our sources, we now estimate average sales per-store, per-week of about 125,000 -to- 150,000.

Additionally, some of the Fresh & Easy stores, such as the store in Los Angeles' Eagle Rock Neighborhood, the store in Manhattan Beach, California that opened on July 2, and a few others, are hitting the $200,000 per-week sales goal that Tesco has as its target for all the stores to be averaging for this point in time.

There also remain some very poor performing stores, such as Fresh & Easy store number one in Hemet, California, which we estimate is averaging less than $100,000 a week in gross sales, based on information form sources. There are other stores in this poor-performing category besides the Hemet store, including more than one in the Las Vegas Metropolitan market.

Deep discount coupons and sales inflation

A stark and important reality though is that one of the key drivers of Fresh & Easy's increased sales over the last six -to- eight months has been its aggressive use of $5-off customer coupons good for what amounts to a 25%-off discount on any grocery purchase of $20 (or more). These coupons are mailed out regularly to shoppers homes and given out in multiples at the stores even when customers make small purchases.

A Fresh & Easy Buzz team member recently spend about $15 in a purchase at a Fresh & Easy grocery store and was given three of the $5-off coupons, for example. A regular reader in Las Vegas says he receives one or two of the deep discount coupons almost every time he makes a purchase at the Fresh & Easy in his neighborhood, saying sometimes he says no thanks since he usually has five or six at home at any one time.

Fresh & Easy has been distributing these coupons regularly and in an on-going way since the first stores opened last fall. Customers are used to them. Many consumers even site the deep-discount coupons as the primary reason they shop the Fresh & Easy stores.

For example, if you read Fresh & Easy store reviews on online sites such as Yelp.com or Chowhound.com (and others), you will see the $5-off coupons come up often as a prime reason reviewers say they shop the stores. We've also received numerous emails, as well as blog comments, saying the same thing. Further, we've interviewed hundreds of Fresh & Easy shoppers outside stores since last fall, and the coupons as a primary reason for shopping the Fresh & Easy markets come up often in those discussions.

Eventually the grocery chain will have to reduce the face-value of the coupons considerably or eliminate them completely. When that happens, we will see a true test of how the stores do since they are positioned as everyday low-price neighborhood markets but the deep-discount coupons are a hi-low retailer tool, serving to artificially discount the price of the products in the stores when used because the face value (25%-off on a $20 purchase) are so high.

Therefore, keep in mind our estimate of average weekly store sales for the chain of about 125,000 -to- 150,000 is based on Fresh & Easy's aggressive use of the $5-off (on purchases of $20 or more) coupons. Reduce the coupons value by say half, which is the offering Tesco gives consumers when it uses similar coupons in the UK, eliminate it completely, or merely use them infrequently as most U.S. chains would if they even used such deep-discount coupons, and it's our analysis those weekly sales averages could likely drop significantly.

Earlier this year, Tesco PLC CEO Sir Terry Leahy said publicly the company would release sales and profit/loss figures for Fresh & Easy Neighborhood Market USA for the first time, like the company does for its other international divisions, in September, 2008 when it reports its interim numbers. That September, 2008 interim sales and profit release date is just a couple weeks away. Therefore, if Tesco does release these numbers, we will be able to have a much clearer picture of Fresh & Easy's performance to date.

We decided to go out on the limb and publish our current per-store, per-week sales estimates of average weekly sales of 125,000 -to- 150,000 anyway. If our source information (average weekly sales estimate) is wrong, we will admit it if it's the case when Tesco publishes the Fresh & Easy sales numbers in a couple weeks.

Lee Scott: A wily CEO

But Back to Wal-Mart CEO Lee Scott and his faith in Tesco's long term prospects with Fresh & Easy. Ironically, another reason wily Lee Scott didn't say the "darndest thing" is because Wal-Mart is staking lots of effort and money on a new format, Marketside, which is very similar in size (Fresh & Easy stores average 10,000 -to- 13,000 square feet, Marketside 15,000 -to- 20,000) and format to Tesco's Fresh & Easy.

Wal-Mart has only created five retail formats in its history--the original discount store, the hypermarket which became the Supercenter, Sam's wholesale Club, its 45,000 square foot Wal-Mart Neighborhood Market supermarket format, and now Marketside. The mega-retailer does not create formats out of whim. Doing so is a deliberative corporate process at Wal-Mart, especially under Lee Scott.

As we've reported and written about often in Fresh & Easy Buzz, Wal-Mart just happens to be opening its first four small-format combination basic grocery and fresh foods Marketside stores in four city's (Gilbert, Mesa, Chandler and Tempe) in the Phoenix, Arizona Metropolitan region where Tesco has Fresh & Easy stores. Not to mention these four Marketside stores are each less than two miles away from Fresh & Easy units.

Like the Fresh & Easy small-format markets, the Wal-Mart Marketside stores will feature a selection of basic groceries, many under a store brand, along with fresh meats and produce, and fresh, prepared foods. The only difference in the prepared foods category between Marketside and Fresh & Easy is that the ready-to-eat and ready-to-heat foods will be prepared right in the Marketside stores, which have in-store kitchens, along with small seating areas for some eat-in customers. The Fresh & Easy prepared foods are made at a central kitchen in Southern California and then shipped to the stores.

So, if we were cynical, and we are not of course, we might suggest Wal-Mart CEO Lee Scott in many ways has a significant vested interest in having faith in the success of Tesco's Fresh & Easy venture--at least in the medium term.

After all, although Wal-Mart does not say so publicly, a considerable part of its strategy with Marketside is an anti-Tesco Fresh & Easy one. In other words, the world's number one retailer, which also now happens to be the number one seller of food and groceries in the U.S., thinks it can build a better small-format, convenience-oriented grocery and fresh foods "Small-Mart" than one of its two chief global competitors, Tesco, can, even though Tesco has experience doing so and Wal-mart doesn't. We will see.

But it is more than that overall. As we write frequently, Tesco PLC is a world class global retailer. It has shown the ability to course correct in places like Asia and Eastern Europe, where its stores initially were not doing well so it corporately made positive changes.

After all, its not just what Fresh & Easy Neighborhood Market USA CEO Tim Mason and his senior executive team do poorly or do well that will result in the ultimate success of Fresh & Easy. That final decision, at least as long as he remains CEO, will be up to Tesco PLC CEO Sir Terry Leahy, who has called some pretty good shots regarding Tesco's strategic growth and successes since he's been the global retailers CEO.

We can't wait to hear what Sir Terry has to say about Wal-Mart's Marketside when he has a chance to visit one of the stores in Arizona, which will start opening in just a few weeks.

Financial Times Follows Fresh & Easy Buzz's Lead in Reporting on Wal-Mart's Plans to Open Marketside Stores in Southern California

Fresh & Easy Buzz was the first publication to report months ago that Wal-Mart is planning to open some of its new small-format Marketside combination grocery and fresh foods markets in Southern California (and Northern California), along with its first four markets set to open in the Phoenix, Arizona market this fall.

We also are the only publication to date (on June 6, 2008) to report Wal-Mart is considering locating a small-format Marketside store in a major new mixed-use development in Reno, in northern Nevada.

We first reported Wal-Mart planned to locate Marketside stores in Southern and Northern California as early as December, 2007. Since then we've filled out that story with numerous pieces about the development.

For example, in this May 18, 2008 story, "Wal-Mart Looking For Sites in California For it's Small-Format 'Marketside' Grocery Stores," we reported on the progress Wal-Mart is making in terms of searching for Marketside store locations in Southern and Northern California.

Fresh & Easy Buzz also was the first to report that among the regions and cities Wal-Mart is targeting in Southern California for its Marketside stores includes San Diego County, including downtown San Diego itself.

Today's edition of the Financial Times newspaper is confirming Fresh & Easy Buzz's enterprise reporting that Wal-Mart indeed has plans to open some of its small-format Marketside grocery stores in Southern California. Specifically, the publication is confirming Wal-Mart plans to open two Marketside stores in the San Diego region, one in downtown San Diego as we reported and the other in the nearby city of Oceanside.

The downtown San Diego location (in the new residential condominium project) is the one we previously reported on in what is often referred to as the city's Gaslamp downtown district.

You can read the Financial Times' report, "Wal-Mart takes on Tesco's US chain," which confirms Fresh & Easy Buzz's reporting of months ago, here.

More Marketside units to come in California

As we've reported previously, the San Diego region is far from the only part of Southern California , and California as a whole, where Wal-Mart plans to open Marketside stores.

In addition, as we've also reported based on information from our sources, Wal-Mart also has plans to open its small-format Marketside grocery stores--which will offer a basic selection of grocery products, fresh foods, and in-store prepared ready-to-eat and ready-to-heat meals and side dishes--in Northern California, with a specific focus on the San Francisco Bay Area.

Wal-Mart has had a difficult time being able to gain approval for its combination food, grocery and general merchandise Supercenters in the Bay Area because of city government and consumer group opposition to the mega-stores which average about 180,000 square feet. Therefore, the retailer hopes in-part to be able to increase its market share in the food and grocery categories in the lucrative Bay Area market by locating the smaller and different style Marketside stores, which don't use Wal-Mart at all as a part of the banner, in the region.

Wal-Mart also believes the somewhat upscale positioning of the Marketside stores, which includes the in-store fresh, prepared foods offering, is "ripe" for Bay Area consumers, who are among the most food-conscious shoppers in America.

The original Marketside development team, led by former Wal-Mart executive David Wild, conducted "Project Marketside" out of Wal-Mart's offices near San Francisco, where the retailer operates its Wal-Mart.com online business from.

It was no accident then Wal-Mart director of new business development Wild chose to do so. He lived in the Bay Area before returning to the United Kingdom to take a CEO job with Britain's leading auto parts and bicycle-maker earlier this year, and took much of the inspiration for the in-store fresh, prepared foods approach for Marketside from a number of the region's grocery chains and independents such as Andronico's Markets, Lunardi's, Draegers, Mollie Stone, Whole Foods Market and even Safeway Stores, Inc. These Bay Area grocers, along with others, are among the pioneers of in-store fresh foods merchandising in the United States.

The San Francisco Bay Area also provided a perfect backdrop for the urban strategy aspect of Marketside, which is to locate the small-format stores in big city's like San Diego and San Francisco, as well as putting them in suburbs like the suburban Phoenix, Arizona cities the first four stores set to open in just weeks are located in.

We also know Wal-Mart has searched for more than one location in the city of San Francisco itself for its Marketside stores, along with looking in San Jose and various Bay Area suburban cities.

Tesco's Fresh & Easy and Northern California

Tesco's Fresh & Easy Neigborhood Market has at least 21 locations to date locked up in the San Francisco Bay Area for its small-format combination basic grocery and fresh foods markets. Further, Tesco is in the process of looking for and gaining leases on additional sites for its Fresh & Easy stores in the Bay Area.

Tesco also currently has leases for about 19 Fresh & Easy stores for the Sacramento Metropolitan region in Northern California. It plans to add more locations in the Sacramento Metro region as well.

The first Bay Area and Sacramento region Fresh & Easy stores were scheduled first to open before the end of this year. Tesco then changed this to having the first stores open in early 2009. However, based on our sources and observation of the states of the various store projects in Northern California, it's our estimation the first Northern California stores won't likely open until at least the beginning of the second quarter of 2009, likely no earlier than April, 2009.

Fresh & Easy and Southern California

Southern California, which Wal-Mart will enter with its small-format Marketside stores, remains Tesco's number one market region for Fresh & Easy. Over half of its current 78 stores are located in the region, as is its corporate headquarters and 800,000-plus square foot distribution center. Tesco also will open many more Fresh & Easy stores in Southern California this year and in 2009.

As is the case with the four Marketside stores opening this fall in Arizona, which are all located one -to- two miles from existing Fresh & Easy markets, the planned Marketside unit in Oceanside, California also is located in that same range.

Locating the Marketside stores close to existing Tesco Fresh & Easy markets is part of (but far from exclusively) Wal-Mart's strategy with its small-format grocery and fresh foods stores.

Wal-Mart wants to see how the format differences--chief among those differences being the Marketside stores will make its fresh, prepared foods in-store (as well as having in-store seating for about 10 customers at a time) rather than having the foods prepared at a central kitchen and then shipped to the stores like Fresh & Easy does--of its Marketside stores play out head-to-head with Tesco's Fresh & Easy.

Since Marketside is merely one-part of a three format food retailing strategy for Wal-Mart--along with its Supercenters and 45,000 square foot Neighborhood Market supermarkets--the retailer plans to observe and analyze the sales at those Marketside stores located near Fresh & Easy grocery markets rather than rollout scores of stores rapidly as Tesco is doing with Fresh & Easy, which is a single food retailing strategy for Tesco thus far in the U.S.

Resources:

Click Here for a selection of Fresh & Easy Buzz past reports and stories about Wal-Mart Marketside.