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.

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

The supermarket industry trade publication Supermarket News reports in a brief item this morning that a Wal-Mart, Inc. spokesperson told the publication on Friday that its initial four Marketside small-format communtiy grocery stores set to open this fall in the Phoenix, Arizona Metropolitan region are part of "a small-scale pilot, and we have no plans [for the format] beyond a handful of stores."

The comment from the Wal-Mart spokesperson came in response to a report published in the Financial Times that quoted the Marketside website as saying the company expected to start with 10 stores and evolve to between 1,000 and 1,500 locations with more than $10 billion in annual sales," according to the Supermarket News report this morning.

As we've written all along since first reporting last year on Wal-Mart Inc.'s development of the 15,000 -to 20,000 square foot Marketside format stores--which will feature in-store fresh, prepared foods, fresh produce, fresh meats and a selection of basic, specialty and natural food and grocery products--Wal-Mart plans are to open an initial handful of the Marketside stores, see how they perform, and then move forward with additional stores slowly and carefully, unike Tesco with its Fresh & Easy grocery markets, which is taking a rapid new store opening approach, having thus far opened 68 of the combination fresh foods and basic grocery markets in Southern California, Nevada and Arizona in a 10 month period, with many more new stores on the way.

This strategy is for what to us are obvious reasons. First, Wal-Mart already is the number one food and grocery retailer in the U.S., with thousands of stores under four formats--Supercenters, Sam's Club warehouse-style club stores, Wal-Mart Neighborhood Market supermarkets and Wal-Mart general merchandise discount stores.

The discount stores, which sell a limited assortment of perishable and dry grocery products (but no fresh meats or produce) are the only one of these four Wal-Mart formats that don't feature a combination of both fresh foods and grocery items in them. Therefore, for Wal-Mart, Marketside is merely a fifth format in its multi-format U.S. strategy, albeit a very different one, and one that like its 45,000 square foot Neighborhood Market supermarkets focuses esclusively on food and grocery sales.

A tale of two (different) strategies: Tesco and Wal-Mart

On the other hand, Tesco's current strategy in the U.S. is a single small-format food and grocery retailing one, with its 10,000 -to- 13,000 square foot Fresh & Easy Neighborhood Market combination basic grocery, fresh, prepared and specialty foods convenience-oriented grocery stores. As such, Tesco's plans is to open hundreds of the Fresh & Easy markets over the next few years, primarily in the Western U.S. but also potentially elsewhere in the country, in order to create a "critical mass" of neighborhood grocery stores primarily in suburban but also in urban neighborhoods.

Additionally, except for the similarity of the Fresh & Easy and Marketside stores (small-format, combination fresh foods and groceries and the like) the strategies of the two mega-international retailers couldn't be more different in terms of format-focus, strategy and tactics in the U.S.

Marketside: More than a test

However, we also know Wal-Mart's strategy and plans for Marketside are far more ambitious than merely opening the four Arizona stores and then sitting back for some time and evaluating their performance before looking for other store sites in other states and market regions.

For example, we've reported that Wal-Mart is taking to a commercial developer in Reno, Nevada about putting a Marketside in a new urban mixed-use retail and residential development in that city. [Read the story: Is A Wal-Mart 'Marketside' Small-Format Grocery and Fresh Foods Store Coming to Reno, Nevada?]

We've also reported (May 18, 2008) Wal-Mart has been talking to commercial real estate people about various potential Marketside store locations throughout California. [See that story here: Wal-Mart Looking For Sites in California For it's Small-Format 'Marketside' Grocery Stores.]

In fact, Fresh & Easy Buzz was told long ago by a source who was in a position to know first hand about Wal-Mart's Marketside plans, that as early as late last year the marketside development team led by David Wild, who recently left Wal-Mart, Inc. to take the CEO position at British car parts and bicycle company Helfords PLC, that strategic plans called for locating Marketside stores in the San Francisco Bay Area, including more than one location in the city of San Francisco.

Wal-Mart only has a few Supercenters in the nine-county San Francisco Bay Area, which has a population of nearly 7 million people, and is one of the most food-oriented regions in America. Wal-Mart has wanted a stronger food and grocery retailing presence in the Bay Area for years, but has been unable to get approvals for most of the Supercenters its proposed in the region's city's because of opposition by many of the citys and numerous consumer and neighborhood groups to having the mega-Supercenters in their communities.

Our source told us Wal-Mart was looking to Marketside as a way to increase its food and grocery sales market share in the Bay Area by locating the small-format, more upscale stores in city's throughout the region. The argument goes that it would be rather difficult for city's and community groups to use the same arguments they've used in opposition to the Supercenters--too big, bad for the environment, ect.--against Wal-Mart's proposals to build and open the small-format Marketside stores in the region. Wal-Mart also isn't calling the stores "Wal-Mart" Marketside in part for that very reason.

The Marketside development team led by David Wild did its work in fact out of the San Francisco Bay Area, where Wal-Mart operates its Wal-Mart.com online business from. Wild also lived in the San Francisco area even though he had the title of corporate vice president for new business development. Nearly all Wal-mart corporate officers work out of headquarters in Bentonville, Arkansas.

Commercial real estate sources in the Bay Area also have told Fresh & Easy Buzz about conversations they've had with members of the Marketside development team in the past regarding store locations in the Bay Area, including in the city of San Francisco, as we've reported previously.

The emphasis on in-store fresh, prepared foods for Marketside in fact was greatly influenced by David Wild's touring numerous San Francisco Bay Area grocers that are famous for quality in-store fresh, prepared foods merchandising, including Draeger's (3 stores), Andronicos (8 stores), Mollie Stone (9 stores), Whole Foods Market (about 25 Bay Area stores), and a number of others.

Southern California also is on Wal-Mart's radar for Marketside. based on source information we know that Wal-Mart representatives have had discussions with real estate agents and developers about numerous potential sites in Southern California, including a site in downtown San Diego's popular Gaslamp district which the retailer may be close to signing a lease on.

Therefore, based on our reporting and source information, we suggest Wal-Mart's strategy and plans for Marketside are neither the ambitious 1,500 stores and $10 billion in annual sales scenario reported in the Financial Times, although such long range plans have been discussed by the Marketside development team when it was headed up by David Wild, nor the tiny mere four store test the Wal-Mart sopkesperson told Supermarket News is the case in its report this morning. (We aren't criticizing Supermarket News. It is reporting what it was told by the spokesperson.)

At a June 6, 2008 press conference held by Wal-Mart's CEO for U.S. operations (in conjunctions with the company's annual meeting) Eduardo Castro Wright, a Fresh & Easy Buzz correspondent asked Mr. Wright about the retailer's expansion plans, including in California, for Marketside. He neither confirmed such plans nor denied them.

However, he made it clear in a number of ways during the press conference, and when he spoke earlier about Marketside at Wal-Mart's annual meeting prior to the press conference, that the retailer's plans for Marketside went far beyond a mere four store test. [Read the June 6 report, "Wal-Mart USA Chief Eduardo Castro-Wright Confirms Fresh & Easy Buzz Reportage on 'Marketside,' Adds Information From the WM Corporate Side.]

Further, Fresh & Easy Buzz has talked with a person who interviewed for a position at Wal-Mart's new Marketside corporate offices in the Phoenix, Arizona region. That person was told by a Wal-Mart executive that the retailer has plans to open Marketside stores far beyond the Arizona market, including in California and numerous other U.S. states. The strategy was described to this person as a combination "fill-in" and upscale retailing (with a fresh, prepared foods emphasis) focus for the company.

In the piece linked above, Eduardo Castro Wright uses this same term, "fill-in," meaning the retailer is positioning the Marketside stores in markets like Arizona for "fill-in" rather than primary food and grocery shopping, meaning it hopes consumers shop its Arizona Wal-Mart Supercenters for major purchases and Neighborhood Market supermarkets and Marketside stores to "fill-in" their shopping after doing the primary at the Supercenters.

The upscale focus refers to using the Marketside stores as a way of attracting higher income and more quality food-oriented shoppers, which is a market Wal-Mart hasn't tapped into with any of its formats. These are shoppers who primarily shop Whole Foods Market and other more upscale regional food retailers' stores. In Arizona this includes Bashas-owned AJ's Fine Foods, Sprouts Farmers Market, Safeway's Lifestyle format stores, Tesco's Fresh & Easy (its fresh, prepared foods and organic groceries sides of the business) and Trader Joe's, for example.

Based on all of our reporting and sources, we can say Wal-Mart's plans at present for Marketside aren't to open 100 or more stores a year to achieve that 1,500 store, $10 billion a year sales number anytime soon, like the report in the Financial Times suggests is the case. But, such a strategy (those figures) wasn't put on the Marketside website as a joke by a hacker either.

Conversly, Wal-Part's strategic plans for Marketside also aren't the mere test-oriented strategy the Wal-Mart spokesperson told Supermarket News is the case.

Lowering expectations almost always best

Unlike Tesco's Fresh & Easy, which used a public relations strategy to create a huge buzz about its Fresh & Easy stores prior to the first store opening, Wal-Mart is taking the complete opposite approach, playing down the Marketside development as a test in order to keep expectations low. It takes digging and reporting to learn what we have thus far about Marketside.

As all political and corporate image masters know (well, should know), managing media and consumer (or voter) expectations is key. And creating lowered expectations, especially for something or someone new to the scene like a small-format groery store from a retailer known for big boxes, almost always is the smartest strategy in business as well as in politics.

Tesco set the bar too high with its pre Fresh & Easy PR campaign. As a result, the mainstream media played it up like it was the second coming of food and groery retailing in America. Once this expectation was set, it has resulted in every negative aspect of Tesco's Fresh & Easy's operations being focused on more so than had Tesco set expectations lower with its public relations efforts like Wal-Mart is doing with Marketside.

Sometimes a retailer, business or politician can be the victim of its own publicity blitz, ezpecially when the expectations game isn't properly maanged or not managed at all. Our analysis is that Tesco did this with its Fresh & Easy campaign (the British Invasion headlines and such). Wal-Mart is making sure to avoid this with Marketside.

By doing so, Wal-Mart is giving the company more room to fail and then course correct with Marketside. This is a good idea since the retailer's culture isn't historically one that is known for either small-format, specialty-oriented or in-store fresh, prepared foods merchandising, despite the fact its done lots of preparation for its Marketside format launch.

Wal-Mart has zero reasons to play-up Marketside--and many reasons to low-key the small-format development. But don't mistake the brawny big-box (and soon to be small-box too) retailer's low-key approach to Marketside for a mere four store test, that if it doesn't work Wal-Mart plans to just close the stores and move on to something else.

The retailer has put lots of research and development into Marketside, including bringing in executives like David Wild--who spent many years working for Tesco in the UK and elsewhere in Europe, and was involved in its initial small-format Tesco Express store development--along with the hiring Jack Sinclair in January of this year as executive vice president of grocery merchandise for Wal-Mart USA. Wild has left but was ready to move onto other new business development tasks before leaving anyway.

Mr. Sinclair spent his entire food retailing career before joining Wal-Mart this year in the United Kingdom (UK), first for many years with Tesco PLC, and then for 14 years before that with the former British Safeway chain, which was acquired last year by Morrisons, the UK's fourth largest supermarket chain. To paraphrase the popular culture saying: 'Jack' (Sinclair) knows small-format food and grocery retailing, along with knowing Tesco and it's brands of small-format, convenience-oriented food retailing, according to those who've worked with him or know him.

He has been involved in the Marketside small-format store process along with his other duties since joining Wal-Mart in January, especially since the new business development team formerly headed by David Wild turned over Marketside to the Wal-Mart operations and grocery merchandising team a couple months ago as the retailer prepares to open the first four stores this fall in the Phoenix, Arizona Metropolitan region.

Wal-Mart may be being low-key with Marketside, but it's a top corporate priority. Similar to what the retailer has done with its Neighborhood Market supermarket format, which has undergone slow but steady expansion, and the expansion of which Wal-Mart has recently been kicking up a couple notches, so too does it plan to grow and evolve Marketside rather than look at it as a mere hit or miss test.

Again, the key fact to remember is that for Wal-Mart, Marketside is a part of its national multi-format food and grocery retailing strategy with its Supercenters, Sam' Club stores and Wal-Mart Neighborhood Market supermarket format. Understanding that fact is central to observing and understanding Marketside as it developes after the first four stores open in Arizona this fall.

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.