Breaking Buzz & Analysis
Tesco-owned Fresh & Easy Neighborhood Market is currently developing a 2,000 square-foot version of its 3,000 square-foot 'Fresh & Easy Express' convenience-oriented food and grocery market, according to multiple sources familiar with the project.
Fresh & Easy is constructing a prototype of the 2,000 square-foot store inside a space it controls near the 10,000 square-foot Fresh & Easy Neighborhood Market unit in Los Angeles' Eagle Rock Neighborhood.
El Segundo, California-based Fresh & Easy Neighborhood Market used that very same space to build a mock-up of its 3,000 square-foot 'Express' format stores, of which their are currently about 10 units, all in Southern California.
The new 2,000 square-foot market, called an F2 in Fresh & Easy speak - the 10,000 square-foot stores for example are referred to internally at Fresh & Easy as F10's, the 3,000 square-foot stores F3's, and the handful of 7,000 square-foot markets the grocer operates are F7's - is basically a scaled-down version of the 3,000 square-foot stores, according to sources who are familiar with the project.
For example, current plans call for smaller refrigerated, frozen food and produce cases than in the 3,000 square-foot stores as a way to compensate for the reduced square footage, according to our sources. Some types of cases and shelving also could be eliminated for the same reason, our sources say.
Neither Tesco or its Fresh & Easy Neighborhood Market chain have announced the development of the 2,000 square-foot stores. This is the first time Tesco's plans for a smaller version of the 3,000 square-foot 'Fresh & Easy Express' store is being reported.
Analysis
The first question any food and grocery retailing analyst or grocer worth his or her salt should ask upon reading this report is: 'Why a 2,000 square-foot version of what already at 3,000 square feet is a very small-format grocery market.?
The answer to that question, according to our sources (and to our reporting and analysis of Tesco and its Fresh & Easy chain for five years on) - and it's what we said was the primary driving force behind the 3,000 square-foot 'Express' format in our stories about the stores last year - is that Tesco's Fresh & Easy is searching for ways to reduce its new store development and opening capital cost while still growing its store count.
Since launching its California-based small-format fresh food and grocery chain in 2007, Tesco has always said it will break even financially with Fresh & Easy - which lost about $245 million in its most recent fiscal year and has lost about $1.5 billion over its five year history - by achieving scale, which means opening numerous stores over a short period of time.
For example, from 2006 to 2010 Tesco said it still planned to have at least 500 stores in four-to-five years, on its way to 1,000 stores over an about six or seven year period, which would be 2013-end-to-2014. It said this despite the fact it's paused opening new stores for many months at least three times in Fresh & Easy's five year history. The most recent period being at present.
But in 2011, not long after he took over as CEO of Tesco in March of last year, Philip Clarke said the United Kingdom-based retailer planned to open just 400 Fresh & Easy stores, which would allow Tesco to break even with its U.S. grocery chain by the end of its 2013 fiscal year, which ends February 2013.
Not many months later Clarke and Tesco changed those plans, saying instead of the 400 Fresh & Easy units needed to break even by the end of fiscal 2013, it had figured out a way to do so with just 300 stores.
But then earlier this year Clarke and Tesco pushed back Fresh & Easy's break-even time to the end of its 2014 fiscal year, at which time the retailer says it will then break even with Fresh & Easy Neighborhood Market. Tesco kept - so far - the 300 store number as the number of Fresh & Easy units needed to break even by the end of the 2014 fiscal year.
There are 199 Fresh & Easy stores in California, Nevada and Arizona.
Tesco's 2014 fiscal year-end is about two years away. That means it will have to build and open 101 stores between now and then to reach 300 units, which Clarke and company say is needed to break even at that time.
But Tesco has essentially stopped opening Fresh & Easy stores, with the exception of one or two here or there.
Instead, the retailer has embarked on a cost-cutting campaign of limited sorts with Fresh & Easy, which begs another key question any industry analyst or grocer should ask: "How can Tesco open 101 stores in two years - which is half as many as it's opened over the last five years - when beginning a couple months ago it essentially stopped opening new Fresh & Easy stores?
In fact, even if Tesco were opening Fresh & Easy stores at its high-point-pace, it would be near physically and logistically impossible, and not very smart, to open 101 stores in two years, particularly considering the continued poor performance of the California-based grocery chain and its need to reduce costs and raise margin at it to even come close to breaking even with Fresh & Easy
The answer to the question, as it pertains to the micro small-format store prototype being developed, isn't that Tesco is going to open 101 2,000 square-foot grocery markets - the format in development. For example, it's opened just 10 or so of the 3,000 square-foot Fresh & Easy Express stores in the year or so since the first unit was opened.
There are numerous reasons why they won't do so but here's a simple reason why if they do it won't help: The best 10,000 square-foot Fresh & Easy stores do about $150,000 in average weekly sales, and there aren't many of those units. That would mean the best of the 2,000 square-foot stores would do - at best - about 40,000 in weekly sales. If scale, as in growing sales by growing store-count, matters, 101 2,000 square-foot stores, even if they all were stellar performers, which they won't be, doesn't add up to a whole lot of annual sales when one looks at the big picture.
But hopes and dreams of reduced capital costs without considering the fundamental question - can 2,000 square-foot grocery stores operated the way Fresh & Easy operates them make any money - it appears spring eternal at Fresh & Easy Neighborhood Market.
Therefore, the Tesco-owned chain is developing a smaller version of its 3,000 square-foot 'Express' store, shaving 1,000 square feet off the store size.
Perhaps Tesco hopes it can "shrink" (in terms of store size) rather than grow (recall those days of a 1,000-store chain) its way to break-even with Fresh & Easy.
But size does matter. And a 2,000 square-foot grocery market, like all small formats - including 3,000 and 10,000 square-foot grocery stores - are fraught with problems when it comes to making money. Just ask Walmart - the now folded 'marketside by Walmart' stores and its fledgling small-format Walmart Express, which despite being 15,000 square-feet is having economic struggles endemic to many small-format grocery stores, particularly those run by chains without a history of operating such stores.
Or ask Safeway CEO Steve Burd, who put an end to the California-based supermarket chain's 'The Market' format (10,000-14,000 square-foot grocery markets ) after just two test units has been opened and operated for about one-year each. Both stores, in Long Beach and San Jose, California, remain open but Burd killed further development of the format over two years ago.
According to our sources, at present there isn't a set date for when - or if - the first 2,000 square-foot Fresh & Easy store will open. However, our sources say, Fresh & Easy already has a number of locations for the stores scouted out, although much of the grocer's real estate team was fired last Wednesday, which is an important indication of the future of Fresh & Easy Neighborhood Market's new store development plans.
Those plans: Little to nothing going forward for the rest of this year in terms of acquiring new store sites - there are already dozens of Fresh & Easy sites that have been sitting fallow for as long as four-to-five years - and opening new Fresh & Easy stores.
[Editor's Note: Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]
Showing posts with label marketside by Walmart. Show all posts
Showing posts with label marketside by Walmart. Show all posts
Wednesday, August 1, 2012
Wednesday, October 12, 2011
Walmart Closing its Four Marketside Small-Format Markets in Arizona October 21
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| The soon to be vacant 'marketside by Walmart' store in Tempe, Arizona. |
Walmart Stores, Inc. will close its four small-format "marketside by Walmart" fresh food and grocery markets in metropolitan Phoenix, Arizona on October 21, Fresh & Easy Buzz has learned.
Walmart representatives met with the employees of the four stores, located in the Phoenix metro-region cities of Mesa, Gilbert, Chandler and Tempe, today, informing the workers that the four stores opened on October 4, 2008 will be closed October 21, and that "marketside by Walmart" will cease to exist as a format for the retailer, according to our sources, which include employees at two of the four stores who we talked to shortly after they were told of the closings. [Click on this link to read stories about the October 4, 2008 openings.]
Walmart currently has no plans to open stores in the soon to be vacant "marketside by Walmart" locations under either its Walmart Market/Walmart Neighborhood Market smaller-to-medium format chain or its new Walmart Express small-format, according to our sources.
Walmart Stores, Inc. held its Annual Meeting for the Investment Community today. Presentations were made by CEO Mike Duke, Walmart U.S. chief Bill Simon and other key senior executives. But no mention was made of the retailer's plans to close the four "marketside by Walmart" stores, perhaps because the store employees were being told of the October 21 closure plans at the same time the investment meeting was taking place.
That Walmart Stores is closing the small-format stores (originally called "marketside") it opened as a test three years ago doesn't come as a surprise to Fresh & Easy Buzz. For example, we reported in September 2010 that Walmart planned to either close or convert the four "marketside by Walmart" stores to a different format by early this year.
We were correct about Walmart's plans to close the grocery markets at the time, although according to our sources the retailer eventually decided to wait until the fall, this month, to do so for a variety of reasons. As such, we did get the specific date wrong.
The fact of the matter is, as we've previously reported, Walmart essentially decided to shelve the "marketside by Walmart" format in late 2009. In 2010 the retailer made the decision to not open any additional stores and to close the four units in Arizona before the end of 2011.
Instead of "marketside by Walmart" becoming its small-format strategy for the U.S., Walmart then decided to go forward with a dual smaller-format store strategy: Walmart Market (smaller-to-medium format stores in the 28,000-to-60,000 square-foot range) and the small-format Walmart Express, which averages 10,000 (some urban versions like the one recently opened in Chicago) -to- 15,000 square feet.
In addition to the first urban region Walmart Express opened last month in Chicago, there are four other units, two in Arkansas and two in North Carolina. Those stores, all in rural towns, are in the 15,000 square-foot range.
In this December 21, 2009 piece - Wither Walmart's Small-Format 'marketside' Stores and Format? - we wrote about the eventual decline of Walmart's "marketside by Walmart" small-format experiment. On October 21 the final chapter of the test (and the withering) will come to an end when the four stores in metro Phoenix, Arizona are closed.
Perhaps it's appropriate (and also a bit ironic) that the four stores involved in Walmart's first new small-format experiment of its modern era, "marketside by Walmart," are located in metro Phoenix, because like in the story of the mythical "Phoenix" that rose from the ashes, a revamped smaller-to-medium format version of Walmart Neighborhood Market and a new small-format convience-oriented grocery chain, Walmart Express, have risen from its ashes.
Walmart U.S. president Bill Simon said at the investor conference today that the retailer plans to open an additional six Walmart Express stores by January, 2012, for a total of 11.
The format is still in test mode, according to Simon, and Walmart will decide whether or not it will go forward with more 'Express' stores once all 11 units are open and have a little history behind them.
"The roll out of Walmart Express is predicated on the review of our pilot program, and the opportunity to build greater scale in a particular market," he said.
Simon also said today that Walmart plans to open between 80-100 of the smaller-to-medium-format (28,000-60,000 square-foot) Walmart Market/Walmart Neighborhood Market stores next year.
This is a major smaller-to-medium format push for Walmart. To put the 2012 plans into perspective, Walmart has opened just under 200 Walmart Neighborhood Market stores in the U.S. since it launched the format and chain about 15 years ago.
The original Walmart Neighborhood Market stores averaged about 42,000 square-feet. The 28,000-60,000 square-foot Walmart Market/Walmart Neighborhood Market format is a revamp of the format.
But despite all this small (format) talk, the mega-supercenter will continue to be Walmart's primary format going forward over the next couple years.
Bill Simon said today Walmart plans to open 130-135 supercenters next year. The new supercenters will average 90,000-120,000 square-feet, although many will be larger than that. As such, the amount of new supercenter square-footage dwarfs that of the planned new smaller-to-medium and small format stores.
Additionally, he said Walmart plans to open as any as 385 new stores in the U.S. over the next two years, with the vast majority of those new units being supercenters.
The "marketside" brand name will live on in the form of Walmart's fresh foods brand (see here) of the same name, which includes a variety of fresh-prepared foods, deli items, bakery goods and packaged fresh produce.
The fresh food products under the"marketside" brand are sold in most of Walmart's supercenters, Walmart Neighborhood Market and Walmart Express stores.
But as Walmart expands its smaller format store base in the U.S. over the next couple years, none of those numerous planned new smaller stores it opens will be "marketside by Walmart" units.
Related Stories
December 21, 2009: Wither Walmart's Small-Format 'marketside' Stores and Format?
October 19, 2010: Walmart's Four 'Marketside by Walmart' Stores Set to Be Closed Soon Never Came Close to Weekly Sales of $100,000
October 11, 2010: Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store?
September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted
September 9, 2010: Walmart Plans to Close Arizona 'marketside by Walmart' Stores, Dump Format By Year-End or Early 2011
October 6, 2008: 'The Promotional Pundit:' How Wal-Mart Can Use its Supercenters to Create Customers For its New Small-Format Marketside Stores in Arizona
Additionally, click here, here, here, here and here for more related stories. Also see the links on the pages.
Monday, June 6, 2011
Back to the Future at Walmart: Walmart Express Today and Walton's Five and Dime in the 1950's
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| The Gentry Walmart Express above opens Wednesday. [Photo: Justin Wedgworth.] |
Walmart Stores' new Walmart Express format can be fairly described as one part modern small-format fresh food and grocery store, one part dollar format store, and one-part post-modern drug - and food - store, as in what Walgreens' and CVS Pharmacy have been doing for the last couple years in terms of adding additional grocery SKUs and fresh foods to their respective stores, for example.
The Walmart Express prototype stores in Gentry and Prairie Grove, Arkansas opening on Wednesday offer a selection of 11,000 -to- 13,000 SKUs of fresh and fresh-prepared foods, perishables, frozen foods and packaged groceries, along with paper goods, health and personal care items, toys, clothing items, office supplies, household goods, DVD's, pre-paid phones and other sundries in their 15,000 square-foot small boxes.
The Gentry and Prairie Grove stores also feature pharmacies in-store and gasoline pumps out front. Most of but not all the Walmart Express stores will have in-store pharmacies. The gasoline pumps are optional, depending on the location of the particular store.
The Gentry (population 3,100) and Prairie Grove (population 3,113) Walmart Express units open June 8. They are two of three stores Walmart has planned so far in three small towns in Arkansas. The third unit will be in Gravette (population 2,300). All three towns are near the retailer's global headquarters in Bentonville.
Next week Walmart will open its third Walmart Express store, in Ridgefield, North Carolina.
Later this summer the first Walmart Express store will open in an urban region - in Chicago, Illinois.
The retailer plans to open 15-20 of the Express format stores this year, including in rural Arkansas, North Carolina and metropolitan Chicago, Anthony Hucker, vice president of strategy and business development for Walmart U.S. said during a tour of the Gentry Walmart Express unit on Thursday, during Walmart's annual meeting week. The retailer's annual meeting was on Friday.
The Walmart Express stores also feature Walmart USA's "Site-to-Store" program, which we reported they would in this March 9, 2011 story -March 9, 2011 - Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas. Also note in the March 9 story we reported the format would offer a significant selection of fresh-prepared foods. It does, as noted earlier about the Gentry unit.. Walmart had not announced either offering prior to the store tour on Thursday.
The "Express" units will also except and cash customers checks like Walmart does at its other format stores, along with excepting food stamps and W.I.C. Vouchers.
Tesco's 175-store (California, Nevada and Arizona) Fresh & Easy Neighborhood Market, for example, doesn't except paper checks of any kind, nor does it except the Women's & Children's Program vouchers in its small-format stores, accept for excepting W.I.C. in one unit, its store at Central and Adams in south Los Angeles. [Read what we've written about the paper check and W.I.C. Voucher issue at Tesco's Fresh & Easy at this link WIC Vouchers.]
The Walmart Express stores are in a basic small-box, just like dollar stores and CVS' and Walgreens' stores are.
The interior of the Walmart Express store in Gentry, Arkansas, which is located less than half-a-mile from a Dollar General store and about 15 miles from the nearest Walmart supercenter, is utilitarian, including having exposed ducts and pipes and simple yellow-painted walls.
But it's also colorful and has plenty of signage throughout the store, including a number of signs that say: "If you want it, we'll get it," which are in reference to Walmart's "Site-to-Store" program, in which shoppers can order items from Walmart.com and have the goods delivered to the Walmart Express store for easy pickup. The feature could be a a significant source for pulling shoppers into the stores, in our analysis.
Walmart is also using the prototype or test aspect of the first Walmart Express stores in rural Arkansas in its favor: There's a suggestion box and forms at the stores' front-end, where customers can offer their opinions on items that should be carried.
There's also a "local" positioning aspect in the Gentry store's produce department, which features signs touting various produce items as coming from local growers.
Walmart has also attempted some cross-merchandising of food and non-food items in the Gentry store. For example, toasters were merchandised in the bread aisle and tea kettles and some coffee-related items were located in the packaged coffee and tea aisle.
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| Walton's small-format 5-10 variety store in the 1950's. |
In looking closely at Walmart Express, we have some breaking news: It's not so much a new format for Walmart as it is a return of sorts to founder Sam Walton's beginnings, because the small-box fresh-food-and-grocery-dollar-store-modern-era-drug-store hybrid format isn't all that different from what Sam started out with as a retailer over six decades ago - which was the old "five and dime" or variety store format.
Before the late Sam Walton opened his first Walmart store in Rogers, Arkansas in 1962 at age 44, he was a variety store retailer. Some might suggest that's what Walmart still is in the U.S. - just on a super-sized scale with its supercenters, which average abut 180,000 square-feet.
After getting out of the U.S. Military, Walton worked briefly for J.C. Penney (then a variety store chain) in Iowa, then bought and operated a Ben Franklin franchise variety store, and later a few more in other cities, in Newport, Arkansas.
Then in 1951 Sam opened the landmark Walton's Five and Dime store in Bentonville, Arkansas, where Walmart Stores, Inc. has been headquartered ever since.
Sam's "5-10" store, which has been preserved and is part of the Walmart Visitor's Center on North Main Street in Bentonville, offered what variety format (and many drug stores) stores of the era offered, which was a little bit of everything - sundries, health and personal care items, clothing and other soft goods, household items, toys, grocery items, prepared food, most often at a "lunch counter," and a whole lot more.
The closest and best example today of the 1950's-60's-era "five and dime" or variety store format is the dollar or 99-cent format store, which in addition to offering a variety of non-food items across many categories also offers packaged groceries, household package goods, health and personal care items, other traditional grocery store items and, in a growing number of cases, fresh foods like produce, meats, deli, perishables and frozen foods, as do a growing number of drug stores like some operated by CVS and Walgreens.
Enter Walmart Express - or "Walton's Five and Dime 2.0," the nickname were giving it in this piece today.
The 'dollar' and 'drug store' challenge
Dollar format stores have been the biggest competitor to Walmart in the U.S. over the last few years, as shoppers have searched for variety at low prices during the down economy. The small but packed-with-variety-at-a-cheap-price dollar format stores operated by chain's like Dollar General, Dollar Tree and numerous others have and continue to grow exponentially throughout the U.S., along with becoming places where American consumers love to shop.
Walmart hundred hopes Walmart Express will help it counter the dollar and 99-cent store challenge, along with allowing it to sell food and groceries in more places in the U.S., such as in small towns like Gentry, Arkansas (population 3,000) and more significantly in urban America, in places like metro Chicago, New York City, Los Angeles, San Francisco and elsewhere where it has little or no food and grocery retailing presence.
So like Sam hoped in 1951 when he opened Walton's Five and Dime, Walmart in 2011 is hoping to cash in on America's love of variety, with a focus on food and groceries, at a cheap price, by opening convenient-to-shop, smaller-format stores - Walmart Express.
Back to the future with Walmart Express
It's not 1951 and Walmart is no longer Sam Walton, his wife and a few hundred associates. Instead, Walmart is now the largest retailer in the United States and the world, along with being the number one-seller of food and groceries in America.
But as the old saying goes - the more things change the more they stay the same.
Among the many things Sam Walton built into the Walmart culture that remain today is the "Big C" - competitiveness.
Therefore, despite its status as America's leading retailer of everything, Mike Duke's (CEO) Walmart wants essentially the same thing Sam Walton wanted (and got) from those variety store beginnings so many decades ago - to dominate.
And were he here today, we suggest Sam Walton would be leading the merchandising charge on the Walmart Express format, reminding all those around him that, after all, he does have a little experience in variety store merchandising.
The big question is: Can Walmart do its variety store origins proud with Walmart Express?
Its small-format efforts over the last three decades - Neighborhood Market, marketside by Walmart and a couple other earlier attempts - suggest the answer is ... "maybe?"
However, Walmart's historical legacy, based on Sam's variety store origins and success, suggests the answer is ... it had better this time around. After all, Sam is probably watching.
Related Stories
June 1, 2011: Walmart Week 2011 - All Aboard the 'Walmart Express:' First Two Stores Open June 8
February 22, 2011: Walmart Stores, Inc. Announces the Name For its New Smaller-Format Food & Grocery Stores: 'Walmart Express'
March 9, 2011: Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas
January 10, 2011: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap
January 11, 2011: A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City
October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA
October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community.
October 11, 2010: Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store?
September 20, 2010: About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010
September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted
July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store
Also see these links - Walmart Stores, 20K Neighborhood Market by Walmart prototye, marketside by Walmart, Tesco Fresh and Easy California March, Wal-Mart, Walmart, Walmart Express, Walmart Market, walmart small store strategy, Walmart Stores - for related stories.
Wednesday, June 1, 2011
Walmart Week 2011 - All Aboard the 'Walmart Express:' First Two Stores Open June 8
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| The Walmart Express in Gentry, Arkansas [Photo: Justin Wedgworth.] |
[Editor's Note: Walmart Stores, Inc. holds its annual meeting, the Superbowl for retail geeks, on Friday. Starting today Fresh & Easy Buzz will be reporting on the mega-event, as well as offering analysis and commentary on the world's largest retailer, which also happens to be the number one seller of food and groceries in America. Below is our first story in the series.]
News/Analysis
All aboard the Walmart Express.
The title of this piece and the phrase above have a double meaning this week.
Walmart Express is the name of Walmart Stores, Inc.'s newest U.S. smaller-format (average 15,000 square-foot) convenience-oriented grocery store venture, the first two stores of which are set to open June 8 in the small towns of Gentry (see above) and Prairie Grove, Arkansas, near its corporate headquarters in Bentonville.
It's also "Walmart Week" this week - the annual week long series of events for investors and the media the retailer puts on Sam-Walton-style leading up to its annual meeting, which is on Friday (June 3).
And it's no accident the first two Walmart Express food and grocery markets are set to open a mere five days after the annual meeting on Friday.
Nor for that matter is it a coincidence the first three Walmart Express stores - there's a third unit opening soon in nearby Gravette - happen to be in Arkansas and close to Walmart's Bentonville corporate headquarters.
It's all a part of Walmart's grand plan this time around, which is to hang a big bright lantern on its smaller-format store plans.
This is unlike the last time it launched a small-format chain in the U.S., marketside by Walmart - opening four stores in four metro Phoenix, Arizona cities in August 2008 with little fanfare.
This time Walmart is doing smaller-format up big with Walmart Express, which is a very different format from marketside by Walmart, which as we've reported for some time is history - the four stores remain open for now - but also incorporates a number of the fresh and fresh-prepared foods aspects of those small-format stores, including a significant offering of Walmart's Marketside fresh foods brand, which was developed out of its three-plus year experiment with the namesake food and grocery markets in Arizona.
"Walmart Week" also includes a sneak peek at the two Walmart Express stores opening June 8 in the two small Arkansas towns near Bentonville.
The two stores are about 15,000 square-feet, as will be the size - give or take a couple thousand square-feet in either direction - of all the 'Express' format stores.
In a nutshell, Walmart Express is one-part small neighborhood grocery store, one-part convenience store and another part fresh food market, with a decent sprinkling of general merchandise tossed in. There are also a couple other surprises we'll talk about in a follow up piece.
The Walmart Express stores offer considerably more food and grocery items and general merchandise than Tesco small-format (10,000-12,000 square-foot) Fresh & Easy markets do. They also go head-to-head in the fresh foods category, albeit probably a little less extensively than Fresh & Easy's category positioning. An in-store pharmacy is also included in many of the Walmart Express stores.
Although small-box grocery store economics are extremely challenging - Walmart learned this with its 15,000-16,000 square-foot marketside by Walmart stores, none of which is even doing close to $100,000 in average weekly sales. Just one of the four marketside stores, the unit in Gilbert, is averaging in the $60,000 week range, while the other three marketside units average between $45,000-$50,000 in weekly sales, according to our sources, who are in a direct position to know the sales figures - the once big-box-only (at least in the U.S.) retailer from not-so- big-Bentonville is bound and determined it get it right this time.
Two-pronged smaller-format strategy
Walmart Express is part of the retailers two-pronged smaller-format food and grocery retailing strategy.
The second format is Walmart Market, which in addition to the new name for its existing Walmart Neighborhood Market stores (average 42,000 square-feet), is the name for a bunch of stores the retailer will soon start opening throughout the country, including in California.
The new Walmart Market stores, which will be similar to the existing Walmart Neighborhood Market units except for a few significant twists (see here), average 30,000-60,000 square-feet.
Walmart says it plans to open 30-40 smaller-format stores this year - which means from June -to December - and could have as many as 300-plus Walmart Express and Walmart Market stores open by the end of 2012, although its our analysis that number is overly ambitious.
Like Walmart Express, the mega-retailer plans to locate its new Walmart Market stores in urban rural and selected suburban areas, although the main focus for both smaller formats will be urban, at least in terms of percentage of overall store-count.
Next stop California
California, where Tesco has 126 of its 175 (28 in metro Phoenix, Arizona and 21 in metro Las Vegas) Fresh & Easy Neighborhood Market stores is, as we've been reporting for sometime now, a major focus for Walmart with its two-pronged smaller-format strategy - Walmart Market and Walmart Express.
And, as we've also been reporting for sometime, many of the locations Walmart is locking up in Califonia for both of the smaller-formats are near existing and future Fresh & Easy stores, in Southern and Northern California primarily.
The locations are both urban - metro Sacramento region and San Francisco Bay Area in Northern California; Los Angeles in Southern California, for example - suburban - Southern California's Orange County and elsewhere in the region - and rural, such as in a few small towns near Sacramento and the far southern portion of Southern California, to offer two examples.
Based on our knowledge of both the Walmart Market and Walmart Express formats and now stores - product selection, pricing and other criteria - a store of either format located near a Fresh & Easy fresh food and grocery market is going to put serious pressure on the sales at that existing Fresh & Easy store. And as noted, in California many stores of both of the Walmart smaller formats will eventually be located close to Fresh & Easy Neighborhood Market units.
Walmart is the number one food and grocery retailer in Arizona, based largely on its numerous supercenters in the state, so it's already a key pressure point for Tesco's Fresh & Easy in metro Phoenix - along with Koger's Fry's, Safeway, Albertsons and about five other chains - where Tesco has a mere 28 units.
And in Metro Las Vegas, Nevada, where Tesco has just 21 Fresh & Easy stores, the competition from Walmart and others - Safeway, Kroger, ect. - is so strong Tesco hasn't opened a new Fresh & Easy market in the region for over a year. In fact it closed five stores (along with five in Arizona and one in Southern California) in November 2010.
Fresh competition makes it less easy for Tesco
This leaves California for Tesco, where as we've written about in a serious of stories starting last year and into 2011, the United Kingdom-based retailer is betting the store when it comes to the success of Fresh & Easy Neighborhood Market. With 126 of its 175 Fresh & Easy stores in California, along with California being the near-exclusive focus of new store openings - the 21 Fresh & Easy stores opened so far this year are all in California, for example - it's the make-it-or-break it market region for the retailer.
The competition in the Golden State is already extensive for Tesco, as it tries to stem its losses - $300 million in the last fiscal year which ended February 26, 2011 - and break-even with Fresh & Easy by the end of its 2012/13 fiscal year, which is just 21 months away.
Walmart Express, the first two units of which will be open for business in Arkansas in seven days, and Walmart Market - both California bound, including numerous units in "Fresh & Easy neighborhoods" are going to ratchet up the already heavy competitive pressure on Tesco's Fresh & Easy even further.
And the 15,000 square-foot "Express" stores, with a major fresh and fresh-prepared foods offering combined with a more extensive grocery and general merchandise product selection than the Fresh & Easy format and stores have, will likely in our analysis take a significant number of shoppers from the Fresh & Easy small-format markets in those neighborhoods where the two formats have stores near each other.
If we were Tesco CEO Philip Clarke and his deputy, Fresh & Easy Neighborhood Market CEO Tim Mason, we would have made sure to have bought stock in Walmart Stores' earlier this year.
Then this week - perhaps wearing fake mustaches and using a southern USA accent, along with wearing hats with a "press" card tucked in the brim in order to get into the Walmart Express Arkansas store media tour - they could make their way to Bentonville and attend "Walmart Week," paying special attention (as we are) to every word spoken by Walmart CEO Mike Duke and Walmart U.S. president Bill Simon, as it pertains to the retailer's two-pronged smaller-format store initiative - and particularly as it pertains to California - where Tesco is betting it all with Fresh & Easy, and where Walmart will soon be opening numerous Walmart Express and Walmart Market stores, many eventually coming to a "Fresh & Easy neighborhood.
Related Stories
February 22, 2011: Walmart Stores, Inc. Announces the Name For its New Smaller-Format Food & Grocery Stores: 'Walmart Express'
March 9, 2011: Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas
January 10, 2011: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap
January 11, 2011: A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City
October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA
October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community.
October 11, 2010: Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store?
September 20, 2010: About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010
September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted
July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store]
Also see these links - Walmart Stores, 20K Neighborhood Market by Walmart prototye, marketside by Walmart, Tesco Fresh and Easy California March, Wal-Mart, Walmart, Walmart Express, Walmart Market, walmart small store strategy, Walmart Stores - for related stories.
Thursday, March 10, 2011
Simon Says: Walmart U.S. Chief Unveils 'Walmart Express' Logo; Says Hundreds of Smaller-Format Stores On the Way
Walmart Stores, Inc. today unveiled the new logo (above) for its new "Walmart Express" convenience-oriented, food and grocery-focused smaller-format stores. Express is one of three new smaller-format store banners that Walmart has either launched ("Walmart on Campus") or is preparing to launch. The third format and banner is "Walmart Market."
Read our story from yesterday about "Walmart Express" here - March 9, 2011: Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas
The logo unveiling was part of a presentation made today by Walmart U.S. president and CEO Bill Simon, at the Bank of America Merrill Lynch Consumer Conference.
At the conference Simon also said Walmart will rebrand its "Walmart Neighborhood Market" to "Walmart Market." You can view the "Walmart Market" logo here. You can also view a slideshow of Simon's presentation at today's conference here.
The "Walmart Market" stores will vary in size from on the low-end 25,000 to 30,000 square feet to as high as 60,000 to 70,000 square feet in some markets, Simon said.
The current "Walmart Neighborhood Market" supermarkets (about 200 in the U.S.) average 39,000-45,000 square-feet. Walmart has also had a smaller-format (about 20,000 square-feet) "Neighborhood Market by Walmart" store open for a couple years in Rogers, Arkansas. That store serves as the inspiration for the "smaller-end (in terms of square-feet) "Walmart Market" stores.
The head of Walmart's U.S. division said today the retailer plans to open hundreds of smaller-format stores over the next three years under the "Walmart Market," "Walmart Express," "Walmart on Campus," and perhaps other formats and names.
Walmart Stores opened its first "Walmart on Campus" store early this year on the University of Arkansas, Fayetteville campus. The store is about 3,500 square-feet. It offers a selection of convenience-oriented food, grocery and general merchandise items and has a pharmacy.
Simon said today Walmart's smaller-format push also includes possible acquisitions, which is something we've previously reported the mega-retailer from Bentonville has been considering doing. Among the potential acquisitions we've suggested readers look for is, on a national scale, the Rite-Aid drug chain. As we've said, Rite-Aid is ripe for an acquisition, as it's value has been in penny stock territory for far to long.
Also look for Walmart to make various regional acquisitions as part of its smaller store strategy, particular if it can find suitable deals in places where it plans to significantly focus the smaller stores, such as California, the Pacific Northwest, metro Chicago, New York and other east coast and New England regions.
Look particularly for Walmart to focus any such acquisitions in urban regions, again in U.S. regions where it has little current retailing presence. For example, sources recently told us Walmart has looked at some of the smaller stores A&P supermarkets is selling, and might sell if the offer is decent, in New York City and other metropolitan region on the east coast.
Approval of any acquisitions won't be a piece-of-pie for Walmart however, particularly any bog ones. Walmart's Simon said today, confirming what we reported in our piece yesterday, that the "Walmart Express" stores will be 15,000 square-feet. He said Walmart Stores plans to test different mixes of products in the first batch of "Walmart Express" stores as it fine tunes the new convenience-oriented format. "We are going to be adding hundreds of these in the coming years, and maybe more, depending on how these work out," he said.
The Walmart USA chief wouldn't say where the first "Walmart Express" stores will open, instead saying "secret handshake" is required to learn that information. But secret handshakes aside, we reported on where, and when, the first three units will be in our story yesterday here: Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas.
Here's some more of what Simon said about the retailer's smaller-format store plans, and how it fits in with Walmart USA's multi-channel strategy:
"We have been hard at work on this roughly 15,000 square-foot format ['Walmart Express.'] We're in the process of developing and we will open in the second quarter in both urban and rural pilots with pharmacy and without pharmacy, varying levels of fresh and other products, product assortment. The aim here, folks, is to get the right model so that we can rapidly roll these things out. At our peak we built about 350 supercenters in a year, so when we get this thing right, these are going to come real fast and we're real excited about this format.
We've been working kind of -- trying to work beneath the radar on this thing, although some of it has been a little bit above the radar I guess as you would say, and in the papers recently.
And there are also a couple of prototypes that have been built in super secret locations that I can't tell anybody about and there's a secret handshake to get in. But they're really, really nice and I think what you will see is a real effective implementation of a strategy that takes a continuum of retail from the -- as close as you can get to -- the small formats as close to the customer as you can get has the high velocity items that the customer wants as you move through the size from Express to market supercenter, you can flex inventory and assortment based on what the customer wants.
And if you overlay all of that with walmart.com and the multichannel experience, you can have whatever you want, whenever you want in a seamless supply chain. That is incredibly powerful and that's what we will be working on when these things open in the second quarter.
We also opened our first Walmart on Campus as a really, really cool format that the first on is on the campus of the University of Arkansas. We like to try things close to home so we can see it and play with it and tweak it a little bit. Frankly it's doing way better than anybody anticipated. It has a pharmacy in it and it serves the college students on campus with the pharmacy. A great, great price, as you know, from our pharmacy offering as well as pretty well everything that a college student needs with an almost endless supply of macaroni and cheese and Ramen noodles along with everything else that they go with.
There's been a lot of interest from a lot of other college campuses, the universities on this project, and it's something that we think is going to play out pretty well for us.
Small formats: I want to take just a minute to talk to you about it. It's something that is not new to Walmart, not new at all. We have -- in fact, most of our markets around the world operate small formats from Todo Dia in Brazil to Bodegas in Mexico, ChangoMas is in Argentina, PALi is in Central America, this one is from Costa Rica.
We run small formats all over the world and these small boxes are among the most profitable businesses that these countries run. So as we borrow and learn from them to build the US small format portfolio, we think we can deliver that end-to-end continuum that will give access to customers wherever they might be with the products that are most relevant to them in the markets that they are in.
And that's the last bullet point here and that's the multichannel element of this thing. The whole thing becomes kind of turbocharged or supercharged or multiplier with multichannel. We believe we are in a unique position in that we operate in more than one channel. There are lots of great brick-and-mortar retailers. There is coming on to be many, many great e-commerce players. But nobody who has the e-commerce business that we have at Wal-Mart.com where the business is just terrific and the brick-and-mortar business that we have, if we can enable all of these formats digitally to provide this experience to the customer."
Simon also said at today's investor conference that Walmart is expanding expanding its "Pick Up Today," program, which allows customers to order and purchase items online at Walmart.com and pick them up in stores. The program is currently available in 750 stores but will be expanded to nearly 3,600 locations by June, Simon said. Walmart issued a press release on the expansion of its "click and pick up" program today. you can read it here.
We discussed how the "Pick Up Today" program, which Simon says he want to change to "Pick Up Now," and expansion might fit in with Walmart's new smaller-store strategy in our piece yesterday, which is linked above.
Walmart's Smaller Store Strategy: Summing it up
In summing up Walmart's current smaller-store strategy, at present the retailer is focusing on three formats and three banners:
>"Walmart Express," which are food and grocery-focused but not exclusively, convenience-oriented stores designed to be located in urban and rural areas primarily. The stores can be as small as 5,000 square-feet but likely will average about 15,000 square-feet in size. (See our piece from yesterday for additional details.)
>"Walmart Market," which will include all of the existing "Walmart Neighborhood Market" stores (the rebranding) as well as new units. The stores will vary in size from 25,000 to 30,000 square feet to as high as 60,000 to 70,000 square feet. The geographic focus of the format is suburban, urban and rural.
>"Walmart on Campus," which is similar to the "Walmart Express" format but focused on college and university campus locations. Sizes will range from about 3,000 square-feet to about 5,000 square-feet. Some units could be slightly smaller, others slightly larger. It all depends on the locations and some additinal variables.
It's important to note that Simon made zero mention of Walmart's "marketside by Walmart" format and existing four stores in suburban Arizona today. That's because, as we've been reporting for some time, the format is going away.
Walmart U.S. president and CEO Bill Simon talked about numerous other aspects of the retailer's U.S. business, including plans and strategies, at the Bank of America conference today. You can view a full-transcript of his presentation here. There's also a webcast you can view here.
Fresh & Easy Buzz will be offering additional analysis on Walmart's smaller-store plans and strategies, in the coming days, as we've been doing extensively for over three years. Stay tuned.
Related Stories
March 9, 2011: Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas
February 22, 2011: Walmart Stores, Inc. Announces the Name For its New Smaller-Format Food & Grocery Stores: 'Walmart Express'
February 22, 2011: The Name Game: Satire Columnist Earl Grey Smells A 'Neighborhood-Express' Conspiracy Involving Tesco and Walmart
January 10, 2011 story: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap
January 11, 2011: 'The Insider' - A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City
October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA
October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community
September 20, 2010: About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010
July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store
September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted
September 29, 2008: Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store
Read our story from yesterday about "Walmart Express" here - March 9, 2011: Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas
The logo unveiling was part of a presentation made today by Walmart U.S. president and CEO Bill Simon, at the Bank of America Merrill Lynch Consumer Conference.
At the conference Simon also said Walmart will rebrand its "Walmart Neighborhood Market" to "Walmart Market." You can view the "Walmart Market" logo here. You can also view a slideshow of Simon's presentation at today's conference here.
The "Walmart Market" stores will vary in size from on the low-end 25,000 to 30,000 square feet to as high as 60,000 to 70,000 square feet in some markets, Simon said.The current "Walmart Neighborhood Market" supermarkets (about 200 in the U.S.) average 39,000-45,000 square-feet. Walmart has also had a smaller-format (about 20,000 square-feet) "Neighborhood Market by Walmart" store open for a couple years in Rogers, Arkansas. That store serves as the inspiration for the "smaller-end (in terms of square-feet) "Walmart Market" stores.
The head of Walmart's U.S. division said today the retailer plans to open hundreds of smaller-format stores over the next three years under the "Walmart Market," "Walmart Express," "Walmart on Campus," and perhaps other formats and names.
Walmart Stores opened its first "Walmart on Campus" store early this year on the University of Arkansas, Fayetteville campus. The store is about 3,500 square-feet. It offers a selection of convenience-oriented food, grocery and general merchandise items and has a pharmacy.
Simon said today Walmart's smaller-format push also includes possible acquisitions, which is something we've previously reported the mega-retailer from Bentonville has been considering doing. Among the potential acquisitions we've suggested readers look for is, on a national scale, the Rite-Aid drug chain. As we've said, Rite-Aid is ripe for an acquisition, as it's value has been in penny stock territory for far to long.
Also look for Walmart to make various regional acquisitions as part of its smaller store strategy, particular if it can find suitable deals in places where it plans to significantly focus the smaller stores, such as California, the Pacific Northwest, metro Chicago, New York and other east coast and New England regions.
Look particularly for Walmart to focus any such acquisitions in urban regions, again in U.S. regions where it has little current retailing presence. For example, sources recently told us Walmart has looked at some of the smaller stores A&P supermarkets is selling, and might sell if the offer is decent, in New York City and other metropolitan region on the east coast.
Approval of any acquisitions won't be a piece-of-pie for Walmart however, particularly any bog ones. Walmart's Simon said today, confirming what we reported in our piece yesterday, that the "Walmart Express" stores will be 15,000 square-feet. He said Walmart Stores plans to test different mixes of products in the first batch of "Walmart Express" stores as it fine tunes the new convenience-oriented format. "We are going to be adding hundreds of these in the coming years, and maybe more, depending on how these work out," he said.
The Walmart USA chief wouldn't say where the first "Walmart Express" stores will open, instead saying "secret handshake" is required to learn that information. But secret handshakes aside, we reported on where, and when, the first three units will be in our story yesterday here: Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas.
Here's some more of what Simon said about the retailer's smaller-format store plans, and how it fits in with Walmart USA's multi-channel strategy:
"We have been hard at work on this roughly 15,000 square-foot format ['Walmart Express.'] We're in the process of developing and we will open in the second quarter in both urban and rural pilots with pharmacy and without pharmacy, varying levels of fresh and other products, product assortment. The aim here, folks, is to get the right model so that we can rapidly roll these things out. At our peak we built about 350 supercenters in a year, so when we get this thing right, these are going to come real fast and we're real excited about this format.
We've been working kind of -- trying to work beneath the radar on this thing, although some of it has been a little bit above the radar I guess as you would say, and in the papers recently.
And there are also a couple of prototypes that have been built in super secret locations that I can't tell anybody about and there's a secret handshake to get in. But they're really, really nice and I think what you will see is a real effective implementation of a strategy that takes a continuum of retail from the -- as close as you can get to -- the small formats as close to the customer as you can get has the high velocity items that the customer wants as you move through the size from Express to market supercenter, you can flex inventory and assortment based on what the customer wants.
And if you overlay all of that with walmart.com and the multichannel experience, you can have whatever you want, whenever you want in a seamless supply chain. That is incredibly powerful and that's what we will be working on when these things open in the second quarter.
We also opened our first Walmart on Campus as a really, really cool format that the first on is on the campus of the University of Arkansas. We like to try things close to home so we can see it and play with it and tweak it a little bit. Frankly it's doing way better than anybody anticipated. It has a pharmacy in it and it serves the college students on campus with the pharmacy. A great, great price, as you know, from our pharmacy offering as well as pretty well everything that a college student needs with an almost endless supply of macaroni and cheese and Ramen noodles along with everything else that they go with.
There's been a lot of interest from a lot of other college campuses, the universities on this project, and it's something that we think is going to play out pretty well for us.
Small formats: I want to take just a minute to talk to you about it. It's something that is not new to Walmart, not new at all. We have -- in fact, most of our markets around the world operate small formats from Todo Dia in Brazil to Bodegas in Mexico, ChangoMas is in Argentina, PALi is in Central America, this one is from Costa Rica.
We run small formats all over the world and these small boxes are among the most profitable businesses that these countries run. So as we borrow and learn from them to build the US small format portfolio, we think we can deliver that end-to-end continuum that will give access to customers wherever they might be with the products that are most relevant to them in the markets that they are in.
And that's the last bullet point here and that's the multichannel element of this thing. The whole thing becomes kind of turbocharged or supercharged or multiplier with multichannel. We believe we are in a unique position in that we operate in more than one channel. There are lots of great brick-and-mortar retailers. There is coming on to be many, many great e-commerce players. But nobody who has the e-commerce business that we have at Wal-Mart.com where the business is just terrific and the brick-and-mortar business that we have, if we can enable all of these formats digitally to provide this experience to the customer."
Simon also said at today's investor conference that Walmart is expanding expanding its "Pick Up Today," program, which allows customers to order and purchase items online at Walmart.com and pick them up in stores. The program is currently available in 750 stores but will be expanded to nearly 3,600 locations by June, Simon said. Walmart issued a press release on the expansion of its "click and pick up" program today. you can read it here.
We discussed how the "Pick Up Today" program, which Simon says he want to change to "Pick Up Now," and expansion might fit in with Walmart's new smaller-store strategy in our piece yesterday, which is linked above.
Walmart's Smaller Store Strategy: Summing it up
In summing up Walmart's current smaller-store strategy, at present the retailer is focusing on three formats and three banners:
>"Walmart Express," which are food and grocery-focused but not exclusively, convenience-oriented stores designed to be located in urban and rural areas primarily. The stores can be as small as 5,000 square-feet but likely will average about 15,000 square-feet in size. (See our piece from yesterday for additional details.)
>"Walmart Market," which will include all of the existing "Walmart Neighborhood Market" stores (the rebranding) as well as new units. The stores will vary in size from 25,000 to 30,000 square feet to as high as 60,000 to 70,000 square feet. The geographic focus of the format is suburban, urban and rural.
>"Walmart on Campus," which is similar to the "Walmart Express" format but focused on college and university campus locations. Sizes will range from about 3,000 square-feet to about 5,000 square-feet. Some units could be slightly smaller, others slightly larger. It all depends on the locations and some additinal variables.
It's important to note that Simon made zero mention of Walmart's "marketside by Walmart" format and existing four stores in suburban Arizona today. That's because, as we've been reporting for some time, the format is going away.
Walmart U.S. president and CEO Bill Simon talked about numerous other aspects of the retailer's U.S. business, including plans and strategies, at the Bank of America conference today. You can view a full-transcript of his presentation here. There's also a webcast you can view here.
Fresh & Easy Buzz will be offering additional analysis on Walmart's smaller-store plans and strategies, in the coming days, as we've been doing extensively for over three years. Stay tuned.
Related Stories
March 9, 2011: Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas
February 22, 2011: Walmart Stores, Inc. Announces the Name For its New Smaller-Format Food & Grocery Stores: 'Walmart Express'
February 22, 2011: The Name Game: Satire Columnist Earl Grey Smells A 'Neighborhood-Express' Conspiracy Involving Tesco and Walmart
January 10, 2011 story: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap
January 11, 2011: 'The Insider' - A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City
October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA
October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community
September 20, 2010: About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010
July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store
September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted
September 29, 2008: Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store
Wednesday, March 9, 2011
Going Rural: First Three Smaller-Format 'Walmart Express' Stores Will Be in Small Town Arkansas
News/Analysis
Walmart Stores, Inc. said today it will open its first three smaller-format "Walmart Express" stores in its home state of Arkansas, in the small towns of Gentry, Prairie Grove and Gravette.
The first of the three stores, the unit in Gentry (population 3,100), is scheduled to open in May at the earliest but likely no later than July.
"Walmart Express" is a new format for Walmart, as we've previously reported, although it will incorporate elements of the chain's "Walmart Neighborhood Market" format and its "Neighborhood Market by Walmart" 20,000 square-foot prototype store, which has been open for a couple years in Rogers, Arkansas, near the retailer's headquarters in Bentonville.
According to Walmart spokesman Steve Restivo, the world's largest retailer plans to start construction on its first small-box Express format store, in Gentry, on March 16. The store will be about 14,500 square-feet.
Construction on the other two Arkansas "Walmart Express" stores, in Prarie Grove and Gravette, both which are near Gentry, is scheduled to begin around the end of March or early April, according to Walmart. The two stores will be about the same square-footage as the Gentry unit.
Prarie Grove has a population of about 3,113. Gravette's estimated population is 2,300. The population figures are based on U.S. Census Bureau numbers for 2010.
The "Walmart Express" format stores are food and grocery focused, as we've previously reported, and will also carry a selection of general merchandise items.
Similar to a typical neighborhood grocery market of about the same size, the center (core-of-the-store) of the "Walmart Express" stores will offer grocery items on shelving, comprising 10-12 aisles. The perimeter and back of the Express format stores will feature fresh produce, meats, frozen foods and perishables.
Although Walmart didn't confirm it, as we've previously reported, the Express format stores will also offer a selection of the retailer's "marketside" private brand ready-to-eat and ready-to-heat fresh-prepared foods, as part of an in-store deli configuration of some sort.
The stores also will have in-store pharmacies, something we've previously reported would be the case.
Additionally, according to our sources, Walmart will likely use the "Walmart Express" stores as pickup points for its Walmart.com online retail operation, as it's currently doing in selected other format stores. Shoppers would be able to order anything available on Walmart.com and then pick it up at a "Walmart Express" store. Think of the process as similar to what Sears has been doing in and with its small-format "catalogue stores, particularly in rural communities, for decades.
Not all of the "Walmart Express" stores will be in the 15,000 square-foot range. Depending on the location, some will be up to 30,000 square-feet, which is something Walmart U.S. president Bill Simon confirmed recently. Some also will be smaller, such as those in highly dense cities. Simon has said some of the stores could be as small as 5,000 square-feet.
Earlier this year Walmart said it plans to open 30-40 of the small-format "Walmart Express" stores in 2011.
As we've previously reported, Walmart Stores, Inc. has acquired numerous locations in California which it has slated for the smaller stores. We've identified a dozen such locations in Southern and Northern California thus far.
Walmart also plans to open the smaller food and grocery-focused stores in metro Chicago, Washington D.C. and New York City, along with other part of the U.S.
Additionally, based on source information we have, one or more of the existing four small-for "marketside by Walmart" format stores in four metro Phoenix, Arizona cities - Gilbert, Chandler, Mesa and Tempe - will likely be converted to the "Walmart Express" format down the road. The four Arizona "marketside by Walmart" stores range from 15,000-17,000 square-feet
"Walmart Express" is positioned as both an urban and rural (and in some cases suburban) format, according to Walmart.
The fact Walmart has chosen to open the first three units in fairly rural small towns demonstrates the retailer is serious about attempting a rural strategy with the smaller stores. The fact it chose three towns in Arkansas, all which are fairly close to its Bentonville headquarters, is no surprise. All three towns are within 35 miles of Bentonville.
Many observers and analysts are rushing to say how Walmart's latest small-format move will be a killer application for the retailer, alongside its supercenters.
However, many of these same analysts said the same thing when Walmart launched its "Walmart Neighborhood Market" format (the stores average about 42,000 square-feet) in the 1990's, and did so again when Walmart launched "marketside by Walmart" (at first called just "marketside") in 2008.
To date the neighborhood market supermarkets have been at best mediocre performers, evidenced not only by various metrics but also by the fact that in two decades Walmart has opened only about 200 of the 42,000 square-foot supermarkets in the U.S.
"Marketside by Walmart," the retailer's first small-format experiment can basically be judged to be a failure. As we've previously reported, none of the four stores have hit targeted average sales of $75,000-to-$100,000 per-week, which Walmart determined was the absolute minimum needed to break even. Just one of the four stores is averaging over $60,000 (but well under $75,000) a week. The other four are in the $45,000-$55,000 range in average weekly sales. All four stores are losing money. We've seen the numbers.
Walmart isn't opening any additional "marketside by Walmart" stores. It has 50-year leases on the four Arizona units. (47 years remaining.) The most-likely scenario, as noted earlier, is that one or more of the stores will be converted at some point to "Walmart Express" stores. Just one of the stores, the unit in Gilbert, Arizona, is suitable from a demographic perspective to convert to Walmart's Supermercado de Walmart Latino grocery store format. However, the store is really too small from a physical and carrying-capacity aspect to do so, in our analysis.
The upshot: The jury is still out on how well Walmart Stores, Inc. can do smaller formats in the U.S. (it does them well in Mexico, for example,), particularly when the focus of the smaller-format stores is fresh food and groceries.
A number of the "Walmart Express" locations in Southern and Northern California we've identified are near Tesco-owned Fresh & Easy Neighborhood Market stores. From what we've been learning, the Express stores will be much less upscale and much more price-impact-oriented (although not a hard-discount format) than the "marketside by Walmart" format and stores are, as well as offering a much broader selection of basic groceries than "marketside" does. (Think an edited version of the "Neighborhood Market by Walmart" supermarkets' SKU assortment when it comes to product selection.)
The upshot: Things are going to get even more interesting in highly competitive California when the first batch of "Walmart Express" stores start opening. Stay tuned.
Related Stories
February 22, 2011: Walmart Stores, Inc. Announces the Name For its New Smaller-Format Food & Grocery Stores: 'Walmart Express'
February 22, 2011: The Name Game: Satire Columnist Earl Grey Smells A 'Neighborhood-Express' Conspiracy Involving Tesco and Walmart
January 10, 2011 story: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap
January 11, 2011: 'The Insider' - A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City
October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA
October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community
September 20, 2010: About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010
July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store
September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted
September 29, 2008: Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store
Walmart Stores, Inc. said today it will open its first three smaller-format "Walmart Express" stores in its home state of Arkansas, in the small towns of Gentry, Prairie Grove and Gravette.
The first of the three stores, the unit in Gentry (population 3,100), is scheduled to open in May at the earliest but likely no later than July.
"Walmart Express" is a new format for Walmart, as we've previously reported, although it will incorporate elements of the chain's "Walmart Neighborhood Market" format and its "Neighborhood Market by Walmart" 20,000 square-foot prototype store, which has been open for a couple years in Rogers, Arkansas, near the retailer's headquarters in Bentonville.
According to Walmart spokesman Steve Restivo, the world's largest retailer plans to start construction on its first small-box Express format store, in Gentry, on March 16. The store will be about 14,500 square-feet.
Construction on the other two Arkansas "Walmart Express" stores, in Prarie Grove and Gravette, both which are near Gentry, is scheduled to begin around the end of March or early April, according to Walmart. The two stores will be about the same square-footage as the Gentry unit.
Prarie Grove has a population of about 3,113. Gravette's estimated population is 2,300. The population figures are based on U.S. Census Bureau numbers for 2010.
The "Walmart Express" format stores are food and grocery focused, as we've previously reported, and will also carry a selection of general merchandise items.
Similar to a typical neighborhood grocery market of about the same size, the center (core-of-the-store) of the "Walmart Express" stores will offer grocery items on shelving, comprising 10-12 aisles. The perimeter and back of the Express format stores will feature fresh produce, meats, frozen foods and perishables.
Although Walmart didn't confirm it, as we've previously reported, the Express format stores will also offer a selection of the retailer's "marketside" private brand ready-to-eat and ready-to-heat fresh-prepared foods, as part of an in-store deli configuration of some sort.
The stores also will have in-store pharmacies, something we've previously reported would be the case.
Additionally, according to our sources, Walmart will likely use the "Walmart Express" stores as pickup points for its Walmart.com online retail operation, as it's currently doing in selected other format stores. Shoppers would be able to order anything available on Walmart.com and then pick it up at a "Walmart Express" store. Think of the process as similar to what Sears has been doing in and with its small-format "catalogue stores, particularly in rural communities, for decades.
Not all of the "Walmart Express" stores will be in the 15,000 square-foot range. Depending on the location, some will be up to 30,000 square-feet, which is something Walmart U.S. president Bill Simon confirmed recently. Some also will be smaller, such as those in highly dense cities. Simon has said some of the stores could be as small as 5,000 square-feet.
Earlier this year Walmart said it plans to open 30-40 of the small-format "Walmart Express" stores in 2011.
As we've previously reported, Walmart Stores, Inc. has acquired numerous locations in California which it has slated for the smaller stores. We've identified a dozen such locations in Southern and Northern California thus far.
Walmart also plans to open the smaller food and grocery-focused stores in metro Chicago, Washington D.C. and New York City, along with other part of the U.S.
Additionally, based on source information we have, one or more of the existing four small-for "marketside by Walmart" format stores in four metro Phoenix, Arizona cities - Gilbert, Chandler, Mesa and Tempe - will likely be converted to the "Walmart Express" format down the road. The four Arizona "marketside by Walmart" stores range from 15,000-17,000 square-feet
"Walmart Express" is positioned as both an urban and rural (and in some cases suburban) format, according to Walmart.
The fact Walmart has chosen to open the first three units in fairly rural small towns demonstrates the retailer is serious about attempting a rural strategy with the smaller stores. The fact it chose three towns in Arkansas, all which are fairly close to its Bentonville headquarters, is no surprise. All three towns are within 35 miles of Bentonville.
Many observers and analysts are rushing to say how Walmart's latest small-format move will be a killer application for the retailer, alongside its supercenters.
However, many of these same analysts said the same thing when Walmart launched its "Walmart Neighborhood Market" format (the stores average about 42,000 square-feet) in the 1990's, and did so again when Walmart launched "marketside by Walmart" (at first called just "marketside") in 2008.
To date the neighborhood market supermarkets have been at best mediocre performers, evidenced not only by various metrics but also by the fact that in two decades Walmart has opened only about 200 of the 42,000 square-foot supermarkets in the U.S.
"Marketside by Walmart," the retailer's first small-format experiment can basically be judged to be a failure. As we've previously reported, none of the four stores have hit targeted average sales of $75,000-to-$100,000 per-week, which Walmart determined was the absolute minimum needed to break even. Just one of the four stores is averaging over $60,000 (but well under $75,000) a week. The other four are in the $45,000-$55,000 range in average weekly sales. All four stores are losing money. We've seen the numbers.
Walmart isn't opening any additional "marketside by Walmart" stores. It has 50-year leases on the four Arizona units. (47 years remaining.) The most-likely scenario, as noted earlier, is that one or more of the stores will be converted at some point to "Walmart Express" stores. Just one of the stores, the unit in Gilbert, Arizona, is suitable from a demographic perspective to convert to Walmart's Supermercado de Walmart Latino grocery store format. However, the store is really too small from a physical and carrying-capacity aspect to do so, in our analysis.
The upshot: The jury is still out on how well Walmart Stores, Inc. can do smaller formats in the U.S. (it does them well in Mexico, for example,), particularly when the focus of the smaller-format stores is fresh food and groceries.
A number of the "Walmart Express" locations in Southern and Northern California we've identified are near Tesco-owned Fresh & Easy Neighborhood Market stores. From what we've been learning, the Express stores will be much less upscale and much more price-impact-oriented (although not a hard-discount format) than the "marketside by Walmart" format and stores are, as well as offering a much broader selection of basic groceries than "marketside" does. (Think an edited version of the "Neighborhood Market by Walmart" supermarkets' SKU assortment when it comes to product selection.)
The upshot: Things are going to get even more interesting in highly competitive California when the first batch of "Walmart Express" stores start opening. Stay tuned.
Related Stories
February 22, 2011: Walmart Stores, Inc. Announces the Name For its New Smaller-Format Food & Grocery Stores: 'Walmart Express'
February 22, 2011: The Name Game: Satire Columnist Earl Grey Smells A 'Neighborhood-Express' Conspiracy Involving Tesco and Walmart
January 10, 2011 story: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap
January 11, 2011: 'The Insider' - A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City
October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA
October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community
September 20, 2010: About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010
July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store
September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted
September 29, 2008: Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store
Tuesday, October 19, 2010
Walmart's Four 'Marketside by Walmart' Stores Set to Be Closed Soon Never Came Close to Weekly Sales of $100,000
Arizona Market Region Report - News & AnalysisIn a September 9, 2010 story - Walmart Plans to Close Arizona 'marketside by Walmart' Stores, Dump Format By Year-End or Early 2011 - we broke the news Walmart Stores, Inc. would be dumping its 'marketside by Walmart' small-store fresh food and grocery format, including closing the four existing stores in Arizona.
We followed the September 9 story up with a piece on September 23 - Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted - in which we reported Walmart was discussing potentially converting some or all of the 'marketside by Walmart' stores into a different small-format, most likely the version of its 20,000 square-foot 'Neighborhood Market by Walmart' prototype it plans to roll out to the tune of about 30-40 stores in 2011. [See - October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA]
The reason for the follow-up story in late September was because not only has 'marketside by Walmart' been neglected for over a year by Walmart Stores, Inc. - for example one of the managers of the four stores in Arizona is and has been running two units at the same time since early this year - but a decision as to whether or not to close all the stores or try to salvage one or more by converting to the new small-format the retailer plans to roll out next year has been up in the air.
On Wednesday, October 13, Walmart U.S. president and CEO Bill Simon confirmed half of our early September 2010 report at the retailer's annual investment community conference, saying the Walmart Stores' does not plan to expand 'marketside by Walmart' beyond the current four stores, commenting the retailer has learned a great deal from the stores and has been able to create a multi-million dollar fresh foods brand, 'marketside,' which it's selling in its Walmart supercenters and Neighborhood Market supermarkets, based on operating the stores. Simon didn't announce plans to close any of the stores or convert them to another small store format at the conference however.
It was the first time a Walmart Stores' executive has said publicly that the retailer would cease any further development of 'marketside by Walmart.' Earlier this year Walmart said publicly it wouldn't open any additional 'marketside by Walmart' stores this year - but did not say it wouldn't do so beyond 2010.
Based on the information we have at present, it's remains most probable Walmart will close all four of the Arizona 'marketside by Walmart' stores by the end of December and no later than the end of January 2011 or convert some or all of the four stores into a new small-format.
Average Weekly Sales: 'marketside by Walmart' Stores
None of the four 'marketside by Walmart' stores have or are doing even close to $100,000 in weekly sales, according to our excellent sources. The four metro Phoenix area stores are located in Gilbert, Tempe, Mesa and Chandler, Arizona. All four stores opened in May 2008.
The Gilbert unit has been doing the best of the four, averaging about $68,000 a week in sales, our sources say.
The other three metro Phoenix 'marketside by Walmart' units are all doing below $50,000 a week in sales, our sources say.
They estimate the Chandler, Arizona store is averaging $48,000-$49,000 in weekly sales; the Mesa unit $33,000-$35,000; and the Tempe store about $40,000 weekly.
Two of the stores are in the 15,000 square-foot range. The other two are between 16,000-18,000 square-feet. According to the most current FMI (Food Marketing Institute) statistics, the average U.S. supermarket has sales-per-square-foot of $11.35. All four stores have been and are doing way below the $11.35 per-square-foot industry average.
In our analysis, these average weekly sales numbers make it unlikely that Walmart will put a different small-store format in any of the current four 'marketside by Walmart' stores when it closes them at the end of this year or in early 2011, although the retailer may believe a different format can make a go of it at the locations.
We'll have more for you very soon. Stay tuned.
'Marketside by Walmart' - Follow the Story Below
>December 21, 2009: Wither Walmart's Small-Format 'marketside' Stores and Format?
>January 9, 2010: Walmart's 'marketside': What's 'In-Store' for 2010?
>September 9, 2010: Walmart Plans to Close Arizona 'marketside by Walmart' Stores, Dump Format By Year-End or Early 2011
>September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted
>July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store
[For a selection of additional past stories on Walmart's 'marketside' and 'marketside by Walmart' click here and here.]
Friday, October 15, 2010
Safeway Shelving 'The Market' Small Store Format; Won't Be Part of its Strategy Going Forward
Breaking Buzz - News & Analysis
Smaller format stores, except its soon to be shelved 'marketside by Walmart,' may be in at Walmart but Pleasanton, California-based Safeway Stores, Inc. is sticking with a single-format strategy - its"Lifestyle"format supermarkets, which average 43,000-55,000 square-feet, with some exceptions - and saying no to further development of its two-store small-format 'The Market' fresh food and grocery venture.
Safeway Stores' CEO Steve Burd confirmed yesterday what we've been saying in Fresh & Easy Buzz for well over a year - which is that Safeway's 'The Market' will not be a part of the grocer's retail format strategy going forward.
In a conference call yesterday as part of Safeway's reporting of its third quarter 2010 results, Burd said the grocery chain does not plan to build the two-store (Long Beach and San Jose, California) "The Market" into a chain of small-format stores.
Here's what the Safeway chief said:
"The good news is that we’re batting a thousand. We built two ['The Market'] stores and they both make money. I think there is no one else that’s created a store that small that can boast that kind of a batting average. At the same time when we went into the small store format we said that we weren't going to make it a big piece of our strategy unless we thought it represented a very significant opportunity. I would tell you that if you can’t build 300 of these for a company like us, then it’s not meaningful, say, over a five-year period.
"So, we think that we learned a lot from the smaller store and some of those concepts we are applying to our main fleet of stores. I think we might have communicated at the last Investor Conference or maybe in one of these earnings calls, we don’t see creating 300 small stores as a basic part of our strategy. Will we occasionally build a store that might be 20,000 square feet, I would say occasionally in some pretty unique circumstances, but we learned enough to conclude that for us it was not a new format that we were going to try to grow and make a big piece of our offering."
The San Jose, California 'The Market' format store - 'The Market by Safeway' - which opened in 2009 - is 21,000-24,000 square-feet. The Long Beach store - 'The Market by Vons' - which is in a building that previously was a standard Vons supermarket, is about 15,000 square-feet. It opened in May 2008.
While Burd didn't say at the most recent Safeway Investor conference earlier this year that "The Market" would not be a part of a multi-format strategy for the grocery chain going forward, he hinted at it at the conference, as he has in the past, at least for those of us who watch Safeway closely.
In fact, Burd spelled out the metrics required from the format in order for Safeway to go forward with it as early as the end of 2008
In December 2008 at that year's annual investor's meeting, eight months after the first "The Market" store in Long Beach, California opened, Burd said the results to date were less than thrilling, as we reported in this story - December 12, 2008: Competitor News: Safeway CEO Steve Burd Says Small-Format 'The Market' Is 'Good' So Far But Not 'Great;' But Must Be 'Great' in Order To Expand. His then assessment on the performance of the first small-format 'The Market' store eight months on was that it's: "good, not great."
At the 2008 meeting he said Safeway planned to open at least two more of the small-format 'The Market' stores in 2009.
However, the grocer opened just one additional store in 2009, the unit in downtown San Jose, California, and hasn't opened any additional stores in the format since then. We wrote about what was the then planned third store in this July 25, 2008 story: Breaking Competitor News: Safeway Stores, Inc. Plans to Open A Small-Format 'the market by Vons' Grocery Store in Downtown Los Angeles.
In December 2008 the Safeway CEO said once the additional two 'The Market' format stores are open, "Unless the results go from 'good to great' and we feel we can open 30 -to- 50 of these per year, it won't make enough difference for these stores to be more than an experiment."
As Burd said yesterday, Safeway may occasionally build a store in the 20,000 square-foot range. But providing his own question and answer in a sentence he qualified that rather clearly, saying: "Will we occasionally build a store that might be 20,000 square feet? I would say occasionally in some pretty unique circumstances."
'The Market" as a multi-store second format for Safeway Stores, Inc. is history.
We're told there are no plans at present to close either the San Jose or Long Beach stores though. As Burd said, they are making (some) money. In the case of the two, we can tell you this: The San Jose store is doing much better than the Long Beach unit.
In early 2008 Safeway had the Cornish & Carey commercial real estate team help it find five or six locations in the San Francisco Bay Area - the downtown San Jose site was one of the locations - for its "The Market" format, which it had only recently finished developing at the time. The firm and Safeway located the sites but the downtown San Jose location is the only one to be built and opened.
A key reason Safeway souoght out the locations was because in January 2008 Tesco announced its plans to open an initial 37 Fresh & Easy Neighborhood Market fresh food and grocery stores in Northern California - 19 in the Sacramento region and 18 in the Bay Area.
Safeway had first-hand experience with Tesco. United Kingdom-based Tesco was the first major chain in the world to establish a food and grocery e-commerce site and combine the online ordering element with home delivery. In the 1990's, when Safeway was interested in doing the same, it partnered with Tesco in Groceryworks, which was Safeway Stores' initial online/home delivery grocery service. The partnership didn't last long. The two chains parted ways and Safeway took the business in-house, which is where it remains today.
As a result of this first hand experience, along with the fact Tesco is a very respected global retailer, Safeway, which already had been considering a small-format of its own, ratched up the development process, creating 'The Market,' and sought out the various store locations in its home-turf San Francisco Bay Area, where it's headquartered, in part as a defensive move against Tesco, which was supposed to open the first Fresh & Easy stores in the region in early 2009. That never happened. Tesco now plans to open the first batch of its Fresh & Easy Neighborhood Market stores in the Bay Area in early 2011.
In the nearly three years since the first Fresh & Easy stores opened - there are currently 168 units; soon to be 155 after Tesco closes 13 stores by November 2, 2010 - Tesco has struggled with Fresh & Easy, losing hundreds of millions of dollars and is closing in on a billion dollar loss. The retailer says it will become profitable in its 2013 fiscal year, at which time it says it plans to have 400 of the 10,000 square-foot Fresh & Easy markets open and operating. But since its projecting a loss in the $250 million range for its fiscal 2010/11 year which ends in February 2011, that's going to be a tall order to achieve. [See: 13 Closing Fresh & Easy Stores List.]
Tesco's struggle with Fresh & Easy has no doubt played some part in Safeway's decision to drop 'The Market' from its future strategic plans, in our analysis, although Burd clearly laid out the metrics back in December 2008. It was a test - in fact a by-the-book test - and as is the case with tests, a decision has now been made.
Additionally, Safeway Stores' CEO Steve Burd is on the record as early as March 2008, saying at the time, as we reported in this story - March 12, 2008: Safeway CEO Steve Burd: 'I'm Not Particularly Worried About Tesco's Fresh & Easy Grocery Stores in California' - that Tesco's Fresh & Easy venture doesn't worry him much as a competitor.
The bottom line is Safeway doesn't really need a dedicated 15,000 square-foot store format in order to sell fresh-prepared foods; it does it just fine in its supermarkets. And if a particular urban location requires a smaller store, it can do a 20,000 square-foot version of its "Lifestyle" format, which "The Market" is essentially a smaller version of anyway.
In a series of stories so far this year we've offered a roadmap to where Safeway Stores, Inc. is going in terms of its format strategy: 43,000-55,000 square-foot "Lifestyle" format stores with expansive fresh food departments and a combination of price/value focused and more upscale food and grocery merchandising elements.
For example, read these three recent pieces from the blog:
>July 25, 2010: Safeway to Start Construction on New Pleasanton, California Flagship Store Soon; Thanksgiving 2011 Target Opening
>August 2, 2010: Safeway Unveils Plans For New 'Lifestyle' Format Store Designed to Fit Today's Berkeley, California Lifestyle
>April 8, 2010: The Branded 'Signature Cafe' in Safeway Stores' Soon to Open 'Social Safeway' in Washington D.C. Should Turn A Few Heads
Like Safeway with its 'The Market' fresh food and grocery store concept, Walmart is preparing to put an end to its 'marketside by Walmart' combination fresh food and grocery format, as it begins to launch a new generation of smaller format stores. [See - September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted and October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA.
Safeway's 'The Market,' Walmart's 'marketside by walmart' and Tesco's 'Fresh & Easy Neighborhood Market' are all three very similar formats - all three are small-format stores that focus on fresh foods with limited assortments of groceries and perishables, for example - and all were launched at about the same time - late 2007 for Fresh & Easy, and mid-2008 for Safeway and Walmart's small-store ventures.
Time will tell if it's a positive development for Tesco to have its Fresh & Easy Neighborhood Market small-format fresh food and grocery chain as the remaining one of the three similar formats. But unlike Safeway and Walmart, Tesco doesn't currently have any other formats to fall back on in the U.S. should that development be a negative and not a positive one.
Related Stories:
March 5, 2008: New Details and Analysis About Safeway's Small-Format Summer SF Bay Area Surprise for Tesco's Fresh & Easy Neighborhood Market
March 12, 2008: Safeway CEO Steve Burd: 'I'm Not Particularly Worried About Tesco's Fresh & Easy Grocery Stores in California'
May 15, 2008: Breaking News: Safeway Opens its First Small-Format 'The Market' Grocery Store Today in Long Beach, California
June 5, 2008: Breaking News: Safeway Stores, Inc. Nearing Negotiation End-Game For its Second Small-Format 'The Market' Store Site; This One in San Jose, California
July 8, 2008: Southern California Market Report: Safeway Stores,'the market by Vons' Mass-Mails First Advertising and Promotional Flyer to Vons Club Card Members
June 6, 2008: More on Safeway's 'The Market' Format: 20-Year Food Retailing Industry Vet Offers Observations and Analysis on 'the Market by Vons,' Long Beach, CA
July 25, 2008: Breaking Competitor News: Safeway Stores, Inc. Plans to Open A Small-Format 'the market by Vons' Grocery Store in Downtown Los Angeles
January 30, 2009: Competitor News: Safeway Stores, Inc. Confirms Second Small-Format 'The Market' Unit to Be in San Jose, CA; Fresh & Easy Buzz Nailed it in June, 2008
Smaller format stores, except its soon to be shelved 'marketside by Walmart,' may be in at Walmart but Pleasanton, California-based Safeway Stores, Inc. is sticking with a single-format strategy - its"Lifestyle"format supermarkets, which average 43,000-55,000 square-feet, with some exceptions - and saying no to further development of its two-store small-format 'The Market' fresh food and grocery venture.
Safeway Stores' CEO Steve Burd confirmed yesterday what we've been saying in Fresh & Easy Buzz for well over a year - which is that Safeway's 'The Market' will not be a part of the grocer's retail format strategy going forward.
In a conference call yesterday as part of Safeway's reporting of its third quarter 2010 results, Burd said the grocery chain does not plan to build the two-store (Long Beach and San Jose, California) "The Market" into a chain of small-format stores.
Here's what the Safeway chief said:
"The good news is that we’re batting a thousand. We built two ['The Market'] stores and they both make money. I think there is no one else that’s created a store that small that can boast that kind of a batting average. At the same time when we went into the small store format we said that we weren't going to make it a big piece of our strategy unless we thought it represented a very significant opportunity. I would tell you that if you can’t build 300 of these for a company like us, then it’s not meaningful, say, over a five-year period.
"So, we think that we learned a lot from the smaller store and some of those concepts we are applying to our main fleet of stores. I think we might have communicated at the last Investor Conference or maybe in one of these earnings calls, we don’t see creating 300 small stores as a basic part of our strategy. Will we occasionally build a store that might be 20,000 square feet, I would say occasionally in some pretty unique circumstances, but we learned enough to conclude that for us it was not a new format that we were going to try to grow and make a big piece of our offering."
The San Jose, California 'The Market' format store - 'The Market by Safeway' - which opened in 2009 - is 21,000-24,000 square-feet. The Long Beach store - 'The Market by Vons' - which is in a building that previously was a standard Vons supermarket, is about 15,000 square-feet. It opened in May 2008.
While Burd didn't say at the most recent Safeway Investor conference earlier this year that "The Market" would not be a part of a multi-format strategy for the grocery chain going forward, he hinted at it at the conference, as he has in the past, at least for those of us who watch Safeway closely.
In fact, Burd spelled out the metrics required from the format in order for Safeway to go forward with it as early as the end of 2008
In December 2008 at that year's annual investor's meeting, eight months after the first "The Market" store in Long Beach, California opened, Burd said the results to date were less than thrilling, as we reported in this story - December 12, 2008: Competitor News: Safeway CEO Steve Burd Says Small-Format 'The Market' Is 'Good' So Far But Not 'Great;' But Must Be 'Great' in Order To Expand. His then assessment on the performance of the first small-format 'The Market' store eight months on was that it's: "good, not great."
At the 2008 meeting he said Safeway planned to open at least two more of the small-format 'The Market' stores in 2009.
However, the grocer opened just one additional store in 2009, the unit in downtown San Jose, California, and hasn't opened any additional stores in the format since then. We wrote about what was the then planned third store in this July 25, 2008 story: Breaking Competitor News: Safeway Stores, Inc. Plans to Open A Small-Format 'the market by Vons' Grocery Store in Downtown Los Angeles.
In December 2008 the Safeway CEO said once the additional two 'The Market' format stores are open, "Unless the results go from 'good to great' and we feel we can open 30 -to- 50 of these per year, it won't make enough difference for these stores to be more than an experiment."
As Burd said yesterday, Safeway may occasionally build a store in the 20,000 square-foot range. But providing his own question and answer in a sentence he qualified that rather clearly, saying: "Will we occasionally build a store that might be 20,000 square feet? I would say occasionally in some pretty unique circumstances."
'The Market" as a multi-store second format for Safeway Stores, Inc. is history.
We're told there are no plans at present to close either the San Jose or Long Beach stores though. As Burd said, they are making (some) money. In the case of the two, we can tell you this: The San Jose store is doing much better than the Long Beach unit.
In early 2008 Safeway had the Cornish & Carey commercial real estate team help it find five or six locations in the San Francisco Bay Area - the downtown San Jose site was one of the locations - for its "The Market" format, which it had only recently finished developing at the time. The firm and Safeway located the sites but the downtown San Jose location is the only one to be built and opened.
A key reason Safeway souoght out the locations was because in January 2008 Tesco announced its plans to open an initial 37 Fresh & Easy Neighborhood Market fresh food and grocery stores in Northern California - 19 in the Sacramento region and 18 in the Bay Area.
Safeway had first-hand experience with Tesco. United Kingdom-based Tesco was the first major chain in the world to establish a food and grocery e-commerce site and combine the online ordering element with home delivery. In the 1990's, when Safeway was interested in doing the same, it partnered with Tesco in Groceryworks, which was Safeway Stores' initial online/home delivery grocery service. The partnership didn't last long. The two chains parted ways and Safeway took the business in-house, which is where it remains today.
As a result of this first hand experience, along with the fact Tesco is a very respected global retailer, Safeway, which already had been considering a small-format of its own, ratched up the development process, creating 'The Market,' and sought out the various store locations in its home-turf San Francisco Bay Area, where it's headquartered, in part as a defensive move against Tesco, which was supposed to open the first Fresh & Easy stores in the region in early 2009. That never happened. Tesco now plans to open the first batch of its Fresh & Easy Neighborhood Market stores in the Bay Area in early 2011.
In the nearly three years since the first Fresh & Easy stores opened - there are currently 168 units; soon to be 155 after Tesco closes 13 stores by November 2, 2010 - Tesco has struggled with Fresh & Easy, losing hundreds of millions of dollars and is closing in on a billion dollar loss. The retailer says it will become profitable in its 2013 fiscal year, at which time it says it plans to have 400 of the 10,000 square-foot Fresh & Easy markets open and operating. But since its projecting a loss in the $250 million range for its fiscal 2010/11 year which ends in February 2011, that's going to be a tall order to achieve. [See: 13 Closing Fresh & Easy Stores List.]
Tesco's struggle with Fresh & Easy has no doubt played some part in Safeway's decision to drop 'The Market' from its future strategic plans, in our analysis, although Burd clearly laid out the metrics back in December 2008. It was a test - in fact a by-the-book test - and as is the case with tests, a decision has now been made.
Additionally, Safeway Stores' CEO Steve Burd is on the record as early as March 2008, saying at the time, as we reported in this story - March 12, 2008: Safeway CEO Steve Burd: 'I'm Not Particularly Worried About Tesco's Fresh & Easy Grocery Stores in California' - that Tesco's Fresh & Easy venture doesn't worry him much as a competitor.
The bottom line is Safeway doesn't really need a dedicated 15,000 square-foot store format in order to sell fresh-prepared foods; it does it just fine in its supermarkets. And if a particular urban location requires a smaller store, it can do a 20,000 square-foot version of its "Lifestyle" format, which "The Market" is essentially a smaller version of anyway.
In a series of stories so far this year we've offered a roadmap to where Safeway Stores, Inc. is going in terms of its format strategy: 43,000-55,000 square-foot "Lifestyle" format stores with expansive fresh food departments and a combination of price/value focused and more upscale food and grocery merchandising elements.
For example, read these three recent pieces from the blog:
>July 25, 2010: Safeway to Start Construction on New Pleasanton, California Flagship Store Soon; Thanksgiving 2011 Target Opening
>August 2, 2010: Safeway Unveils Plans For New 'Lifestyle' Format Store Designed to Fit Today's Berkeley, California Lifestyle
>April 8, 2010: The Branded 'Signature Cafe' in Safeway Stores' Soon to Open 'Social Safeway' in Washington D.C. Should Turn A Few Heads
Like Safeway with its 'The Market' fresh food and grocery store concept, Walmart is preparing to put an end to its 'marketside by Walmart' combination fresh food and grocery format, as it begins to launch a new generation of smaller format stores. [See - September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted and October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA.
Safeway's 'The Market,' Walmart's 'marketside by walmart' and Tesco's 'Fresh & Easy Neighborhood Market' are all three very similar formats - all three are small-format stores that focus on fresh foods with limited assortments of groceries and perishables, for example - and all were launched at about the same time - late 2007 for Fresh & Easy, and mid-2008 for Safeway and Walmart's small-store ventures.
Time will tell if it's a positive development for Tesco to have its Fresh & Easy Neighborhood Market small-format fresh food and grocery chain as the remaining one of the three similar formats. But unlike Safeway and Walmart, Tesco doesn't currently have any other formats to fall back on in the U.S. should that development be a negative and not a positive one.
Related Stories:
March 5, 2008: New Details and Analysis About Safeway's Small-Format Summer SF Bay Area Surprise for Tesco's Fresh & Easy Neighborhood Market
March 12, 2008: Safeway CEO Steve Burd: 'I'm Not Particularly Worried About Tesco's Fresh & Easy Grocery Stores in California'
May 15, 2008: Breaking News: Safeway Opens its First Small-Format 'The Market' Grocery Store Today in Long Beach, California
June 5, 2008: Breaking News: Safeway Stores, Inc. Nearing Negotiation End-Game For its Second Small-Format 'The Market' Store Site; This One in San Jose, California
July 8, 2008: Southern California Market Report: Safeway Stores,'the market by Vons' Mass-Mails First Advertising and Promotional Flyer to Vons Club Card Members
June 6, 2008: More on Safeway's 'The Market' Format: 20-Year Food Retailing Industry Vet Offers Observations and Analysis on 'the Market by Vons,' Long Beach, CA
July 25, 2008: Breaking Competitor News: Safeway Stores, Inc. Plans to Open A Small-Format 'the market by Vons' Grocery Store in Downtown Los Angeles
January 30, 2009: Competitor News: Safeway Stores, Inc. Confirms Second Small-Format 'The Market' Unit to Be in San Jose, CA; Fresh & Easy Buzz Nailed it in June, 2008
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