Walmart Closing its Four Marketside Small-Format Markets in Arizona October 21

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.

Back to the Future at Walmart: Walmart Express Today and Walton's Five and Dime in the 1950's

The Gentry Walmart Express above opens Wednesday. [Photo: Justin Wedgworth.]

Walmart Stores, Inc. and Smaller-Format Retailing USA

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.

Walton's small-format 5-10 variety store in the 1950's.

Walmart Express: Sam's' five and dime' with a modern twist

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.

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

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

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

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.

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

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

Brookings Institution Takes In-Depth Look At 'Food Desert' Supermarket Access in 10 U.S. Metro Regions, Including California, Nevada and Arizona

The above video, "Getting to Market," features an overview analysis of the Brookings Institute's new "food desert" supermarket access study.

Fresh & Easy Buzz has written extensively about the topic of "food desserts" over the last three years, particularly (but far from exclusively) as the issue relates to the Western U.S., where Tesco's Fresh & Easy Neighborhood Market and its competitors operate fresh food and grocery stores. There are currently 168 Fresh & Easy stores in California, Nevada and Arizona. The grocer is closing 13 stores, which it says will be done by November 2, 2010. That will bring the total to 155 units. [See: 13 Closing Fresh & Easy Stores List.]

A "food desert" is defined as a low-income neighborhood - mostly urban inner-city but can also be rural - that is underserved by grocery stores that offer a decent selection of fresh foods and groceries at reasonable prices. Its residents lack sufficient access to grocery stores and must travel a distance to shop.

The "food desert" issue is a multi-facted one. First, it's a personal or individual issue. Residents who live in neighborhoods without adequate access to stores offering fresh foods and groceries tend to shop at mini-marts and convenience stores, buying and consuming less healthy foods, which leads to health problems, like obesity, diabeties, high blood pressure and other lifestyle-related problems.

Additionally, not having grocery stores offering fresh foods and groceries in the neighborhood is an economic issue for residents. Having to travel outside the neighborhood to shop means spending money on transportation, be it for gasoline for the car or for public transit. The economics can also play out in added costs for medical care and prescription drugs because of a reliance on less nutritious foods. High blood pressure and type 2 diabetis are often prevented by eating a healthy diet and getting exercise, for example. But once people get the diseases they tend to take perscription drugs to treat them for a lifetime.

The "food desert" phenomenon is also a social and public policy issue. In addition to the individual health and wellness problems residents in neighborhoods underserved by grocery stores face, there are negative social and economic implications for society at large as well. For example, because residents of neighborhoods underserved by grocery stores offering healthy foods often eat a much less nutritious diet, they tend to have more health-related problems than those living in neighborhoods well-served by such stores. Since most of the residents are low-income, they often lack health insurance and instead must seek public health care, which is paid for by taxpayers.

Prevention through access to fresh and nutritious foods goes a long way to not only making people healthier but also towards reducing the burden on hospital emergency rooms and other government-funded clinics, assuming of course people take advantage of the availability and practice a healthier lifestyle, which is something people from all economic segments of the U.S. population struggle to do. All these factors tax local and state government budgets, thereby creating a social and economic issue for even those residents that live in non "food dessert" areas.

But "food deserts" also present an economic opportunity for grocers and other food and grocery retailing format operators such as mass merchandisers (Walmart, Target) and convenience and drug store retailers wanting to offer fresh foods in the stores. For example, Walgreens is testing fresh foods, including produce, in some Chicago and New York stores. CVS Pharmacy is doing the same in about 40 stores in New York and New England.

Many food and grocery have been discovering this fact over the last couple years and have started to open stores in these urban food desert neighborhoods, after avoiding what are mostly low-income and inner-city areas since the flight to the suburbs movement took force in America a few decades ago. Wal Mart's recent deal with the City of Chicago to open up to 24 stores of various formats and sizes over a period of years includes a focus on stores in underserved neighborhoods on the south side, for example.

In addition, a number of states and cities have started initiates, many modeled after the Pennsylvania Fresh Food Financing Initiative, designed to lure grocers to these underserved neighborhoods. For example, the City of Los Angeles recently approved a multi-million dollar "food desert" initiative. Tesco's Fresh & Easy store in low-income south Los Angeles, which was opened in February of this year without any financial assistance from the city, is doing very well for the grocer.

The Washington D.C.-based Brookings Institute's Metropolitan Policy Program, in partnership with The Reinvestment Fund (TRF), which is a community development financial institution and research organization based in Philadelphia, has just released a major study of "food desserts," focusing on ten major U.S. metropolitan regions. The regions are:

>Los Angeles, California
>Phoenix, Arizona
>Las Vegas, Nevada
>San Francisco, California
>Atlanta, Georgia
>Little Rock, Arkansas
>Baltimore, Maryland
>Cleveland, Ohio
>Louisville, Kentucky
>Jackson, Mississippi

All of the metro regions listed above are live links. If you click on the name of the region, you'll get Brookings' analysis of the particular region in terms of which areas have the lowest-levels of access to grocery stores that offering a decent selection of fresh food and groceries at reasonable prices, along with some additional variables and analysis.

Brookings is a well known research center and think tank based in the nation's capital. It operates numerous programs in the areas of domestic and foreign policy. It's

TRF played a lead role in designing and implementing the Pennsylvania Fresh Food Financing Initiative, a program that provides grants and low-cost capital to facilitate the location of new supermarkets and fresh food retailers in that state’s underserved communities. That initiative is now the model for several other state and local programs, as well as the inspiration for a major new federal budget initiative that seeks to improve community health and economic development outcomes through supermarket attraction and expansion.

Brookings and TRF have also created an interactive map/data base [see it here] that can be used to analyze and pinpoint specific aspects of the underserved areas in the 10 metropolitan regions studied, which include the metro California, Arizona and Nevada regions listed above.

Unlike a lot of previous research that attempted to identify "food deserts," Brookings/TRF’s analysis looks at factors beyond distance to a supermarket that matter for access, including a community’s population density and level of car ownership. And it uses household income and expenditure data to help pinpoint the communities that have a significant untapped local demand for supermarkets.

This new and detailed information should be extremely helpful to retailers in considering locating food and grocery markets in these underserved regions.

For example, Tesco's Fresh & Easy Neighbrohood, which operates 168 stores in Southern California and the Bakersfield and Fresno metro regions in California's Central Valley, along with 34 stores in metropolitan Phoenix, Arizona and 27 stores in metro Las Vegas, Nevada, has opened a handful of those stores in low-income "food dessert" neighborhoods, such as its stores in south Los Angeles, Compton and a few others places.

[Note: we've seen and continue from time-to-time to see publications putting out stories saying Tesco's Fresh & Easy Neighborhood Market either has a "food dessert-focused" strategy or that it has been opening numerous stores in underserved neighborhoods. That's not the case. Less than 5% of the 168 Fresh & Easy stores are in areas that qualify as "food desserts." In fact, in our research we've only been able to identify three-four Fresh & Easy stores that are in areas that can be defined as "food deserts." The grocer currently has two-three new stores in development, including one in San Francisco, that are in urban neighborhoods underserved by grocery stores.]

"Across the 10 metro areas [Brookings] studied, about 1.7 million people (5 percent of total population) live in low- and moderate-income communities that are significantly underserved by supermarkets. African Americans, children, and very low-income families are over-represented in these areas," according to Alan Berube, a senior fellow and the research director of Brookings' Metropolitan Policy Program.

"Greater Los Angeles alone accounts for half a million of the underserved; and in the Cleveland metro region, more than one in nine residents lives in a low-supermarket-access community. Estimates suggest that upwards of $2.6 billion annually in grocery expenditures may 'leak' out of these communities due to a lack of nearby supermarkets," Berube says data from the study show.

That $2.6 billion annual figure, along with the respective figures for each of the 10 regions, is and important one for retailers. It means there's a sales opportunity gap of $2.6 billion in these 10 U.S. metropolitan regions alone that's being lost by the food and grocery industry in general and specific grocers in particular.

A number of grocers, including Kroger Co. and others (including independents), as well as Tesco's Fresh & Easy, have been opening a few stores in "food desserts" in California, Arizona and Nevada over the last few years, and are considering building and opening more. The Brookings research and the TRF food store access map should provide a useful tool for grocers and others, including municipal governments, in helping to determine the particular neighborhoods in the 10 regions studied that offer the most opportunity, combined with other research and data, of course. You can also access the data for the 10 metro regions studied using the PolicyMap’s feature, which offers 10,000 data indicators and full functionality. It's at http://www.policymap.com/.

For those interested in additional U.S. metropolitan regions TRF has a nationwide analysis of low-supermarket-access communities at its website here. There's additional information on the "food dessert" issue at the website.

There's clearly loads of opportunity for grocers in "food dessert" neighborhoods, if done right. For example, Tesco has yet to open a Fresh & Easy store in downtown Los Angeles, which although now has a Kroger-owned Ralphs Fresh Fare supermarket which is doing extremely well, still needs and has room for additional markets. This is a real missed opportunity for Tesco's Fresh & Easy, in our analysis.

In the San Francisco Bay Area, the Fresh & Easy store in the Bayview district at Third Street and Carrol Avenue, which is one of the first batch of 11 stores set to open in early 2011, is in a "food dessert" neighborhood. Kroger has one of its Foods Co discount supermarkets not far away but it's the only full-service supermarket in the vast Bayview neighborhood. The fresh & Easy will be the second.

None of the other 20-plus Fresh & Easy Neighborhood Market store locations so far in the Bay Area are located in "food desert" neighborhoods, according to our analysis, although the 32nd and Clement site in San Francisco's Outer Richmond district, also one of the first batch of Fresh & Easy stores Tesco plans to open in early 2011, is in a neighborhood underserved by grocery stores, but its not low-income. [See our Northern California Fresh & Easy Store List.]

The "food dessert" issue is increasingly becoming a front burner topic among elected officials, government policy-makers and non-profit national, community and neighborhood groups. First Lady Michelle Obama's "Let's Move," nutrition initiative has also shined a spotlight on the issue, since increasing access to grocery stores in "food dessert" neighborhoods is a major element of the program.

There's significant opportunity in numerous American inner-city regions, where residents are lacking access to fresh food and groceries at decent prices (and in rural regions as well), for grocers that can operate the right food and grocery retailing format using the right formula.

Additionally, with more and more cities like Los Angeles and others now offering various economic incentives to grocers if they will open stores in the "food desert" neighborhoods, the incentives to enter these neighborhoods and open stores can be extremely favorable for retailers.

Readers Resource

Click here and here to read a selection of past stories in Fresh & Easy Buzz on the "food dessert" and access to fresh food and groceries topic and issue.

Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store?

News & Analysis

Bentonville big box brawler Walmart Stores, Inc. is set on Wednesday (October 13) to present an overview of its food and grocery retailing-focused strategy and plans to open smaller-format stores in various U.S. urban regions, including: Los Angeles (and metro Southern California); San Diego; the San Francisco Bay Area; Chicago; New York City; Boston and possibly a few others.

Additionally, Walmart CEO Bill Simon said on September 15 at the Goldman Sachs Retail Conference that it's possible the smaller-format stores could also be used in suburban (fill-in) and rural areas as part of the retailer's overall USA strategy.

Fresh & Easy Buzz played a key part in kicking off what has been considerable discussion in the industry and media about Walmart's urban smaller-store food and grocery-focused retailing strategy, when we reported in detail in this July 6, 2010 story - Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store - about the retailer's plans. Late last month a number of major publications reported what was essentially our July story. [See - September 20, 2010: About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010.]

In addition to announcing a version of the about 20,000 square-foot (can range from 20,000 -to- as much as 40,000, depending on the site) small-format 'Neighborhood Market by Walmart' prototype store mentioned in our story above, we expect Walmart to describe at least one medium-format and possibly a third smaller-format it plans to use as part of its urban (and as Simon noted at the Goldman conference, potentially suburban fill-in and rural) smaller-store food and grocery retailing strategy and plans.

The second smaller-format could be a flexible-format food and grocery-focused store. That flex-format would range from a low of about 5,000 square-feet to about 20,000 square-feet. The smaller range would be for very dense urban neighborhoods, think Manhattan and San Francisco, for example, where not only is space at a premium but so too is the per-square-foot cost of retail/commercial space.

We've discussed this flexible square-footage smaller-format store in the past in Fresh & Easy Buzz, often referring to it as an American version of a bodega. This is appropriate terminology because Walmart has borrowed, and will continue to borrow, extensively from its Mexico operations, where the company operates store formats ranging from under 5,000 square-feet to over 100,000 square-feet. Walmart is the number one food, grocery and general merchandise retailer in Mexico.

Walmart on Wednesday will also talk about its new flexibility in terms of size as it pertains to its supercenters, which remain the retailer's primary retail weapon of choice in the U.S. As we've been reporting and writing about since 2008, although (store) size still matters at Walmart, when it comes to its supercenters, which average about 180,000 square-feet (the average size has come down by about 10,000-15,000 square-feet in the last couple years), Walmart is no longer as dogmatic about achieving that "average size" as it has been in the past.

For example, in 2009 Walmart opened its first supercenter in Modesto, California, in what was a vacant big box building the retailer renovated. The supercenter is 98,000 square-feet total, with about 75,00-85,000 square-feet of selling space. The smaller supercenter has been doing extremely well since it opened last year.

Due in large part to the success of the Modesto smaller, "hybrid" supercenter, which offers a full selection of fresh foods and groceries and all the other general merchandise departments featured in the bigger supercenters in a edited fashion, Walmart acquired two vacant big box stores in Southern California early this year, which it's renovating into smaller supercenters (70,000-80,000 square-feet of selling space), modeled on the Modesto unit.

Walmart has also been building and proposing some built from-the-ground-up supercenters in the last two years, which are much smaller than traditionally has been the case.

For example, in Patterson, California, which is about 15 miles from Modesto, Walmart is proposing a below average-sized 158,000 square-foot new construction supercenter, at Sperry and Ward avenues, in the city of about 35,000. The location is an open-space area along busy Interstate 5, which connects Northern and Southern California The Patterson City Council votes to approve or deny the store on Tuesday night. The city's mayor, Becky Campo, says it's likely the majority of the council will vote in favor of the store's construction at tomorrow night's meeting. A new supercenter opening this month in Reno, Nevada is even smaller.

These two pieces, along with building new supercenters and the to be announced smaller-store strategy, are key to Walmart's U.S. food and grocery retailing strategy.

An additional key piece of the retailer's U.S. food and grocery retailing strategy is its ongoing expansion (square-footage) at many of its discount format stores, which Walmart essentially isn't building anymore, in which its adding fresh foods and groceries, converting the stores into a "hybrid" supercenter. (We call both the smaller supercenters in renovated vacant buildings and the discount store conversions "hybrid" because they are modifications on the basic supercenter format model.)

Since 2009 Walmart has added square-footage and the equivalent of a full-service supermarket inside numerous discount format stores in the U.S. And in a number of cases, where it either hasn't been able to add square-footage because none is available adjacent to a particular discount store, or it's unable to get governmental approval to do so, Walmart has been adding fresh foods and expanded grocery selections in the discount stores anyway, reducing other department sizes to make room. The discount format stores average about 100,000-130,000 square-feet, so there's plenty of space to do so. And it creates a store format similar to the Modesto hybrid.

A most recent example of this is the remodeled store in Oceanside, California near San Diego, where Walmart reduced the store's electronics department considerably in size, along with shrinking some other departments, in order to add the fresh food and grocery space. [See - September 21, 2010: Fresh & Easy Neighborhood Market and Walmart Create A September New Grocery Store Rain Storm in Oceanside, California]

[Read the seven stories linked below for background on: (1) the smaller super-center in vacant big big box program; (2) the flexible-size new design supercenter program; (3) the discount store conversions and adding of fresh foods and groceries; and (4) smaller-format, small-store strategy.]

>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

>April 25, 2008: Going Smaller: Wal-Mart Might have Found A Solution or Two to Much of the Opposition to its Mega-Supercenter Stores in the USA

>June 27, 2008: Wal Mart Has Created A New, More Upscale Supercenter Store Design Prototype; Submitting Plans For the Stores Selectively in U.S.

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

>February 11, 2009: Tesco's Fresh & Easy Isn't the Only Food & Grocery Retailer With its Eyes on Bakersfield: Wal-Mart's Bakersfield Push and Central Valley, CA Strategy

>May 6, 2010: Going Smaller & Getting 'Hybrid': Walmart's Smaller Supercenter in Vacant Retail Buildings Strategy Began in 2008

Walmart's plans and Tesco's Fresh & Easy

Walmart's smaller-store plans will strike directly at the heart of the two key market regions Tesco has laid out going forward for its Fresh & Easy Neighborhood Market chain, Southern California, where it has over half of its current 168 stores (soon to be 155 after it closes 13 units by November 2, 2010; see 13 Closing Fresh & Easy Stores List ), and Northern California, which it plans to enter in early 2011 and, along with Southern California, put the majority of its focus on for the next two years. [See - October 5, 2010: Philip Clarke's Early Welcome to America: Tesco Logs $151 Million Half-Year Loss For Fresh & Easy Neighborhood Market]

In Los Angeles and parts of Southern California, as well as in the San Francisco Bay Area, Walmart is looking at various versions of strategic plans similar to what it recently announced for Chicago. Below (in italics) is what Walmart USA CEO Simon said about the retailer's Chicago plans at the September 15, 2010 Golden Sachs conference:

"Many of you heard and read about our Chicago announcement a month or so back. After a lot of time and energy, much of it not successful in urban areas in the US, we took a different approach with Chicago, working very closely with Mayor Daley and his team. And I respect them greatly for this effort.

"We have been able to reach an agreement with the City, the City Council and all the constituents in Chicago. And there are a lot of them. (For any of you who know how that whole thing works, please explain it to me one day. I think that would be a big help.) We do believe there is an opportunity for us to grow in Chicago, and the announcement we made talked about several dozen stores over the next five years and after.

"[After] years and years of City Council votes of 64 to nothing against us, we've had three approvals in the last six weeks from the City Council, and we are very, very optimistic about Chicago, and particularly about our opportunities in urban markets.

"We will be adding at least 12,000 jobs in the City, and at a time when jobs are a premium, we offer this, in addition to the savings it will offer our customers in the City of Chicago. There will be about 10,000 Wal-Mart associates and about another 2000 construction trade jobs that this will generate [in Chicago].

"We will have to be a little creative with formats, more so than we've been in the past. There is not a lot of big, empty lots that we can build 200,000 square-foot Supercenters in, nor do we want to anymore. So we will have a mix, a healthy mix, of Supercenters and small formats, including our grocery format, neighborhood market and smaller formats.

We have lots of learnings around the world from Wal-Mart in small formats. Our group in Mexico and Central America, Latin America operates small formats very well and very profitably, and we are going to beg, borrow, steal and learn from them as quickly as we can, because it is important for our urban strategy."

Fresh & Easy Buzz has learned Walmart representatives have had discussions of varying degrees with representatives of the cities (and mayors) of Los Angeles, San Diego, San Francisco, San Jose and a few others, in which the topic of discussion has been about the retailer's interest in opening numerous stores of different sizes, mostly smaller-format, in these cities and the surrounding suburban fringes.

The California cities, all historically previously pretty cool to Walmart in general, have a renewed interest in the retailer because of the agreement Walmart reached with the City of Chicago and the UFCW union, which agreed not to stand in the way of the stores opening. As an example, the mayors of Los Angeles and San Francisco, both Liberal Democrats, have friendships with Chicago Mayor Daley, a Democrat, as well as having strong respect for his governance of the city.
The fact Walmart is talking about smaller, urban-style stores has also peaked the interest of these California municipal officials and their representatives, as this is the first time Walmart representatives have approached them with such a conceptual idea. In the past it's been all about big box supercenters. We're calling it the Chicago model.

Additionally, there's the cold, hard economic facts: Like Chicago, these economically hard-pressed California cities and others are looking for private sector help to develop inner-city neighborhoods, new businesses to create jobs, and additional retail stores to bring in sales tax monies. The deal Walmart struck with the City of Chicago, where Walmart has so far had two new stores approved by the City Council (there's one Walmart discount store in he city) offers all these elements.

Walmart has already been acquiring, and continues to search for, retail space in California for these smaller-format stores, as we first reported back in July. [July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store.] A number of the sites it's obtained and continues to look at are vacant retail buildings, along with from scratch sites.

This means once Walmart pulls the trigger on the smaller store strategy, it won't take it long to renovate and open the first batch of stores, which include the Northern and Southern California focus, where the small-format stores will go in both urban and suburban cities. And there's considerable rural opportunity in California, especially in the north, as well.

Based on our reporting, we also expect Walmart might eventually locate some of its smaller-format stores in metropolitan Las, Vegas, Nevada and the metro Reno region in northern Nevada, although the regions aren't at the top of its priority list right now.

Metro Las Vegas is one of Tesco's four regions with Fresh & Easy Neighborhood Market, along with Southern California, metro Phoenix, Arizona and California's Central Valley.

There are currently 27 Fresh & Easy stores in metro Las Vegas. After Tesco closes the six units by November 2, that will leave 21 stores in the region.

Tesco also has plans to open Fresh & Easy stores in the Reno area as part of its Northern California launch. The Reno-area stores won't likely open any sooner than late 2001 or early 2012, based on our information.

Walmart could also use some of the smaller-format stores as infill in the metro Phoenix, Arizona Market, including replacing some or all of its four 'marketside by Walmart' small-format fresh food and grocery stores. Those four stores are in the Phoenix suburbs of Mesa, Chandler, Gilbert, and Tempe.

Additionally, two sources, both in good positions to know, recently told us Walmart plans to remodel many of the existing 39,000-42,000 Neighborhood Market supermarkets in Arizona that aren't fairly new or weren't remodeled in the retailer's last cycle in the state. This makes sense in light of the about 20,000 square-foot 'Neighborhood Market by Walmart' prototype Walmart's been testing in Rogers Arkansas and the differences it has compared to the existing format. Some of Walmart's newer neighborhood market supermarkets in Arizona are named 'Neighborhood Market by Walmart," although they are in the 35,000-40,000 square-foot range.

Tesco currently has 34 small-format Fresh & Easy Neighborhood Market stores in metro Phoenix, Arizona. After the closure of the six, it will bring the total store-count down to 28. Walmart is the number one food and grocery market share leader in metro Phoenix and all of Arizona, followed by Kroger's Fry's, Safeway, Albertsons, and Basha's. Tesco's Fresh & Easy isn't in the top 10.

This means once Walmart pulls the trigger on the smaller store strategy, it won't take it long to renovate and open the first batch of stores, which include the Northern and Southern California focus, where the small-format stores will go in both urban and suburban cities. And there's rural opportunities in California, especially in the north, as well. For example, there are numerous smaller cities where a supercenter won't work but a smaller-format store will.

U.S. food and grocery is about to get even more interesting - and competitive - with Walmart's decision to expand its format portfolio and square-footage, and go after U.S. urban markets. Stay tuned to Wednesday.