Getting Real in the Golden State: First Group of 13 Walmart Neighborhood Market Stores Opening in California This Fall

Walmart Neighborhood Market in California

We first reported in this July 2010 story [July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store] that Walmart Stores, Inc. was looking for locations in California for its Walmart Neighborhood Market supermarkets, which range in size from about 30,000-45,000 square feet.

To date Walmart has operated its mega-supercenters and discount format stores only in California, many of which it's been converting over the last few years to hybrid supercenters offering food and groceries, but not its Neighborhood Market grocery stores.

We followed our July 2010 report and analysis piece up with other stories, like this one in January 2011 about the Bentonville, Arkansas-based global retailer's plans to launch its Walmart Neighborhood Market format in the Golden State. In the January piece and in others, we reported on specific locations in California where Walmart would be opening its Neighborhood Market stores.

It's been a long reportage road from our first reports in 2010 about the mega-retailer's plans to open Walmart Neighborhood Market supermarkets in California to the present.

But it's been a fruitful journey.

Why? Because Walmart Store's, Inc. has now announced - and in our case confirmed because many of the store locations it's announced are those we already reported on - the first Walmart Neighborhood Market locations it plans to open, beginning this fall, in California.

Inside a Walmart Neighborhood Market supermarket. Photo courtesy Walmart Stores, Inc.

Below are the locations of those 13 (Walmart obviously isn't superstitious) supermarkets, along with all the key data grocery industry wonks and consumers alike like to see.

Walmart has other Neighborhood Market locations already booked in California, a couple of which are mentioned in our previous stories. In addition, the retailer is looking for more sites for its Walmart Neighborhood Market supermarkets throughout California.

We will be writing about Walmart's launch of its Walmart Neighborhood Market supermarkets in California from now until the end of the year, including reporting on some of those additional locations.

We'll be using this header: 'Walmart Neighborhood Market in California,' in those stories.

As of today we expect the first Walmart Neighborhood Market stores in California to open in the October-November time period. One of the first, if not the first unit, will be in Lincoln, California near Sacramento, where Tesco's Fresh & Easy Neighborhood Market opened a store in March 2012.

Walmart Stores, Inc. currently has 168 Neighborhood Market stores in the U.S., with plans to double the store- count over the next couple years. As we've said a number of times in Fresh & Easy Buzz, California will play a major role at Walmart in the growing of that store-count. Stay tuned.

[Read our extensive four-plus years of reporting, analysis and commentary about Walmart Stores, Inc., including its Walmart Neighborhood Market and other smaller format grocery stores at the following links: Wal-Mart, Wal-Mart Stores Inc, Walmart, Walmart Stores.]

The Walmart Neighborhood Market supermarket (an urban version) in Chicago's West Loop Neighborhood, which opened earlier this year. The store is about 31,000 square feet. Photo courtesy blog.chicagoarchitecture.info.

Walmart Neighborhood Market in California

Walmart Neighborhood Market - 13 Confirmed California Store Locations

Confirmation sources: Delia Garcia, Walmart West. Steven Ristivo, Walmart Stores, Inc., senior director of community affairs.

SOUTHERN CALIFORNIA

1. City: Los Angeles
County: Los Angeles
Address: Corner Grand Avenue and Ceasar Chavez Avenue. Downtown, on outskirts of Chinatown.
Square-footage: 33K. Ground floor of senior citizens' residential complex.
Current target opening: Early-to-mid-2013. Construction to begin summer 2012

2. City: Huntington Beach
County: Orange
Address: Corner Beach Boulevard and Atlantic Avenue. Former Rite-Aid drug store building
Square-footage: 31K
Current target opening: August 2012

3. City: Rancho Santa Margarita
County: Orange
Address: 30491 Avenida de Las Flores. Avenida de los Flores and Antonio Parkway
Square-footage: 33K
Current target opening: August 2012

4. City: Camarillo
County: Ventura
Address: Camarillo Town Shopping Center. 275 West Ventura Boulevard. Vacant Linens and Things building
Square-footage: 34-36K
Current target opening: Late 2012

5. City: San Diego
County: San Diego
Address: Logan Heights. Imperial Avenue between 21rst and 22nd Streets, near downtown. In historic former Farmers Market building. Neighborhood is underserved by grocery stores offering fresh food and groceries at affordable prices.
Square-footage: 48,800K
Current target opening: Late 2012/Early 2013

NORTHERN CALIFORNIA

San Francisco Bay Area

6. City: Pleasanton/East Bay
County: Alameda
Address: Meadow Plaza shopping center. 3112 Santa Rita Road. Santa Rita Road and Stoneridge Drive
Former Nob Hill Foods' (Raley's owned) supermarket building. Near Safeway Stores, Inc.'s corporate headquarters. Less than a mile from a Safeway store and a Fresh & Easy market.
Square-footage: 31K
Current targeted opening: Late 2012/Early 2013

7. City: San Ramon/East Bay
County: Contra Costa
Address: Country Club Village Shopping Center. 9100 Alcosta Boulevard. Former Ralphs' supermarket and La Asia supermarket building. Closest competitor: Save Mart-owned Lucky supermarket, less than one mile away.
Square-footage: 33-36K
Current target opening: Fall 2012

8. City: Hayward/East Bay
County: Alameda
Address: 2480 Whipple Road. Former Circuit City building
Square-footage: 33-35K
Current target opening: Late 2012/Early 2013

9. City: San Jose
County: Santa Clara
Address: Westgate Mall. 1600 Saratoga Avenue
Square-footage: 38K. Recently closed Safeway store
Current target opening: Fall 2012

Sacramento Region

10. City: Sacramento
County: Sacramento
Address: Taylor Center. 2700 Marconi Avenue. Marconi Avenue and Fulton Avenue. Former Goore's children's store building. Prior to 1999, when Goore's moved in, was a the American Stores' Inc. Lucky supermarket. Goore's closed in fall 2011.
Square-footage: 32-36K*
Current target opening: Late 2012/Early 2013

11. City: Granite Bay (Roseville border)
County: Placer
Address: Sierra Oaks shopping center. Douglas and Sierra College boulevards. Former Grocery Outlet store, plus additional square-footage attached to the building but previously not used by Grocery Outlet.
Square-footage: 43K
Current target opening: Late 2012-to-early-2013

12. City: Lincoln
County: Placer
Address: Highway 65 and Second Street. Former Rainbow Market building
Square-footage: 31-32K
Current target opening: Fall 2012

13. City: Modesto
County: Stanislaus
Address: Coffee and Orangeburg shopping center. Corner Coffee Road and Orangeburg Avenue. Former Dollar Superstore building (26K sq. ft.. Plus, former Leslie Pool Supply building next door (10K sq. ft.)
Square-footage: 36K.
Current target opening: Late 2012-to-early 2013

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 Stores, Inc. Announces the Name For its New Smaller-Format Food & Grocery Stores: 'Walmart Express'

Bill Simon, president and CEO of Walmart U.S., said today during a conference call in which Walmart Stores, Inc. reported its fiscal year 2011 fourth quarter financials, that the Bentonville, Arkansas-based global retailer has decided on a name for its new smaller-format food and grocery-focused stores. The name: "Walmart Express."

The "Walmart Express" name will be used for the smaller-format stores, which will range up to about 30,000 square-feet, which we've reported on and written about extensively in Fresh & Easy Buzz, in both urban and rural markets, Simon said today.

The head of Walmart's largest division, Walmart U.S., also said today that the first "Walmart Express" stores are set to open in the second quarter of this year, just a few months from now.

As we've previously reported, Walmart has secured numerous locations for the smaller-format, food and grocery-focused stores in California, including in both the southern and northern parts of the Golden State.

For example, in this January 10, 2011 story: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap - we reported on specific locations Walmart has obtained in California for its smaller-format stores. We also reported in our piece that Walmart is preparing to open the first batch of its smaller-format stores soon, which Walmart U.S. president and CEO Bill Simon confirmed today, saying: "The development of our small format is progressing ahead of schedule. We expect to open our first 'Walmart Express' stores in the second quarter [of 2011]" [Also see - July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store; and September 20, 2010: About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010.]

Since publishing our story in early January, we've learned about and additional 10 locations in Southern California that Walmart Stores has acquired for its smaller-format stores. We've agreed with the Southern California commercial real estate source that provided the information to us not to list the locations of the stores just yet.

In addition to California, Walmart has acquired locations, has sites in the pipeline and has further plans to acquire locations for its "Walmart Express" smaller format stores throughout the U.S., including in major urban regions like Chicago, Washington D.C., New York and elsewhere.

Additionally, along with urban area, Walmart plans to open the smaller-format food and grocery stores in suburban and rural regions of the U.S., which is something we've previously reported, and that Bill Simon confirmed today.

Simon also said today that he and Walmart Stores, Inc. is disappointed with the sales performance of Walmart U.S. for the fourth quarter. "Our 1.8 percent comp decline for the fourth quarter didn’t meet anyone’s expectations. They certainly didn’t meet mine. Period," Simon said today.

Walmart Stores, Inc. reported a 1.8% decline in comparable store sales at Walmart U.S. for the 13-week period ended Jan. 28, 2011. On a slightly brighter note, comparable sales for Walmart's Sam's Club wholesale club division increased 2.7 percent, excluding fuel sales, for the same period.

Below is a summary of the financial metrics Walmart Stores, Inc. reported today for its fourth quarter:

• Walmart reported diluted earnings per share from continuing operations (reported EPS) of $1.41. This compares to $1.261 per share from continuing operations last year. Fourth quarter underlying diluted EPS from continuing operations was $1.342.
• Reported EPS from continuing operations for the fourth quarter included tax benefits of $243 million, or approximately $0.07 cents per share.
• Consolidated operating income for the fourth quarter was $8.0 billion, up 7.3 percent from last year.
• Net sales for the fourth quarter were $115.6 billion, an increase of 2.5 percent from last year.
• Walmart U.S. comparable store sales declined 1.8 percent in the 13-week period ended Jan. 28, 2011. Sam's Club comparable sales, without fuel, increased 2.7 percent for the same period.
• Full year reported EPS from continuing operations was $4.18, compared with last year's EPS of $3.731.
• Full year underlying diluted EPS from continuing operations was $4.072.
• Consolidated operating income for the full year was up 6.4 percent to $25.5 billion.
• Net sales for the full year were $419 billion,an increase of 3.4 percent.
• The company leveraged operating expenses for the quarter and the full year.
• Return on investment (ROI) for the fiscal year ended Jan. 31, 2011 remained strong and stable at 19.2² percent. Walmart ended the year with strong free cash flow of $10.92 billion.
• For the year, the company returned a record $19.2 billion to shareholders through dividends and share repurchases.

[You can view Walmart Stores, Inc.'s full financial release here. Click here to view the full-transcript of Walmart's Fourth Quarter Fiscal Year 2011 Earnings Call.]

Fresh & Easy Buzz will have additional news and analysis on Walmart's new "Walmart Express" smaller-format food and grocery store initiative upcoming soon. In the meantime...

Follow the story in Fresh & Easy Buzz: Walmart's New Smaller-Store Initiative

July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype 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

October 13, 2010: Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA

October 11, 2010: Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store?

October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community.

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

Readers: You can read additional stories about Walmart, including its smaller-format development at (by clicking on) the following links - 20K Neighborhood Market by Walmart prototye, California, Wal-Mart, Walmart, Walmart in California 2011, walmart small store strategy, Walmart Stores marketside by Walmart, Wal-Mart, Wal-Mart format innovation, Wal-Mart hybrid supercenters, Wal-Mart Marketside, Wal-Mart Modesto CA, Wal-Mart Supercenter, Wal-Mart's new Supercenter prototype, Walmart, marketside store brand, brand marketside, Walmart Stores Inc. Use the 'Older Posts' 'Newer Posts' links at the bottom of the linked pages for more pages/stories.

Simon Says: Walmart U.S. CEO Outlines Smaller Store Strategy and Plans; Walmart to Offer Groceries Online in USA

Walmart U.S. president and CEO Bill Simon outlined Walmart Stores, Inc.'s smaller store strategy and plans this morning at the retailer's annual conference for the investment community in Bentonville, Arkansas.

In addition, Walmart said today it plans to start offering packaged food and grocery items on its Walmart.com e-commerce website in the coming year.

Below is what Simon said in his talk this morning about the smaller-format stores and Walmart's "Three format" strategy:

"Over the next few years, we will introduce new formats to help us enter new markets.

"Walmart U.S. will move toward a three-format portfolio, which will drive expansion to urban markets and small towns, as well as fill in gaps in existing markets," Simon explained.

"The large format is our supercenter, which sells a broad assortment of groceries and general merchandise.

"We have integrated efficiencies into our supercenter design that have allowed us to decrease the average square footage for our supercenter format.

"The medium (store) format, between 30,000 and 60,000 square feet, will be based on the needs of an individual market.

"The small format, which is less than 30,000 square feet, will be targeted to urban markets and small towns."

Simon stressed in his talk this morning that although he believes there's room for "hundreds" of the smaller format stores in the U.S., Wal-Mart plans to open just 30 -to- 40 of the smaller stores in its 2012 fiscal year, as it tests the formats.

Walmart's head of U.S. operations also confirmed Walmart's plans to open the smaller format (and likely some medium) stores in Southern California and Northern California, as well as in Chicago and New York. Other major regions and cities are part of the plan as well. He didn't offer a specific laundry list of regions and cities but said "yes" to all of the above. [See - October 11, 2010: Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store? and July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store] [Also see the column linked in the paragraph below.]

Simon also joked about liking the two musical numbers - "My Kind of Town (Chicago is)" and "New York, New York" - both of which were performed by the "Walmart Choir" during last night's conference kick off and dinner. Read what our 'The Insider' columnist had to say about it yesterday - October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community.

That announcement should surprise many of the equity analysts in the audience, who are among those who've recently been suggesting prior to today, like they did when 'Neighborhood Market' was launched in 1998 and again in 2008 with 'marketside,' that Walmart will build hundreds and even thousands of the smaller format stores. The proof will be in the pudding.

Walmart's track record with smaller stores - it's opened about 181 of the 39,000-42,000 square-foot Neighborhood Market supermarkets since 1998 and just four 'marketside by Walmart' units (about 15,000-18,000 square-feet) since 2008 - is less than stellar. Walmart U.S. is making the right decision to start slow, based on its track record with smaller format stores.

That Walmart plans to take a slow and cautious approach with its smaller store strategy and plans is good news for Tesco's Fresh & Easy Neighborhood Market. Were Walmart to go aggressive with the launch, opening a hundred or more stores over say a two year period of time, particularly in California where Tesco is putting most of its emphasis, the United Kingdom-based retailer would be under even more pressure than it already is under with its small-format Fresh & Easy venture.

Walmart plans to open 185 -to- 205 new stores in the next fiscal year, compared with 153 stores in the current year, but with the same increase in square footage, 11 million, and similar capital expenditure, $7.5 billion to $8 billion, Simon said.

Simon tied Walmart's U.S. supercenter strategy into its new, smaller store plans. And supercenters - new units and discount store conversions - remain Walmart's primary retailing - including food and grocery - format and growth instrument going forward in America, without a doubt.

"We also are allocating capital to continue converting discount stores to supercenters, which add no square footage, but are expected to increase sales," Simon said today.

"Of the 155 to 165 supercenters we will add next year, 45 to 50 will be new units, with the remainder conversions. Simon said U.S. supecenters now average about 180,000 square-feet.

"Neighborhood Markets will make up the bulk of the medium format stores, and there will be some pilots of the small store format included in next year's plan."

By the end of Walmart's current fiscal year, more than 550 U.S. stores will have been remodeled, Simon said today, adding that Walmart U.S. plans to remodel more than 500 stores next fiscal year.

"Remodeling costs will be lower next year, due to changes in design and schedules. The time to remodel a store will decrease by 40 percent, and with fewer disruptions, traffic and sales will improve sooner,"he said at today's investor conference.

"We are very excited about the additional growth opportunities that we have in the United States. We will have growth in geography, growth in formats and growth in multi-channels."

A key point noted by Simon this morning is that capital expenditures for Walmart U.S. next year will be flat when compared to the current year, as will square footage growth. But stores and sales are projected to grow, he said.

Simon commented that Walmart believes it can and should be grabbing a bigger share of U.S. consumer dollars, including food and grocery purchases, particularly from lower-income shoppers.

Consumers earning less than $70,000 a year account for 68% of Wal-Mart's U.S. customers, Simon said today, adding that its store remodels of the last couple years and the use of more-simplified product offerings have helped the retailer attract more affluent shoppers.

However, he said Walmart has lost ground with its lower-income customers, which the retailer is working hard to turn around adding-back SKUs and new merchandise and focusing its promotions on overall shopping basket value and savings rather than putting an emphasis on just a few items.

What Simon is referring to is the fact that some of Walmart's middle and lower-income customer base has been shopping other formats like dollar stores and deep-discount grocers, as well as cherry-picking among numerous retailers, over the last couple years, driven in large part by the recession, rather than being as loyal as they've been in the past to Walmart, particularly when it comes to grocery shopping.

"In this environment [poor economy, high unemployment] we should be thriving," Simon said in his talk, adding that while its true the economy is causing pain for Walmart's lower-income consumers, that posed an opportunity to gain market share by making its offering more appealing and getting them back.

America's Next Online Grocer: Walmart of course

Walmart also announced at the conference today it will begin offering packaged food and grocery items on its Walmart.com website in the coming year, which it's referring to as a pilot project.

Fresh & Easy Buzz first reported Walmart would do so in early 2009 on our Twitter.com feed (which you can view at the top/right) and have mentioned it in the blog a number of times since. It's been a long time coming, in fact.

The food and grocery products will be shipped to homes and business addresses by postal carriers like Federal Express, just as clothing, books, furniture and everything else ordered via the website is.

Online ordering with pick-up at selected stores via Walmart's "Pick Up Today" program will also be an option. Walmart is expanding its "Pick Up Today" and related "FedEx Site to Store" program to additional U.S. regions, including the San Francisco Bay Area and metropolitan Chicago, Phoenix and Washington D.C., along with expanding the program in general. See here for details.

Direct home grocery delivery isn't part of Walmart's plans. The retailer already offers a selection of non-food packaged goods like household cleaning products and laundry detergent, along with pet foods, on Walmart.com.

Our 'The Insider' columnist nailed the online grocery offering announcement ahead of today's conference in his column yesterday - October 12, 2010: 'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community.

[Editor's Note: Fresh & Easy Buzz will be offering additional coverage and analysis (including a follow-up column by 'The Insider') on Walmart's smaller store and "three format" strategy and plans, it's online grocery plans, international initiatives, and more. Stay tuned.

Related Stories:

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?

July 6, 2010 story - Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype 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

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 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.

About Today's Walmart Stores, Inc. Smaller Stores Media Frenzy: We Scooped it On July 6, 2010

Fresh & Easy Buzz

July 6, 2010:
Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store [Additional regions and cities mentioned in our piece.]

Others

Financial Times
September 19, 2010:
Walmart lines up sites for smaller stores

Wall Street Journal
September 19, 2010:
Wal-Mart Scouting Sites For Smaller US Stores - Report

Associated Press
September 20, 2010:
Wal-Mart to make a big push into urban markets

San Francisco Chronicle
September 21, 2010
Walmart sets sights on San Francisco

Additional Publications - click here

In the coming days, Fresh & Easy Buzz will have more to come about Walmart's smaller-format, smaller-store plans, leading up to the retailer's plans to offer more details in October at its anlaysts' meeting.

Walmart in Fresh & Easy Buzz: Suggested Reading/Linkage:

marketside by Walmart, Wal-Mart, Wal-Mart format innovation, Wal-Mart hybrid supercenters, Wal-Mart Marketside, Wal-Mart Modesto CA, Wal-Mart Supercenter, Wal-Mart's new Supercenter prototype, Walmart, marketside store brand, brand marketside, Walmart Stores Inc. Use the 'Older Posts' 'Newer Posts' links at the bottom of the linked pages for more pages.

Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store

Breaking News - Plus Analysis

Walmart Stores, Inc. is currently searching for numerous future store sites in Northern California, with a focus on existing vacant retail buildings, for its 20,000 square-foot Neighborhood Market by Walmart prototype format, which it's been testing in a store in Rogers, Arkansas near corporate headquarters in Bentonville for about a year, Fresh & Easy Buzz has learned.

In addition to its Northern California focus, Walmart is also scouting for sites for the smaller-format stores in northern Nevada, in other selected urban regions in the west, and at urban locations on the east coast and in the Midwest, particularly in Chicago, where it recently announced a major development initiative in partnership with the city and Mayor Richard Daley, in which Walmart will invest tens millions of dollars to develop numerous stores (multiple format, big and small) on Chicago's south and west sides.

The 20,000 square-foot prototype store in Rogers, Arkansas - which is essentially a smaller, hybrid version of Walmart's 40,000 square-foot Neighborhood Market format, mixed with some of the elements of its Marketside by Walmart fresh food and grocery format, four stores of which the retailer's been operating in Metropolitan Phoenix, Arizona since October 2008 - currently goes by the name Neighborhood Market by Walmart, as do at least two converted Neighborhood Market stores (both are 40,000 -to- 45,000 square-feet though); one in Naples, Florida and the other in Plano, Texas. However, according to our sources, Walmart has not yet decided if the 20,000 square-foot prototype will end up being called Neighborhood Market by Walmart, or if it will choose another name for it.

Walmart is searching for an initial 10 locations for the new concept, 20,000 square-foot Neighborhood Market by Walmart prototype format in the Sacramento Metropolitan region, and for about the same number of store sites in the San Francisco Bay Area, according to two Northern California-based commercial real estate sources in a position to know about the search.

According to our sources, Walmart is looking for at least three initial locations in Sacramento, with the other seven store sites being in the surrounding suburbs, including in Elk Grove, where Tesco's Fresh & Easy Neighborhood Market has two future store sites - one at Bruceville Road and El Grove Boulevard, and the other at Elk Grove Florin Road and Calvine Road. This mix is subject to adjustment and change.

Interestingly, Southern California-based Smart & Final is planning to open its first Henry's Farmers Market food and grocery store in Elk Grove in late August. [See here.]

Tesco's Fresh & Easy has had 19 publicly confirmed store locations in Northern California's Sacramento/Vacaville Metropolitan region since February 2008. Ten of the store sites are in Sacramento. The other seven are in the suburbs. Two of the stores are in Vacaville, which is about a 30 minute drive from Sacramento, and is located about mid-way between Sacramento and the Bay Area. [See - February 28, 2008: News & Analysis: Tesco's Fresh & Easy Confirms 19 Store Locations for the Sacramento-Vacaville Region in Northern California]

The search for store locations for the 20,000 square-foot prototype format, currently going by the name Neighborhood Market by Walmart, in the San Francisco Bay Area includes a mix of urban and suburban locations, including in the south Bay Area near San Jose, in the East Bay, as well as in San Francisco, and elsewhere in the nine-county region of about 7 million residents.

Tesco's Fresh & Easy has 18 confirmed future store locations in the San Francisco Bay Area. Those store sites were announced in February 2008 as well. Click here to read our most recent - and past - coverage on Fresh & Easy Neighborhood Market's plans in Northern California, including in the nine-county Bay Area.

Walmart is hoping to find some of the Northern California locations this year, and could announce, or at least confirm, its plans for the 20,000 square-foot stores before the year is out.

Fresh & Easy Buzz has visited the 20,000 square-foot new concept Neighborhood Market by Walmart store in Rogers, Arkansas. It differs from the traditional 40,000 square-foot Neighborhood Market format (about 152 existing stores at present) in a number of key ways, although its apparent to us it's where the inspiration and structural basis for the prototype comes from.

First, the 20,000 square-foot prototype store is more compact, but doesn't have a crowded look or feel to it. Second, the store's sight lines (lower but with fairly high-profile gondola shelving in order to hold plenty of SKUs) and overall interior design are an improvement over the traditional Neighborhood Market stores, in our analysis.

Additionally, the department graphics - green in color - in the 20,000 square-foot prototype store are colorful and pop when you set your eyes on them. The theme "Save Money Live Better," is used throughout the store.

The prototype store also features both full-service and self-service checkout lanes.

Lastly, the 20,000 square-foot prototype Neighborhood Market by Walmart store in Rogers, Arkansas has a service seafood counter, a deli/prepared foods department under the "Marketside" brand, am in-store cafe, and features a substantial offering of natural and organic food and non-food products, in addition to conventional national brands, and lots of private label SKUs, across all departments and categories.

We've been reporting and offering analysis for the nearly three-year existence of Fresh & Easy Buzz that in order for Walmart to have a significant presence in the food and grocery retailing space in Northern California it must have a multi-format and multi-square-foot strategy.

The retailer initially began exploring this strategy in late 2007/early 2008, when it located a number of potential sites in Northern California for its small-format (16,000 -to- 20,000 square-foot) Marketside by Walmart fresh food and grocery stores (originally named just Marketside). However, in 2009 Walmart put the opening of any new Marketside stores on hold, and began creating the 20,000 square-foot Neighborhood Market by Walmart prototype, the first and only store of its size currently being the one in Rogers, Arkansas.

There are currently four Marketside by Walmart stores in Metro Phoenix, Arizona. All four stores opened in early October 2008.

Walmart Stores, Inc. currently has no plans to open any additional Marketside by Walmart stores - anywhere - including in Northern California. In fact, the retailer still holds leases on two sites in Southern California, one in San Diego and another in nearby Oceanside, but has no plans to open them as Marketside by Walmart stores. Construction at both locations, vacant retail buildings, has never been started, nor are there any plans to do so in the near future.

It's our analysis that Walmart is likely to replace the Marketside by Walmart format with some final version of the 20,000 square-foot Neighborhood Market by Walmart prototype, in terms of not opening any additional Marketside stores, and eventually close the four stores in Arizona, or replace one or more with the 20,000 square-foot prototype. It's important to note that the 20,000 square-foot prototype store in Rogers, Arkansas remains a work in progress in terms of not being cast in stone as the final format product, just like the name Neighborhood Market by Walmart might not end up being what it's called. [For some background see - December 21, 2009: Wither Walmart's Small-Format 'marketside' Stores and Format? and January 9, 2010: Walmart's 'marketside': What's 'In-Store' for 2010?]

As we've reported and offered analysis on frequently in Fresh & Easy Buzz, Walmart has embarked on a strategy to increase its market share, which is minimal, in Northern California in three key ways.

First, it's converting as many of its Division I discount format stores - just as its doing throughout the U.S. - as it can in the region into hybrid supercenters, adding anywhere from 30,000 -to- 56,000 square-feet of additional space to the stores as part of a complete remodeling, and using that added space for fresh foods and groceries.

Additionally, following on the heels of the opening of its first-ever smaller-format, hybrid supercenter in Modesto, California in 2008, which is located in an about 90,000 (less selling space than that though) square-foot building, which formerly held a discount warehouse supermarket and a drug store, Walmart has been and is searching for similar sized - in the 75,000 -to- 1000,000 square-foot range - vacant big box stores in Northern California that it can remodel and turn into edited versions of its Supercenters, like it did with the Modesto store on McHenry Avenue in the city of 205,000, in Stanislaus County [See - May 6, 2010: Going Smaller & Getting 'Hybrid': Walmart's Smaller Supercenter in Vacant Retail Buildings Strategy Began in 2008]

Lastly, Walmart is proposing numerous new supercenters in Northern California, including in the Sacramento region - one is planned for Elk Grove in the southern part of town in fact - the Northern Central Valley (Stockton, Modesto, Merced regions), the Bay Area (in a limited way though because approval is difficult to get) and elsewhere.

The reason Walmart needs a multi-format and multi-square-footage strategy in Northern California is for two primary reasons: (a) obtaining approval for mega-supercenters is extremely difficult in the region (some cities and counties even have ordinances banning the big stores) and (b) the geographical (density) limitations in key cities like San Francisco, Oakland, San Jose, Sacramento and a couple others make locating and 100,000-plus square-foot supercenters (and even 75,000 square-foot units) nearly impossible. Therefore, focusing on a food and grocery- centric format like the 20,000 square-foot (or slightly bigger or smaller) Neighborhood Market by Walmart prototype is key for Walmart to become a grocery retailing player in the Northern California, as well as in numerous other similar places in the U.S., region.

Selected Related Stories from Fresh & Easy Buzz:

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.

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

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

November 19, 2008: Competitor News: Wal-Mart Lowering Prices on Holiday Items and Staples; New Formats Coming; Online Grocery Sales; Hundreds of New Stores FY 2009-2010

October 5, 2008: Wal-Mart's Marketside is More Than the Sum of the Parts of its Other Formats; While Time and Consumers Will Judge, We See the Format As A Stategic Fit

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

November 21, 2008: Breaking News: Wal-Mart Stores, Inc. Names New CEO to Replace Lee Scott; USA Chief Castro-Wright Elevated to Vice Chairman Effective Immediatly

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 16, 2009: Competitor News: Wal-Mart Clears First Major Hurdle For Proposed Mega-Distribution Center in Merced, CA; Chain's Regional Strategy Moving Forward

October 3, 2008: Wal-Mart Opens First Four Small-Format Marketside Fresh Food and Grocery Stores Tomorrow Morning in Gilbert, Chandler, Mesa and Tempe, Arizona

December 21, 2009: Wither Walmart's Small-Format 'marketside' Stores and Format?

May 20, 2010: Welcome to Discountopia USA

Stories thus far in our on-going 2010 Northern California Market Special Report Series:

June 26, 2010: Tesco Planning to Announce in July When First Northern California Fresh & Easy Neighborhood Market Stores to Open

June 14, 2010: Newly-Named Whole Foods Market CO-CEO Walter Robb Comes Full Circle With the Opening of the New Store in Mill Valley CA

June 5, 2010: Sprouts Farmers Market Opens First Northern California Store in Sunnyvale; Strikes Up Partnership With Local Non-Profit Farm

May 29, 2010: Going Rural: Fresh & Easy Neighborhood Market to Build First Store in Los Banos, California

May 28, 2010: First Phase of Fresh & Easy Neighborhood Market-Anchored Condo Development in San Francisco's Bayview Set For Completion in June

April 19, 2010: Tesco Debating Whether to Launch Fresh & Easy Into Northern California This Fiscal Year... or Wait

May 9, 2010: A Whopping 15 of Whole Foods Market's 41 New Stores in Development are in California - And Nine of The 15 Are In Northern CA

May 8, 2010: Sprouts, and Likely Henry's to Beat Fresh & Easy to Northern California Despite it's Big Head Start

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

[Readers: Click here and here to read about Fresh & Easy's Buzz's extensive reporting and analysis on Tesco's Fresh & Easy-Northern California, as well as on the Northern California market in general.]