With
Wal-Mart’s stock under pressure and
profit growth slowing dramatically, the
world’s largest retailer is reportedly
finalizing strategies for a new store format
that would be dramatically smaller than
existing stores, in part to achieve better
success in urban and upscale markets. (See
Where
is Wal-Mart’s Secret Plan?).
The Wall
Street Journal reports this week that Wal-Mart
“has a team of executives hunkered
down far from Bentonville in the San Francisco
Bay area devising two new small-footprint
stores,” one of which would be grocery
store designed to battle head-on the type
of store the U.K.’s Tesco plans to
launch this November in the U.S. (See
Here’s
a Switch: Wal-Mart Calls for Investigation
of Tesco Market Dominance in U.K.)
The
strategy appears to have at least two objectives:
(1) to have a competitive small format grocery/convenience
offering to combat the Tesco invasion and
similar moves emerging from other grocers,
and (2) to find a format that will have
greater success in the urban and upscale
markets that, for a variety of reasons,
it has so far struggled to penetrate. Of
special importance is California,
where, mostly due to local opposition, Wal-Mart
has not been able to open many stores. With
much of that local opposition to be specifically
focused on “big box” stores,
perhaps the smaller footprint formats will
have more success gaining approval.
One of the
coming store formats is said to be an urban
convenience store less than a tenth of the
size of the company's current supercenters,
carrying groceries and convenience items
geared to more affluent and urban tastes.
The other format will involve stand-alone
stores offering a variety of health services
and products. Both could be introduced as
early as the first quarter of 2008.
Analysts
believe Wal-Mart sees huge opportunity in
providing a variety of basic health care
services, from eye exams and glasses to
physical exams, vaccinations and other routine
care, tapping into the huge and growing
market.
The strategy
is also, in a sense, a continuation of Wal-Mart’s
stated goal of tailoring local store execution
to local market requirements. Though a plan
to offer store managers more autonomy and
format big box stores around local customer
demographics is still very early in its
roll out, the new convenience-based stores
would also be an element of the strategy
(See In
Search of More Growth, Wal-Mart Follows
Best Buy in Move to Tailor Stores to Individual
Markets.)
The
new stores will certainly require some supply
chain and inventory changes on the part
of Wal-Mart and its suppliers. Tesco is
famous for its continuous replenishment
program it uses in small footprint grocery
stores in Europe
similar to the 30 Fresh & Easy Neighborhood
Markets locations it initially plans to
open in the U.S.
With the
small format and almost no backroom space,
Tesco applied Lean principles to its replenishment
strategies, making local deliveries to each
store several times per day. In many areas,
Wal-Mart will be able to leverage its vast
DC network to achieve logistics efficiencies
to these smaller stores. However, the more
urban/upscale customer will probably also
require some new food suppliers and an even
more responsive supply chain, SCDigest believes. |