Retail News Breaks Archives
Walmart sharpens focus on small-format stores
October 28th, 2013
BENTONVILLE, Ark. – Walmart plans to open more small stores than Supercenters in the coming year — marking a first for the quintessential big-box retailer.
Walmart executives told analysts at an investment event earlier this month that the company believes that it can wring more growth out of mature markets by taking more sales away from drug stores, dollar stores and supermarkets.
In the current fiscal year that begins on February 1, 2014, Walmart is planning to open 120 to 150 Walmart Neighborhood Markets and Walmart Express stores, and only about 115 Supercenters.
“We will accelerate growth of our Neighborhood Markets because of their strong returns, consistent comp-sales performance and double-digit net sales increases,” said Walmart U.S. president and chief executive officer Bill Simon at the 20th Annual Meeting for the Investment Community.
“We will continue to build and leverage the Supercenter format, which remains our primary format for growth. We plan to open approximately 115 Supercenters next year, including relocations and expansions.
“The combination of large and small store formats will allow us to strengthen our market share position and give customers convenient access to shop for food and general merchandise, as well as access to our e-commerce offerings.”
Simon described how Walmart’s growth strategy would play out, using an actual (unnamed) market as an example. Walmart currently has three Supercenters in that market, and they are very profitable, with each averaging more than $100 million in annual sales.
Walmart opened the last of those stores in 2003, reckoning that the market could not support another Supercenter. But since then more than 30 drug, grocery and dollar stores have opened in the market, many of which are located closer to where Walmart’s customers actually live.
“We’ve been pleased with the performance of these [Supercenters], but we’re clearly not capturing all the growth we should be able to capture in this market.”
In markets like this, which Simon described as typical in the United States, Walmart intends to open Neighborhood Markets and Walmart Express stores to try to capture some of those sales that are being lost to other channels, including drug stores.
Simon pointed out that Walmart introduced the Neighborhood Market stores in 1999, and it took 10 years for the format to generate $1 billion in sales. Walmart currently has about 300 of these stores — which average approximately 40,000 square feet — in operation.
“Over the next three years we’ll grow this format to over $12 billion, and we have plans to add more than 400 units, bringing the total count to well over 700 units. And we’re adding convenience to the format. Increasingly you’ll see us use fuel as a major piece from a convenience perspective for the stores as we add them to the pipeline.
“We’re also very excited about the possibilities with Walmart Express. The customer response has been very, very good,” he said.
Simon added that customers visiting its smaller stores will be able to pick up merchandise delivered from local Supercenters or ordered online. That should allow a Walmart Express to have the sales of a much larger store, he said.