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NEIGHBORHOOD MARKET NEARS ADULTHOOD WITH NEW MATURITY

How old is Wal-Mart Neighborhood Market?On the calendar it's five years old, which for some retailers would be enough time to evolve into a mature format with a detailed expansion plan.But in growth stage Neighborhood Market is somewhere between adolescence and adulthood in what has seemed a long period of rearing. The formula has been constantly tweaked. But it's now beginning to show the clearest

How old is Wal-Mart Neighborhood Market?

On the calendar it's five years old, which for some retailers would be enough time to evolve into a mature format with a detailed expansion plan.

But in growth stage Neighborhood Market is somewhere between adolescence and adulthood in what has seemed a long period of rearing. The formula has been constantly tweaked. But it's now beginning to show the clearest signs of maturity.

Neighborhood Market is one of five retail formats showcased in this week's story on innovative operators, which begins on Page 10. Neighborhood Market is Wal-Mart's most supermarket-like format in terms of size (40,000 to 50,000 square feet) and product assortment. There are now about 50 units and plans to add 20 to 25 in the current fiscal year.

For years, Neighborhood Market has been criticized for lack of sophistication in perishables and overall merchandising and layout. For instance, two years ago I took a tour of a Dallas unit with industry executives and reported on our consensus findings: "The relatively small produce assortment didn't look appetizing, and many bins were partially empty. The case-ready meat packs weren't appealing. The deli and bakery were small and bumped up against each other."

What has happened since then? Industry consultant Neil Stern, senior partner at McMillan Doolittle, has long followed Neighborhood Market's evolution and in the past has criticized its merchandising approach, wondering when it would finally succeed in mastering the format.

"'When' is now here," he warns supermarkets in his Retail Watch newsletter this month, describing a recent tour of a new Neighborhood Market, also in Dallas. "Wal-Mart has significantly closed the gap on quality of store and shopping experience and has a huge advantage in price."

Stern points to findings that include a more exciting traffic pattern; a bakery department that "now feels real and substantive with good selection and presentation"; a major commitment to self checkout; and unexpected general merchandise offerings ranging from storage items to cell phones.

There's also a new emphasis on convenience. This week's SN story cites Neighborhood Market's recent focus on quick, ready-to-eat foods, whether that means full meals, side dishes or just doughnuts and coffee. This strategy is bound to get the attention of other supermarkets and convenience stores.

Not all will agree that Neighborhood Market has turned a corner, and there are hurdles in the format's future. It must increase return on investment and continue to improve perishables sophistication. Also, Neighborhood Market won't make its biggest impact until Wal-Mart decides to accelerate rollouts of new units, which entails shifting some focus from supercenter growth.

But even before that time comes, Neighborhood Market should be taken more seriously. As it moves toward adulthood, it is taking on new directions and potentially represents a formidable one-two punch along with its cousin, Wal-Mart supercenters.

TAGS: Walmart