BENTONVILLE, Ark. -- Wal-Mart Corp. here said last week it is testing an expanded food assortment at a handful of its discount stores "to provide additional convenience for customers."
The new assortment adds frozen food and prepackaged meats to the bread, eggs and milk that Wal-Mart has been testing for a year to complement its basic offerings of chips, soda, juices and canned goods. Industry observers said bread, eggs and milk will be offered at all 1,900 discount stores this summer.
Les Copeland, director of public relations, told SN that Wal-Mart has always carried consumables at its discount stores. "What you're seeing is an evolution here. We're adding a few different items to meet our customers' needs. It's not unusual for Wal-Mart to expand and re-evaluate what we do."
Copeland said Wal-Mart is testing different combinations of expanded products at different stores. "We're adding products or taking products out to see what the customer wants, to see how we can improve as customers give us feedback."
He declined to discuss the size of the expanded food sections or the size of the existing sections, explaining they vary too much from store to store. "But we've sold groceries in our stores for years, and what we're doing now is just taking a look at that department and trying to improve the selection."
Wal-Mart is using the name Market Express for the expanded food department at a store in Independence, Mo., although it has no plans to use that name at other locations, Copeland said. "We have just the one store where we've put up a mockup of an actual sign with the name 'Market Express' on it, simply to experiment with a signing program.
"But right now we're more interested in the format itself than with the words on the sign," he said.
Stephen Long, a securities analyst with the Atlanta division of Prudential Securities, New York, said Wal-Mart's year-long test of bread, eggs and milk "made the company realize how well those items could sell, so it's decided to expand the selection further with frozen food and prepackaged meats."
Long said he expects Wal-Mart to test the expanded selection for another year in a couple of different areas, although he said he was uncertain where those tests would be. "Wal-Mart tends to test products or merchandising ideas in selected pockets, usually in two separate areas, to really understand the business and to get a good grasp on how it will evolve," he explained.
According to Long, expanding the food selection should add incremental sales, "but more important, it gets more people in the stores and increases product turns, so the average basket is higher."
Observers likened Wal-Mart's new approach to what Kmart, Troy, Mich., did when it installed expanded food sections, called The Pantry, at about 450 Kmart stores.
Copeland declined to comment on comparisons with Kmart. Long said the Pantry sections at Kmart tend to offer a broader selection of product than the expanded food sections at Wal-Mart.
"But both Wal-Mart and Kmart are very aggressive competitors, and if one sees the other having great success in one area, then it will definitely explore that area for itself. Kmart realized it could get people into its stores with low-margin, high-turn food items, and it's gotten an average increase of 10% to 15% in sales at stores with a Pantry."
Jonathan Ziegler, a San Francisco-based securities analyst for Salomon Smith Barney, New York, said expanding the food assortment represents Wal-Mart's attempt to focus more attention on food at its discount stores.