LOS ANGELES — Wal-Mart Stores is continuing to test and tweak formats but is unlikely to attempt any rollouts until it figures out how to boost traffic at its supercenters, Leon Nicholas, director of retail insights for Cambridge, Mass.-based Management Ventures Inc., a division of Kantar Retail, said here last week.
Speaking at Kantar's annual mid-year forum, he said one of the new formats Wal-Mart is testing is an 80,000-square-foot store designed to compete with supermarkets and drug stores. Operating under the banner Neighborhood Marketplace in Alexandria, Va., the store combines food, drug and some general merchandise.
“Wal-Mart is focusing on a number of formats and format sizes, and it's looking at this food-and-drug concept to take on Walgreen and other drug store operators,” Nicholas said.
Wal-Mart has been tweaking the smaller Neighborhood Market concept at a new prototype in Rogers, Ark., near its Bentonville headquarters, Nicholas added, “and it likes the emphasis on fresh, the private-label offering, the lowered sight lines and the store labor element — though the inclusion of a cafe may not last.”
Nicholas also said Wal-Mart does not plan to expand the 20,000-square-foot Marketside stores beyond the four locations in Phoenix “because they are not working so well.”
“But the company did learn a lot about fresh departments at those stores, including produce, deli and bakery, that it's using at other formats.”
According to Nicholas, Wal-Mart is “very, very excited” about its Supermercado de Walmart — the Neighborhood Market in Houston it converted to a Hispanic-focused store last year.
“People wonder why the company isn't expanding the format if it's so happy with it, but right now it's concerned with traffic in supercenters, and until those concerns are resolved, format expansion in the U.S. is on hold,” he explained. “But when expansion begins, Wal-Mart sees the Supermercado as a key to unlock inner-city locations — and as bodega killers.”
David Marcotte, director of retail insights for Kantar, said the Supermercado is “really appealing” to second-generation Hispanic shoppers, “the ones that spend money.”
He said Wal-Mart is committed to smaller stores around the world and is likely to pursue a similar approach in the U.S.
The company has been “incredibly successful” promoting its Bodega Aurrera in Mexico, he said, using a cartoon character called “Mama Lucha,” who wrestles competitors to achieve low prices. “No one ever thought Wal-Mart was funny or clever, but if it ever took that approach in the U.S., it could be terrifying to competitors.”
Speaking about the Fresh & Easy format Tesco operates in the Southwest, Marcotte said Tesco is “still trying to come to terms with whether it works. They are very smart people, and they are so smart, they found one part of the business — smaller stores — that no one else was in. But they forgot to figure out how to get people in.”
In remarks about Target, Nicholas said the Minneapolis-based company is expected to open its first three smaller, urban stores in San Francisco, Boston and Minneapolis.