Marketside Expansion in Check 2009-06-15

MARK HAMSTRA

FAYETTEVILLE, Ark. — Wal-Mart Stores said the weak economy is forcing it to take a wait-and-see approach with its experimental Marketside small-format banner.

In a press conference after the company's annual meeting here, Eduardo Castro-Wright, vice chairman, told reporters that the company was “pleased” with the four-unit Marketside test in the Phoenix area, “but at this point in time given the current condition in the marketplace, with a significant reduction in demand, we are not accelerating that effort until we have better data to make a decision,” according to reports.

The four stores, measuring about 15,000 square feet each, have a more upscale feel than the chain's supercenters and have a strong focus on prepared and convenience foods. Wal-Mart opened the experimental concept last year amid an industry focus on small-format stores in the wake of Tesco's rapid rollout of the Fresh & Easy banner in the Southwest.

Last week, reports said that Wal-Mart also had rebannered the four stores with the “Marketside by Walmart” moniker and had replaced the previous logo, which included a stock of colorful circular shapes, with the Wal-Mart “sunburst” image. The stores originally were simply called Marketside.

In addition, last week Wal-Mart opened the second location of its Supermercado de Walmart concept, also in Phoenix, after debuting the banner in April in Houston. Both of the Supermercado stores are conversions of former Neighborhood Markets, the traditional supermarkets Wal-Mart operates in several markets across the country.

In a report issued last week, Management Ventures Inc., Cambridge, Mass., said the Supermercado format makes a strong appeal to Hispanic shoppers.

“Supermercado de Walmart appears to be a well-considered endeavor to appeal explicitly to Hispanics through the extensive use of the Spanish language; availability of Mexican products; targeted theming and layout; and range of properly allocated departments,” Leon Nicholas, director of retail insights, MVI, said in the report. “One might consider this to be a store-of-the-community on steroids.”

He also said the format appears to be more “scalable” than Marketside, noting that relatively low staffing levels in relation to customer traffic and the widespread use of private labels indicate the potential for strong margins should Wal-Mart choose to expand it.