Small Formats Key to Wal-Mart's U.S. Growth

SMALL-FORMAT STORES might be as important to Wal-Mart Stores' future expansion as its EDLP platform has been to its historic growth.

“It represents a long-term opportunity for them, and something that they need to get right in order to grow, because they are going to be running out of places to locate what they know works, which is the supercenter format,” said Jim Hertel, managing partner at consulting firm Willard Bishop LLC, Barrington, Ill.

Wal-Mart Stores debuted its Walmart Express format — measuring about 15,000 square feet and with a full grocery offering — this month with one location in North Carolina and two in Arkansas, near its Bentonvile, Ark., headquarters.

Hertel said that in some ways, the Walmart Express format appears to leverage some of Wal-Mart's strengths, with lean staffing and efficient logistical needs.

“Obviously, they are going to be space-constrained, in terms of the back room, so to do it well it places a premium on getting the orders just right and just in time, because they will be taking those orders from the receiving area right out to the sales floor,” he said.

Wal-Mart said it planned to test the waters of the Express format for an undetermined period of time, noting that past format rollouts — including the nascent ramp-up of its Walmart Market format — have taken years of refinement before they were ready for an accelerated deployment.

“The Supercenter will produce the most opportunity for top-line growth for a number of years,” said Mike Duke, chief executive officer, Wal-Mart Stores, at a recent investor conference, adding that the Walmart Market format is “no longer in test” and is being rolled out more rapidly. “But the Walmart Express, I think, is one that's looking out longer term over a strategic period of time.

“If you look at the way Wal-Mart has built formats in the U.S., we've been patient. Even the Neighborhood Market [now called Walmart Market], we worked on for a number of years, and would adjust and tweak. The supercenter was a great example — from the very first hypermart until we really began to roll out supercenters was six or eight years of development before we really moved into a rollout kind of period.”

Walmart Express, he said, “is a test, and it'll take a period of time.”

At least one additional Walmart Express is slated to open in Chicago this summer, of the 20 locations or so that the company said it plans to open by next January.

The first Walmart Express in Gentry, Ark., included a pharmacy, as well as a limited assortment of nonfood merchandise, according to Natalie Berg, global research director at Planet Retail, London.

The store was very focused on merchandising branded packaged groceries, with a very limited assortment of perishables, and about 11,000 to 12,000 SKUs altogether.