Wal-Mart Launches Entry in Small-Format Fray

JAMES TENSER

PHOENIX — In an event greatly anticipated by the supermarket industry, Wal-Mart has debuted its modern take on the corner grocery store with four 15,000-square-foot Marketside locations in this market.

Billed as a “pilot,” the Marketside openings arrive at a time when international grocery powerhouse Tesco already operates 25 of its small-footprint Fresh & Easy Neighborhood Markets throughout greater Phoenix, with a dozen more area locations pending, according to the Fresh & Easy website.

Meanwhile, Bashas', headquartered in fast-growing Chandler, where one of the Marketside stores opened, operates a small-format food store of its own in the area — a “petite” version of its upscale AJ's Fine Foods. And the area also hosts nine Trader Joe's units.

“This is a conventional grocery store shrunk down,” said John Rand, director of retail insight for Management Ventures and who was spotted taking notes at the Tempe Marketside location. “Shoppers will understand it immediately, whereas people are still figuring out Fresh & Easy.”

The Marketside assortment heavily features national brands, a marked contrast with Fresh & Easy, which emphasizes private label. However, like the Tesco format, this new effort from Bentonville, Ark.-based Wal-Mart Stores features a range of ready-to-eat and ready-to-prepare foods and meal kits, evidently intended to serve the grab-and-go lifestyle of busy consumers.

The company website also claims some 300 natural and organic products, which are integrated throughout the store.

Prices were deemed “competitive” by several observers and competitors on the scene. Some prices were visibly lower than conventional supermarkets, but not as low as at area Wal-Mart Supercenters.

A merchandise manager from a competing supermarket operator who asked not to be identified was clearly impressed with the Marketside effort.

“I could do all my shopping here if I had to,” he said. Pressed about whether he regarded the stores as a competitive threat, he responded, “Definitely. This will require us to make adjustments in this market.”

The stores reportedly carry 5,000-7,000 SKUs of product.

All four Marketplace units are located in freestanding former locations said by employees to be converted Osco drug stores. Among three stores visited, the footprints and exterior facades vary slightly based on the design of the preexisting buildings, but all have surrounding parking and locations that are on or near the corners at major intersections.

The stores are about one-third the size of Wal-Mart's Neighborhood Markets, which are traditional food-and-drug combo supermarkets.

Marketside interior fixtures are predominantly black with red accents. Walls and ceilings are mustard-colored with green accents, with a clearly visible purple header running around the perimeter that identifies major departments, with designations like, “The General Store,” “The Corner Deli,” “The Bakery” and “The Garden.” Ceilings were left open, with exposed, painted steel, ductwork, and track and pendulum lighting. The concrete floors were glazed tan.

On the opening Saturday, arriving crowds were greeted with sampling stations set up beneath canopies erected along the store aprons as well as inside. Among items available were deli meats and cheeses from suppliers Dietz & Watson, sushi rolls from Chef Select, Marketside pizza, and 8-ounce bottles of Vitamin Water beverages.

A variety of prepared food items — side dishes, entrees and “family-sized” meals — were offered for $2, $4, $6 and $8 each, displayed in sleek coffin coolers. Staffers clearly were challenged to keep these displays filled, as shoppers armed with opening-day coupons emptied them into their carts.

All prepared and ready-to-prepare foods had 2-inch-wide adhesive labels indicating the date each item was prepared and when it should be used by. These items are packed and delivered to the stores by an area contractor, according to an employee. Tesco's Fresh & Easy operation, by contrast, does its own food preparation and packaging at a centralized facility.

A visitor remarked that some local residents had received gift bags filled with product samples and coupons in the days prior to the opening.

Three of the four stores offer beer and wine — however, the Chandler location does not, which employees said is because of its location next to a day care facility. As a result, the Chandler store had a little bit of floor space to spare, which was largely absorbed by what may be described as a “power square” where temporary promotional displays were located.

One pallet display was stacked with cases of Niagara drinking water, 24-count half-liter bottles, priced at $2.97. Another offered 3.25-ounce bags of Pop Chips, “market value” at $1.50 each. Other display tables offered baked goods and fresh fruit — bananas were 68 cents a pound, and medium honeydew melons were $3.27 each.

One shopper commented that this area, at least 20 feet wide, could easily accommodate eight or more cafe tables and chairs during the lunch trade.

Employees were not all in uniform, but most wore color-coordinated aprons and all sported green, laminated badges with their first names and the store logo. On the day SN visited, many Wal-Mart lanyards and badges were also in evidence.

One visiting Wal-Mart operations official told SN that energy-saving features adapted from the well-known Wal-Mart green project stores included pull-down shades on the cooler cases that can be closed at night to save on electricity use.

Overhead lighting was compact fluorescent throughout, with liberal use of LED lighting in the black-framed freezer cases that made product stand out clearly, even through the double-glass doors.

Several prices observed at the shelves seemed promotional, even though they were not flagged as such. Twelve-pack cans of Coke soft drinks, for example, were priced at $3.33, and Pepsi products at $4.28. Both were below everyday retails.

A visiting competitor observed that a ramen noodle cup that sells for about 28 cents in the Wal-Mart Supercenters was priced at 32 cents in Marketside. “Prices here are strong, but not as low as at the supercenters.”

Other observations: