SUPERCENTER COMPETITION

David Merrefield

Many regional, and larger, chains have come up with strategies that permit successful competition with Wal-Mart Supercenters, or at least that mitigate damage.

Yet, the prospect of a Supercenter moving into the neighborhood can be little apart from bad news for most conventional supermarket operators. Aside from other considerations, Wal-Mart is an amazingly large player, as was shown by the retailers' annual financial statement that appeared in last week's SN, and in many other publications.

Look: Wal-Mart's top line is now an astonishing $165 billion, a increase of about 20% against the previous year. Wal-Mart's net income for the year most recently reported was $5.4 billion, up 23%. There's more: Wal-Mart employs about a million people, of which 10,000 are in its headquarters in Bentonville, Ark., alone. These numbers seem more like an accounting of an army than a retailer. And, by any accounting the retailer is huge. It's nearest size competitor is the newly merged Carrefour-Promodes company, based in France, which has a pro forma top line of about $80 billion, less than half that of Wal-Mart. Wal-Mart has about 4,000 stores worldwide, of which about 690 are supercenters. The company intends to rollout those food-discount combinations at the rate of some 150 a year. And, Wal-Mart doesn't carry the overhead of an organized work force in this country, although, as you'll see by looking at the news article on the front page of this week's SN, meatcutters at a supercenter in Texas have voted to join a union. But this may not be much of a harbinger of things to come: The vote was seven to three. Look for Wal-Mart to go to the mat on this one.

In sum, then, seen from any angle, the prospect of a supercenter going in across the street from an established food retailer -- or within several miles, for that matter -- is not one that inspires comfort.

As you'll see on Page 14, the more supercenters continue to dot the competitive landscape, the more thought is being given to living in a supercenter world. A couple of retailers and wholesalers spoke out about surviving supercenters at a forum in New York. Here is a brief look at how they view the supercenter challenge:

Expertise: One retailer, facing both several supercenters and a couple of Wal-Mart's smaller Neighborhood Market food format, recommended pointing efforts toward what can be done better. This includes being "fresher, faster and better," and locking in customers with a loyalty program.

Keep share: One wholesaler acknowledged that the opening of a supercenter near a corporately owned supermarket produced a sales decline of about 30%. But hanging on and retaining market share paid off since players ranked third or lower in market share tend to be taken out by the new competition.

Take a look at this issue for a lot more about Wal-Mart, the labor market and how such matters are likely to shake out in the future.