TOO BIG?

David Merrefield

Wal-Mart Stores -- never a company to think small -- entered the combination discount-supermarket business nearly a decade ago with a huge Hypermart USA location in Dallas. That "mall without wall" experiment faded away, after a couple more locations were opened, in part because at more than 225,000 square feet the store was simply too large.

But that hypermarket format was quickly transmuted into the successful supercenter concept that Wal-Mart is rolling out across the land. The supercenters are still spacious enough, but all are smaller than the hypermarkets. By the numbers, the largest supercenters measure 200,000 square feet; most range from 167,000 square feet to 188,000, although some are at 136,000 square feet. But they still cover a lot of acreage, raising the question: are they still too big? Maybe so. At Wal-Mart's annual shareholders meeting, John Menzer, Wal-Mart's chief financial officer, told the usual huge crowd at a University of Arkansas stadium in Fayetteville that the company's continuing optimism about supercenters is premised on good results produced by a yet-smaller model of 109,000 square feet -- less than half the size of Wal-Mart's original food-selling format.

As the Page 1 article in this issue shows, Wal-Mart expects that the smaller supercenter will be a means to enter hamlets that couldn't generate sufficient sales volume to warrant a big store.

"Early results are very encouraging, which gives even more growth opportunity for supercenters," John Menzer said. A similar observation was made in a news analysis of Wal-Mart supercenters in SN's April 1 issue.

By the way, if you add the optimism concerning the smaller format to Wal-Mart's expectation that most of the 100 or so supercenters to be added this year will be conversions or relocations of existing stores, you get the idea that Wal-Mart won't press supercenters toward urban centers as quickly as some observers expected. In any case, Wal-Mart's apparent infatuation with format downsizing may be more than an economy move, although it's that. It may represent early word that consumers continue to be discontented with vast retail spaces and their conventional offerings. Such a point was made at a presentation during this month's annual meeting in Paris of CIES, the Food Business Forum. Louis W. Stern, the well-known academician, author and business observer, told a seminar audience that "the industry is investing more and more in large stores, and they need to drive ever-higher volumes through them to break even. The industry is faced with an enormous amount of excess capacity and the question of what to do with it. It's a new world of stomach share and that will impact companies with high fixed costs." There's more on this on Page 14.

The future belongs to the versatile, and Wal-Mart is adjusting to that by seeking the optimum store cost and size.

Letters to the editor and other comments can be sent using the e-mail capability of the web site at http://www.supermarketnews.com. Letters may also be sent to the mailing address at the top of Page 4. Letters may be edited for clarity and brevity. The web site also features weekly news updates, posted the Friday prior to SN's publication, along with classified advertising and information about Brand Marketing, the SN Directory and the SN Archive. A sample issue of the SN Group's weekly IS Solutions newsletter is also provided.