WAL-MART'S NEIGHBORHOOD IS EVER EXPANDING

David Orgel

Every time Wal-Mart decides to bring its Neighborhood Market concept into a new region -- such as the recent announcement that it will expand it to Houston -- the industry discussion intensifies.

Mostly the talk is about how fast this two-and-a-half-year-old conventional supermarket format will be rolled out around the country and which supermarket competitors in which regions will be impacted. A recent visit to a Dallas Neighborhood Market got me thinking about a different question: What type of customers will be drawn to Wal-Mart's new neighborhood?

I visited the Dallas Neighborhood Market as part of a tour of food retail chains in that city. The visits were sponsored by the National Grocers Association during its annual convention. Joining me on the tour were numerous industry retailers and suppliers.

I was especially interested in gauging the reaction of these other food executives to the Neighborhood Market. In the Dallas-Fort Worth area, Neighborhood Market currently operates three units, has four under construction and plans seven more for 2001.

Overall there are 19 units in the Neighborhood Market group ranging in size from 40,000 to 55,000 square feet. The Dallas units are larger than the first Arkansas and Oklahoma stores and have adopted more of a warehouse look.

Some of the food executives on my tour were quite opinionated, and while walking through Neighborhood Market the conversation quickly turned critical. The relatively small produce assortment didn't look appetizing and many bins were partially empty. The case-ready meat packs weren't appealing. The deli and bakery were small and bumped up against each other.

I agreed with many of these criticisms, but wanted to find another point of view. I struck up a conversation with a group of consumers in the store who were shopping this relatively new unit for the first time. They were decidedly more pleased than the industry colleagues.

"We're Wal-Mart shoppers," one of them offered. "We shop in the supercenters and Sam's Club, too. But lately we're finding it hard to get in and out of the supercenter, so this store is more manageable."

These shoppers liked the look of the store's meat and the drive-through pharmacy. Perhaps most importantly, they were drawn by Neighborhood Markets' very low prices (which are heavily reinforced by signage) and surprisingly extensive variety of groceries. Wal-Mart is also bringing to Neighborhood Market its trademark efficiencies, including placing produce on the shelves in the same packages used to gather them in the field -- cutting out multiple middle steps. The resulting presentation may not win visual merchandising awards, but it helps support low margins and prices.

If the shoppers I spoke with are representative, then Wal-Mart is achieving its goal of winning over the consumer for multiple shopping occasions with its various food formats. All of which guarantees that other operators will continue watching Neighborhood Markets closely and anxiously wait for an eventual wider rollout.