WAL-MART'S NEIGHBORHOOD MARKET: EASY IN, QUICK OUT

David Ghitelman

BENTONVILLE, Ark. -- In 1998, when Wal-Mart Stores here introduced the first store in its Neighborhood Market concept, the industry wondered if the new format would transform the supermarket business as the mass merchandiser's supercenter format has.

The concept remains simple: a 40,000- to 50,000-square-foot store offering conventional supermarket fare at Wal-Mart discount prices, inevitably located in a market area served by supercenters as well.

Now, five years later, Wal-Mart has 49 Neighborhood Markets in eight Southern and Western states, and whether the format will ever achieve the critical mass of supercenters remains an open question.

Nick White, a former Wal-Mart executive who is currently president and chief executive officer of White & Associates, Rogers, Ark., a retail consultancy, told SN he believed the format is prospering but will not be fully rolled out while Wal-Mart is busy concentrating on supercenters.

"I'm not privy to the Neighborhood Markets' sales figures anymore than anyone else is, but what I see indicates that the concept is doing very well," he said.

Another retail consultant, David Rogers, president of DSR Consulting, Deerfield, Ill., offered a less optimistic assessment. "Neighborhood Markets are a good average supermarket, but they don't compare to supercenters in terms of volume or appeal. I think the jury is still out on them," he said.

Meanwhile, Wal-Mart has been refining the concept. Neighborhood Markets are now being designed to stress ease of shopping rather than simply low prices, according to Tom Williams, a company spokesman.

"The more recent ones we call convenient stores," he told SN. "There's a real emphasis on the person who needs to get in and get out very quickly.

"For example, in one of the newer ones, you walk in the front door and grab doughnuts and coffee on you right, while on your left is the deli and then a bakery."

White also noted a growing emphasis on ready-to-eat foods. "The idea is to focus on the customer who stops on the way home from work or whatever to pick up the kind of food that suits their particular needs," he explained. "Sometimes, that may be a fully cooked meal, a par-cooked meal or side dishes and dessert."

Rogers, however, said the company still needs to work on its product variety. "The research we've done has indicated that consumers perceive the assortment to be rather limited," he said. "I think they have to become more successful at perishables execution and selection."

Still, Rogers said the format could be a threat to conventional retailers, particularly in markets where the company is saturating the market with a combination of Neighborhood Markets and supercenters. "If you look at Memphis, Oklahoma City, Tulsa and Dallas-Fort Worth, just by sheer floor space Neighborhood Markets have become a significant competitive threat."

And yet it is a threat that many in the industry have continued to play down.

During a recent conference call, Al Rowland, president and CEO, Winn-Dixie Stores, Jacksonville, Fla., was asked about the opening earlier this year in Orlando of Florida's first Neighborhood Market. "I've been in Neighborhood Markets," he said. "It would be foolish to say they're not going to be a competitive threat."

However, he noted, the Neighborhood Market in Orlando has had "an impact not a lot different from any other 50,000-square-foot store."