WAL-MART TO EXPAND SHIFT TO SUPERCENTERS?

DON YAEGER

INDIANAPOLIS -- Wal-Mart Stores is about to make a supercenter decision that could have far-reaching effects on supermarkets.

That warning came last week from Bill Lancaster, vice president of sales at Associated Wholesale Grocers, Kansas City, Kan., who said Wal-Mart will soon decide whether to convert hundreds of conventional discount stores to supercenters.

Lancaster, speaking at the convention of the Indiana Retail Grocers Association, said the Bentonville, Ark.-based giant discounter is nearing completion of an 18-month study on whether to reformat its existing Wal-Marts. "They plan to accelerate conversion of existing Wal-Mart stores," the audience was told. "This will affect as many as 1,500 stores and begin as soon as possible. They have a plan to do them all."

Such a move would be particularly damaging to independents, who are already under a "phenomenal squeeze" from both supercenters and chains, Lancaster said. He spoke at the conference's workshop titled "Surviving the Onslaught of Alternative Formats."

Keith Morris, a spokesman for Bentonville, Ark.-based Wal-Mart, told SN he wasn't aware of the reformatting study that Lancaster cited. Morris said Wal-Mart is continuing with previously announced supercenter expansion plans. Wal-Mart currently operates close to 200 supercenters. Observers have recently estimated that Wal-Mart would operate more than 300 supercenters by the end of fiscal 1996 and more than 400 by the end of 1997.

While Lancaster stressed the store-conversion issue, he said there was still a chance that not all stores would be reformatted -- "but I think they are very pleased with supercenter growth and numbers. When they add food, there is a 25% to 30% sales increase on the general merchandise side."

Lancaster and his staff at AWG have extensively researched supercenter competition and have published their findings in a booklet titled "Survive & Thrive." The booklet said that by January 1996 an anticipated 240 Wal-Mart supercenters could account for more than $14 billion in sales.

Even retailers in small towns are vulnerable to supercenter competition, Lancaster pointed out. "Anywhere there's a Wal-Mart, there is the possibility of a supercenter," he said, citing the construction of a 118,000-square-foot unit in Ash Flat, Ark. Population: 1,000.

While there has been and will be "some mortality" among independents, many will survive through an emphasis on perishables, store brands and customer service, Lancaster said. They can also stay sharp by anticipating future Wal-Mart strategies.

For example, in Mount Pleasant, Mich., and a few other locations, Wal-Mart is testing an Aldi-type limited-assortment store within a conventional Wal-Mart -- with about 90% of the items containing the Great Value label. "If you are not using your own label well, you could be vulnerable," Lancaster said.

Also under test at a conventional Wal-Mart in Rogers, Ark., is a 700-square-foot meals-to-go section called The Chef, which features a line of prepared foods and a few commodity items.

Lancaster said there are now 95 supercenters -- Wal-Mart, Kmart and Target -- operating in the 10-state territory served by AWG -- and they are taking $1 billion at wholesale out of the territory each year.

After the meeting, Lancaster said the two largest stores in the territory to close as a result of supercenter competition were each 53,000 square feet, and were located in Sedalia, Mo., and Springdale, Ark. They were not AWG customers.

Lancaster said customer-interview campaigns are important for independents to stay competitive.

"Each department manager should be assigned to ask at least 10 customers per day for three to five ideas for improving the store. Also, the employee must give the customer three to five things that have been done to improve competitiveness, selection and quality."

Lancaster offered retailers other tips on holding customer loyalty:

· In produce, price key items competitively, offer variety not found in a supercenter, develop an image for large-sized fruits and vegetables, create a precut section for salad mixes and increase variety in value-added produce.

· In meats, set up an in-store smokehouse, merchandise 20 or more fresh poultry items plus value-added and flavored chicken items, start a fresh lamb and veal section, and advertise trim standards.

· In bakery, focus on supercenters' lack of variety in croissants, pudding cakes, bagels and crusty breads, and consider a case-ready line of "thaw-and-sell" products.

Lancaster said Harp's Food Stores, faced with a Wal-Mart Supercenter and a Sam's Club in Springdale, Ark., has noted the importance of staying competitive on health and beauty care and selected general merchandise items. "This is where Wal-Mart got their price image in the early years."