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Wal-Mart Searches for ‘Scalable Specialization’

Wal-Mart may have stoked a reputation for sameness but over the years it has amassed quite a diverse collection of store formats, and it's a portfolio undergoing massive change. Most recent in this group are the Marketside small-store format, which arrived last year in Phoenix, and Supermercado de Walmart, a Hispanic-focused grocery store that debuted earlier this month in Houston and is set for a

Jon Springer, Executive Editor

June 29, 2009

2 Min Read
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JON SPRINGER

Wal-Mart may have stoked a reputation for sameness but over the years it has amassed quite a diverse collection of store formats, and it's a portfolio undergoing massive change.

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Supermercado de Walmart, a new Hispanic grocery format, has the potential to expand to hundreds of U.S. locations, one observer said.

Most recent in this group are the Marketside small-store format, which arrived last year in Phoenix, and Supermercado de Walmart, a Hispanic-focused grocery store that debuted earlier this month in Houston and is set for a Phoenix-area bow shortly.

These join the Walmart discount stores, Supercenters, Neighborhood Markets and Sam's Club warehouses in Wal-Mart's U.S. portfolio.

Leon Nicholas, director of retail insights for Management Ventures Inc., Cambridge, Mass., recently visited Supermercado de Walmart, and told SN he felt the store holds the promise to grow into a chain of “300 or 400 stores,” indicating a format with the scalability and growth potential that Wal-Mart demands.

Nicholas said Wal-Mart seeks “scalable specialization” as it proceeds with new formats and looks to sharpen its existing vehicles. In that regard, he views Supermercado as a superior option to Marketside, predicting the latter would be retooled before any more are built or rolled into new markets.

Marketside, he said, is suffering from the recession, competition and a lack of scalability.

“They have very little private label in the store so the gross margin potential isn't there, and the staffing seems excessive for the size,” he said. “Wal-Mart just doesn't know how to run a low-gross-margin, high-labor small box. It just seems so outside of their sweet spot.”

A similar issue with labor productivity may be preventing Wal-Mart's Neighborhood Market grocery store format from growing any faster than it has by now, Nicholas added. The company operates 153 Neighborhood Market locations, according to its annual report, and plans to add about 25 this fiscal year.

“One issue with the Neighborhood Market is that the store management has to be of the same quality as a Supercenter if not more so, so as a result the return on labor is not as high,” Nicholas said.

Supermercado in the meantime may provide a solution for Neighborhood Markets in the appropriate locations. The store that opened near Houston this month was a former Neighborhood Market conventional store.

“It's an authentic store that's not afraid to use the equity of the Wal-Mart name, which has positive ramifications for shoppers from Central America and South America,” he said. “Could they take a bite out of the Fiestas and the Publix Sabors of the world? Yes.”

Nicholas also predicted efforts would be made to better distinguish the Supercenter format from Sam's Club.

About the Author

Jon Springer

Executive Editor

Jon Springer is executive editor of Winsight Grocery Business with responsibility for leading its digital news team. Jon has more than 20 years of experience covering consumer business and retail in New York, including more than 14 years at the Retail/Financial desk at Supermarket News. His previous experience includes covering consumer markets for KPMG’s Insiders; the U.S. beverage industry for Beverage Spectrum; and he was a Senior Editor covering commercial real estate and retail for the International Council of Shopping Centers. Jon began his career as a sports reporter and features editor for the Cecil Whig, a daily newspaper in Elkton, Md. Jon is also the author of two books on baseball. He has a Bachelor of Arts degree in English-Journalism from the University of Delaware. He lives in Brooklyn, N.Y. with his family.

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