Will there be a Mini Walmart around the Corner from You in the Near Future?
As early as September of last year, several news sources, including Forbes, announced that Walmart was scouting locations for a new small retail format. Now it is official. On March 16, the company that made popularized the supercenter concept at 185,000 sq. ft., began construction on Walmart Express, a 14,400-square-foot store in Gentry, Arkansas, a town of 3,158 about 20 miles southwest of the company’s Bentonville headquarters.
The Express concept According to Business Week, which studied building permits filed in Gentry, the Express store will occupy around five acres, cost $1.2 million to build, offer up 75 parking spaces, and have just three-four checkouts.
Local planning directors in the rural Arkansas community revealed that the store will have fresh produce, refrigerated and frozen foods, and a pharmacy. Product display will be limited to around a dozen aisles.
Smaller stores not new in the Walmart empire Previous experiments with smaller stores include the Neighboorhood Markets, opened in 1998, and Marketside dating from 2008. The Neighborhood Markets are 42,000 sq. ft. in size and currently number 183. The format is like a shrunken Walmart superstore with an edited assortment of food/drug/general merchandise. Reports are that the concept did not deliver the return on investment that the company expected.
Currently there are only four Marketside stores, all in Arizona. Walmart describes them as "small community pilot grocery stores specializing in fresh, delicious meals at great prices," occupying around 15,000 sq. ft. The concept emphasizes a fresh food image, "restaurant-quality" prepared meals featuring freshly baked breads and a broad assortment of wines, 200 of which sell for under $10 a bottle.
Prognosis for the future Walmart shares have dropped 2.6 percent over the past 12 months and industry analysts believe that future profitability dependent upon continuing to build new stores beyond its current 4,000+ outlets in the U.S.
"I see this as a smart move, instead of coming into a market as a 900-pound gorilla," said Faith Consolo, chairman of real estate firm Prudential Douglas Elliman's retail leasing division. "They're on an aggressive roll," she added. "This is a creative time. Everyone is thinking out of the box."
Wall Street Strategies analyst Brian Sozzi wrote that any move by Wal-Mart to smaller stores is both "wise and long overdue." He believes that opening stores in urban markets would give the discounter access to higher income consumers who "could be tapped for sales of gross-margin-enhancing categories."
Local competition The new Walmart 14,000 sq. ft. concept may not prove to pose as serious a treat to small/local businesses as the original Walmart discount store in the 70's and the supercenter in later decades.
Observers believe that local small supermarket operators have built up a loyal customer base and have learned to use attentive customer service as a competitive advantage. Kenneth Stone, who has been researching Walmart for the past 20 years as an economics professor at Iowa State says, “People have learned to compete with them over the years. There are many examples around the country of small businesses that are very astute at offering what the public wants.”