Merchandising Features / Trend Features
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Walmart Thinks Small

Wal-Mart Stores Inc. is expanding its perishables reach with the launch of its smaller-format Walmart Express outlets.

January 5, 2012
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KEY POINTS

Wal-Mart Stores Inc. has started operating smaller-format food outlets.


Locations merchandise private label and supplier-branded perishables.


The limited space presents inventory and cost-containment issues. 

Walmart Becomes A More Prominent Neighbor

While Walmart Express is Wal-Mart Stores Inc.’s latest retail concept, the merchandiser still is expanding its perishables reach in its other banners.

Walmart, for instance, in September opened a Neighborhood Market outlet in downtown Chicago in an area dominated by office buildings—but one that also is close to the plethora of condominiums and apartment buildings that were constructed over the last decade.

Altogether, there are about 167 Walmart Neighborhood Markets with an average store size of 42,000 square feet.

Perishables include fresh produce, meat and dairy products, frozen selections and deli foods.

Similar to Walmart Express, the Chicago Walmart Neighborhood Market is targeting convenience-minded shoppers.

Close to the front entrance of the outlet, for instance, are refrigerated heat-and-serve entrées, as well as take-and-bake and hot pizza.

Also near the front checkouts are hot cases with rotisserie chicken, chicken tenders, macaroni and cheese, and potato wedges.

Walmart reports that Neighborhood Market sales for its third fiscal quarter of 2012 were 3-percent higher than the year-earlier period and that the chain posted year-over-year sales increases for 15 consecutive months.

Also active is Walmart’s Sam’s Club warehouse stores.
There are more than 600 Sam’s Club locations, and the banner is increasingly emphasizing fresh foods.

Indeed, Sam’s Club for the third consecutive quarter recorded double-digit increases in bakery and bread sales, and a single-digit increase in produce sales.

“More and more of our members are skipping the restaurant trip and eating at home,” notes Brian Cornell, Sam’s Club president and chief executive officer. “This trend is driving significant sales increases in categories such as home meal solutions and prepared meals.”

He adds that members increased their trips to Sam’s Club outlets during the third quarter, which led to double-digit sales increases in the freezer/cooler, vegetable and fruit categories.

Sam’s Club in 2011 also introduced its Artisan Fresh store brand in the deli and bakery areas, and Daily Chef in frozen foods

.—Rich Mitchell, editor-in-chief
 

When one hears the name “Walmart,” the first word that might typically come to mind is “huge.”


Bentonville, Ark.-based Wal-Mart Stores Inc. is the world’s largest retailer with fiscal 2011 U.S. revenues of $260.2 billion.

Walmart also is a powerful presence in the perishables merchandising market.

It operates more than 3,000 U.S. Supercenter outlets with full grocery sections that have an average of 185,000 square feet of space and are open 24 hours.

In addition, the company has more than 600 Sam’s Club warehouse outlets selling groceries.

Yet, Walmart’s already significant perishables presence is being solidified with its rollout of comparatively dinky outlets called Walmart Express.

Positioned as test stores, the first two locations opened in June 2011 in Northwest Arkansas.

Walmart reports that Walmart Express was created to offer low prices every day in a smaller format store that provides convenient access for fill-in and stock-up shopping trips.

“The stores give Walmart flexibility in serving customers, especially in rural and urban areas where shoppers may not have access to larger stores,” the company notes.

Walmart Express outlets average 15,000-square-feet and offer groceries and general merchandise, including assortments of fresh produce, dairy products and meats, as well center store items. Non-foods include health and beauty aids and over-the-counter medicines, and some stores have pharmacies.

One of the newest locations is in the Lakeview neighborhood on Chicago’s north side.

Those area shoppers also have access to larger supermarkets as two major conventional stores operate within several blocks of Walmart Express—Jewel-Osco and Dominick’s, which are owned by Eden Prairie, Minn.-based Supervalu Inc. and Pleasanton, Calif.-based Safeway Inc., respectively.

Walmart Express, however, is convenient to the thousands of nearby consumers who primarily reside in apartments and condominiums and usually walk to neighborhood stores.

Ben Ball, senior vice president of Dechert-Hampe & Co., a Northbrook, Ill.-based sales and marketing consultancy, says Walmart Express strengthens Walmart’s ability to compete with newer food competitors, such as dollar and drug stores.

And unlike most convenience stores, Walmart Express pricing is comparable to that of traditional supermarkets or larger Walmart outlets.

He notes that while the Supercenters “definitely made Walmart a more acceptable food destination,” it is challenging for the company to effectively merchandise specific perishables in those locations.

All Walmart meats, for instance, are case-ready—which can be discouraging to shoppers seeking the freshly cut or cut-to-order proteins available in many competing supermarkets.

Supercenter operators also must manage the potentially large amount of shrink common to expansive produce departments.

While Walmart Express outlets have much fewer SKUs than most food retailers, stores still carry a mix of national and private label brands.

And similar to the Supercenters, Walmart Express’ store-branded Great Value items typically cost less than similar supplier brands.

The frozen case in the Chicago store, for instance, features seven varieties of Great Value ice cream in 48-ounce containers for $3.28: Mint Chocolate Chip, Chocolate, Cookies & Cream, Chocolate Fudge Brownie, Butter Pecan, Chocolate Chip Cookie Dough, and Vanilla Bean.

Also available are five types of Dean’s-branded ice cream in 48-ounce containers for $3.96: Chocolate, Butter Pecan, Homemade Vanilla, Moose Tracks, and Mint Meltaway.

Most frozen meats also carry the Great Value brand, including 4-pound bags of chicken thighs, drumsticks, wings and wing drummettes, for $5.28, $5.28, $8.98 and $9.98, respectively, and boneless/skinless chicken fillets in 3-pound bags for $6.48.

Frozen cook-and-serve entrées primarily feature national brands, including Banquet, Stouffers, Boston Market, Marie Callender’s, Kid Cuisine, Birds Eye, P.F. Chang’s, Lean Cuisine, Healthy Choice, and Smart Ones.

Great Value also is prominent in the dairy case (Great Value milk sells for $2.98 a gallon vs. $3.98 for Dean’s milk), and refrigerated section ($2.33 for a half-gallon of Great Value organic juice vs. $2.98 for Minute Maid and $2.98 for 59-ounces of Florida Natural juice).

The Walmart Express meat case is close to the front entrance and features about 30 SKUs of beef—the most prevalent protein in the case.
All selections are generic and include 1-pound ground beef chubs—73-percent lean for $2.98, 80-percent lean chuck for $3.28 and 93-percent lean all-natural for $3.98.

There also is 96-percent lean ground beef in overwrap packaging for $5.28 a pound, and 85-percent lean all-natural ground beef patties for $4.28 a pound.
Also being merchandised are about 15 steaks and roasts—including flat iron steak for $2.98 a pound, top sirloin steak for $5.18 a pound and chuck roast for $3.98 a pound—and about 12 SKUs of fresh chicken.

Most chicken carry the Tyson brand, but also available is generic boneless/skinless chicken breast for $2.98 a pound.

The outlet’s most prominent emphasis, however, is on convenience.

Shoppers, immediately upon entering the Chicago Walmart Express, encounter a large refrigerated case labeled “Ready-to-Go Meals.”

The case contains boxes of 16-inch take-and-bake pizza that carry the company’s Marketside brand.

Varieties, which range in price from $7.98 to $9.98, include Pepperoni, Sausage, Supreme and Ultimate Meat.

Also available are 12-inch Supreme and Ultimate Meat pizzas for $5.98 and $6.98, respectively.

In addition, the case contains selections of Walmart Deli-branded salads, and heat-and-serve entrées and side dishes. Brands include Hormel, Bob Evans, Lloyd's, Oscar Mayer and John Soules Foods.

Directly opposite the entryway is a four-sided refrigerated grab-and-go display featuring sandwiches, salads, sushi and heat-and-serve meals.

The heat-and-serve offerings in 12-ounce packages that are priced from $3.48 to $3.88 include Enchilada Chicken Casserole, Lemon Butter Chicken with Linguini, Macaroni and Cheese, Breaded Chicken Parmesan with Spaghetti, Chicken Alfredo with Penne Pasta, Chicken Tika Masala with Biryani Rice, Chicken with Artichokes, Four-Cheese Mostaccioli, and Turkey Meat Loaf with Mashed Potatoes.

By offering similar selections in each store, Walmart will bring the uniformity to convenience-food shopping that is missing from other outlets, Ball states.
“There are many independent neighborhood markets serving the population and shoppers don’t know what to expect when they walk into a store,” he says. “Walmart Express’ two main selling points, however, are location and price, and no one does those things better than Walmart.”

The biggest Walmart Express challenge will be maintaining low costs while dealing with limited store space and a relatively small amount of products, Ball notes.
“The only way to keep narrow inventories fresh, such as produce, is to increase service to the store,” he states. “But delivering three times a week rather than once adds to your expenses. Turnover will be the key to maintaining freshness and keeping prices down.”
 

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