3/14/2011 4:09 PM ET|
Wal-Mart tries thinking smaller
The retailer known for its giant stores tries cozier markets for shoppers in a hurry. But is the convenience worth it when supercenters are more profitable?
The world's largest retailer has begun construction on a 14,400-square-foot store in Gentry, Ark., a town of 3,158 about 20 miles southwest of the company's Bentonville headquarters, according to the permits.
While Wal-Mart has kept details of the new stores a closely guarded secret, Steve Restivo, a company spokesman, confirmed the location of the store opening and the timing.
Work on similar stores in nearby Prairie Grove and Gravette is also expect to begin this month, said town officials. Each new store will feature a pharmacy and a grocery section.
"Wal-Mart's U.S. store fleet is designed for yesterday's retail wars," said Craig Johnson, president of Customer Growth Partners in New Canaan, Conn. "If they want to capture their rightful share of today's shopping trips, they have to have a smaller format. God bless supercenters, but they are not designed to get in and out of within five minutes."
Mike Duke, Wal-Mart's chief executive, is seeking new avenues for growth in the United States as comparable-store sales in the company's namesake stores have fallen for seven consecutive quarters.
The retailer plans to open as many as 40 smaller units this year in rural and urban areas, and executives said in February that the first Express store would open as early as May.
Wal-Mart's U.S. chief, Bill Simon, has said that "there are hundreds, if not thousands of opportunities in the U.S." for stores that are smaller than the retailer's supercenters, which accounted for 76% of Wal-Mart's U.S. locations as of Jan. 31.
The Express stores, concrete square boxes with metal roofs, will cost $1.2 million to build and sit on lots just under 5 acres, according to building permits filed in Gentry and Prairie Grove, which has a population of 4,380.
The stores will have 75 parking spaces, a pharmacy and three or four checkout counters, said Jackie Baker, Prairie Grove's building and planning director.
Wal-Mart supercenters average 185,000 square feet with about 142,000 items, according to the company's website. Supercenters typically have as many as 800 parking spaces.
Sections for fresh produce, refrigerated foods and frozen items will go down one side and along the back of the Express store, Baker said in an interview. The store will have about a dozen aisles, according to Gentry's city superintendent, David McNair.
It's not clear from the planning materials how much of the product assortment will be groceries compared with general merchandise. Groceries accounted for 51% of Wal-Mart's $258 billion in U.S. sales in fiscal 2010, according to company filings.
McNair said that when he first saw the layout, Wal-Mart's sponsorship of the project was not disclosed, with the plans calling the project simply "Retail Store."
Wal-Mart has tried smaller stores before. In 1998, it launched Neighborhood Market, a 42,000-square-foot food-and-drugstore combination, but that format did not deliver the return on investment provided by the supercenters, according to Maggie Gilliam, a retail consultant.
"Large stores are inherently more profitable than small ones," said Gilliam. "The supercenter is one of the greatest retail concepts ever created by mankind."
In 2008 in Arizona, Wal-Mart rolled out the Marketside concept -- stores of 15,000 square feet that focus on fresh food and prepared meals. In 2009, the company converted two Neighborhood Market stores in Houston and Phoenix into Hispanic-themed grocery stores called Supermercados de Walmart, offering such items as sweet Mexican-style breads and fresh corn tortillas.
As of Jan. 31, Wal-Mart had two Supermercados, four Marketside stores and 182 Neighborhood Markets.
Internationally, Wal-Mart operates a broad range of smaller stores, particularly in Latin America. Simon has said that Wal-Mart's smaller U.S. stores will draw upon what the retailer has learned abroad.
This article was reported by Matthew Boyle for Bloomberg Businessweek.
VIDEO ON MSN MONEY
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The Nasdaq Composite (+0.5%) and S&P 500 (+0.2%) posted modest gains on Thursday, but not before enduring a morning dip into the red, which took place in reaction to reports indicating Russia has commenced military exercises on the Ukrainian border.
The news from Europe knocked the key indices from their early highs, while giving a boost to safe-haven assets like gold futures (+0.5% to $1290.80/ozt), Treasuries (10-yr yield -1 bps to 2.69%), and the Japanese yen (102.30 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'