Can Walmart win small?
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.
The small-format Neighborhood Market has recently been Walmart’s star performer, showing a 5.5 percent comp jump in the recent third quarter, and is set for expansion.
Offering convenience and a more intimate shopping experience than a supercenter, Neighborhood Market is also enabling Walmart to reach smaller communities.
Although early stores (the first opened in 1998) were more like mini supercenters heavy on general merchandise and housewares, the newest iteration is much more like a traditional supermarket, with the emphasis on edibles — but without some of the bells and whistles you would see at other outlets. In addition to the usual shelf-stable, dairy and frozen items, Neighborhood Market offer fresh produce, fresh baked goods and service delis, all of which are targeted for improvement under a key initiative announced at an investor meeting last October.
"Our focus now is on optimizing this format … [including] improving the customer offer particularly in fresh and particularly around bakery, produce and deli," said Judith McKenna, who was recently promoted to COO.
A visit to a Neighborhood Market in Bentonville showed that the produce section looked good, perhaps due to increased application of the chain’s "Would I Buy It?" scale. But there was no in-store bakery — so no aroma of fresh-baked bread to attract consumers to the section — and an unexpectedly small service deli.
While the store was large and well maintained, the refrigerated and frozen sections packed the same top-10 brands in several categories you would find at your local Walmart supercenter.
Carrying similar assortments enables Neighborhood Market to leverage Walmart’s buying power and some observers think that’s fine, citing the old 80/20 rule.
But others believe assortments need to be greatly differentiated to local market tastes and shoppers’ needs. At the local supermarket, home-meal replacements, fill-in products like milk and bread, and fresh, perimeter items are more important; at a supercenter , where consumers go to stock up, it’s all about value sizes, pantry fillers and frozen foods.
"The variety at Neighborhood Markets should be wildly different from the commodity-focused stuff at a Walmart Supercenter so they can appeal to a slightly different consumer — not necessarily an upscale consumer but an aspirational consumer," says Minneapolis-based marketing strategist Craig Espelien. "But right now, I just see a slightly smaller assortment of what’s at a supercenter."
"The cookie-cutter approach to different markets just isn’t successful," agrees Nikki Baird, managing partner at RSR Research.
On the plus side, a large bank of grab-and-go prepared foods near the entrance of a new Denver store targeting the location’s heavy lunch-time crowd signalled progress toward more tailored assortments. Said Ms. Baird, "That tells me Walmart is paying attention to how consumers use the store, which is something I haven’t seen from it in the past."
Do assortments have to be “wildly different” at Neighborhood Market versus Walmart’s Supercenter format? In what ways does Neighborhood Market have to shift away from being a mini-supercenter that best leverages Walmart’s buying power?