Walmart to play small ball

Feb 25, 2014

The consensus of a discussion last week on this site was that Walmart shouldn’t acquire Family Dollar or any other retailer to help it speed up its small box strategy. Instead, say our commentators, Walmart should devote greater resources to opening small stores if management sees them as key to the company’s growth prospects. It turns out that Walmart thinks the same thing and also last week announced it plans to build 270 to 300 small stores this year, an increase of its previously estimated range of 120 to 150.

Walmart’s Neighborhood Market format saw same-store sales grow four percent for its most recent fiscal year, while its big boxes struggled.

"Our small store expansion, in addition to providing customers access to a wide variety of products, including fresh, pharmacy and fuel, will help us usher in the next generation of retail," said Bill Simon, Walmart U.S. president and CEO, in a statement. "This will combine thousands of points of physical access with digital retail experiences that include initiatives such as Site to Store and Pay with Cash."

The retailer currently operates 346 Neighborhood Markets and 20 Walmart Express locations. The success of the Express format has led Walmart to announce it would expand locations beyond its three-market test.

"We believe that accelerating our small store expansion will allow customers to choose where and when to shop based on their needs," said Mr. Simon. "Our small store expansion will also strengthen our market share and create greater efficiencies in our supply chain through a tethered approach that uses supercenters as a supply chain base, links our resources and provides a unique and connected customer experience."

Belus Capital Advisors analyst Brian Sozzi expressed concern that Walmart’s focus on small stores might keep it from addressing issues such as out-of-stocks in its big box locations.

"Turning a blind eye is a recipe for long-term margin and returns pressure," Mr. Sozzi told CNBC.

Is one of Walmart’s small store concepts — Neighborhood Market or Walmart Express — more important for its future growth prospects than the other? Do you think it’s likely Walmart’s increased focus on small boxes will be to the detriment to its Supercenter business?

Join the Discussion!

9 Comments on "Walmart to play small ball"

Notify of

Sort by:   newest | oldest | most voted
Herb Sorensen

The small store movement, globally, is due to the increased identity of the local store as a communal pantry, rather than as a more distant neighborhood warehouse. This trend can only accelerate when it is recognized that Amazon (and others) are pressing home delivery, to deliver at least as fast as you might get to your local store.

There are a lot of other factors involved, but DELIVERY is the dominant force behind this movement. See: “Retail ‘Spoons.'”

Ron Margulis

I like the idea of having a network of Neighborhood Market or Walmart Express stores that can act as a depot for online deliveries. The Neighborhood Markets in more rural areas and the Walmart Express stores in urban markets. Maybe a mix in the suburbs. All the stores carrying a common base assortment and Neighborhood Markets fleshing that out with added fresh and replenishment items. And who knows, maybe this will eliminate the need for a Supercenter in select locations.

Dick Seesel

There is room for both concepts in the Walmart portfolio. The “Neighborhood Market” concept provides viable competition to conventional grocers, without the bells and whistles (and site planning issues) associated with a full-blown supercenter. The “Market” that I shopped most recently was clean, well-organized and well-stocked with fresh meat and produce, in an area somewhat underserved by traditional supermarkets.

Without knowing about sales results or profitability metrics (leases in high-traffic urban locations, etc.), the “Express” idea is just as compelling. If Walmart pursues anything close to a saturation strategy in cities like New York or Chicago, it’s not just the dollar stores who should worry…it’s Walgreens, too.

gordon arnold

The only thing important to the future of Walmart is finding a way to move product. The difficulties lie in the way they approach this problem. So far, small boxes and e-commerce are not responding to their needs. Or are they? This may be a matter of perception that suppresses the interests in growing a business that returns millions instead of billions of dollars.

The top of the heap in this largest of all companies will look at the smaller retail investments as not just a step down in prominence and importance but as an elevator ride down the measure of fame and career relevance they wish for. Attachment with high resolution monthly reporting is the key in overcoming this very big problem. Placing any and all bonus programs on combined mission complete. But with big egos in lofty positions, the likelihood of these needs are surely very low. As time goes by, this is something they may wish they did in place of being glad they did.

Ben Ball

Express — hands down.

Many see Walmart’s core competency as efficient sourcing and distribution. I see it as serving under-served constituencies. First it was rural shoppers in the lower/middle tier economic scale with the discount stores. Supercenters moved that to better value shopping for suburban dwellers. The Express format can give them reach into inner city and other difficult geographies. The last thing we need is another 40,000 square foot supermarket.

Anne Bieler
Anne Bieler
3 years 6 months ago

Walmart’s focus on small store development is a strong strategy for growth; shoppers want quick access to fresh products and essentials in a convenient location. Walmart has the expertise to execute these smaller formats more efficiently than others, and should leverage here.
Supercenters will continue to be important and stocking solutions have to be implemented across all Walmart stores to retain their shopper constituency.

Tom Redd

Both of Walmart’s small store concepts work. They map the express to the bigger center, high traffic areas and the Neighborhood Market to the Urban apartment-homes/suburban spaces. Overall it will shift more shoppers to the Walmart brand and convince them that Walmart is not just some big monster. Walmart was built to serve the shopper and this concept fulfills what Sam W. would have wanted (Redd belief).

The added value of order online, pick up at store and all that will help Walmart with their competition.

Walmart does care about their shopper – it is a tradition of theirs and the Markets are more proof.

Kelly Tackett

Walmart needs to explore a multi-format portfolio, and small stores need to be part of that strategy. And it’s not a question of either or. Walmart needs to fix the core business (it’s too big and too important to ignore) AND grow its base of alternative formats as runway for further supercenter expansion runs out.

I also don’t think it’s a question of Express vs. NM. There’s room for both, and Walmart has the wherewithal to deal with the operational complexity of managing multiple formats. That being said, the single small format Walmart I’ve visited – Walmart on Campus – suggests that the retailer has a ways to go in delivering an experience that will attract consumers for anything more than a quick fill-in trip or collection point for online sales.

Brian Numainville

Both of these formats work and fulfill needs for different shoppers. And their span of formats really allows Walmart to cover the waterfront from rural, to suburban and urban, both from a customer standpoint and from a real estate approach.


Take Our Instant Poll

How likely is it that Walmart’s increased focus on small boxes will keep management from addressing problems with its Supercenter business?

View Results

Loading ... Loading ...