CSD: What Walmart’s New C-Stores Mean for the Industry

Discussion
May 12, 2011

Through a special arrangement, presented here for discussion
is a summary of an article from Convenience Store Decisions magazine.

It appears
that Walmart plans on setting up hundreds of convenience stores in the near
future and many of these will be completed before 2012. Why is Walmart getting
into the c-store business, you wonder? Well, considering many of its superstores
also sell fuel, and more and more patrons are using the Sam’s
Club card and Walmart credit cards to buy fuel, it may as well have a c-store
out front for everybody.

Can Walmart compete in this venue?

Of course, Walmart already has a captured
audience, which will only grow as the price of fuel goes up higher and higher
and consumers are trying to squeeze a few more pennies out of each gallon.
Also, Walmart will be able to sell products in its c-stores at a price point
cheaper than other convenience stores, as it has a big buying advantage with
its vendors. Does this mean other convenience stores will lose business to
Sam’s Club and Walmart c-stores?
Yes, it could throw a loop in the industry, but it probably will not be too
big a deal since Walmart is only planning a few hundred of these stores between
2011 and 2012.

In the future, it could be more devastating to the industry if
Walmart starts throwing up convenience stores all over the place, but I don’t
see that happening.

Still, it could be a challenge for those c-stores in close
proximity. When Walmart entered the oil change industry and started selling
tires, for instance, both tire stores and quick lubes dealers were hurt.

And
Walmart is known for low-price, high-volume strategies. They do even better
during difficult economies, or when the rest of the industry is either inflating
prices to customers, or the price of those commodities skyrocket. That’s what’s
happening with the price of oil, thus why gasoline is so expensive. Perhaps,
in a way, it will just keep everyone honest and, what the heck, a little competition
is always healthy for an industry.

Indeed, this could very well change the entire
dynamics of the industry, and Walmart may even put these minimart type stores
in locations other than its own current properties at some point in the future
— who knows?

Discussion Questions: What do you think small format Walmarts will mean for the convenience story industry? How should convenience stores respond to Walmart opening its own c-stores?

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20 Comments on "CSD: What Walmart’s New C-Stores Mean for the Industry"


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Dick Seesel
Guest
10 years 6 days ago

I don’t agree with the author’s statement that he doesn’t see Walmart throwing up C-stores all over the place. If the concept is successful, that is exactly what Walmart can be expected to do. The company has been interested in national and even global footprints for its various concepts for many years, and the C-store business seems to be dominated by strong regional players. (At least in my corner of the country, Kwik Trip is a much bigger player than 7-Eleven.) Walmart is starting from a strong brand name and pricing credibility; if it focuses on commodities, its competitors need to be prepared with different offerings, such as fresh and ready-to-eat foods.

Cathy Hotka
Guest
10 years 6 days ago

While Walmart has mad skills, you have to wonder if they really know how to micro-merchandise by geography, as top c-store players do. They’ll probably bring some innovation to the space, but the dominant c-stores can steal them. Should be interesting to watch.

Steve Montgomery
Guest
10 years 6 days ago
When Walmart partnered with Murphy Oil, it got the advantage of having fuel (a destination driver) on its out lots without having to actually operate the locations. Murphy and Walmart have changed their business relationship and Murphy has elected to develop larger c-stores in more traditional locations. This left a void in Walmart’s going forward strategy. A natural next step would be to develop its own stores to fill the void left by Murphy. However, it is a far different thing to have someone operate c-stores on your out lots than to operate them yourself. Ask the supermarket chains who found that owning and operating c-stores didn’t work for the majority of them. True, there are some who do an excellent job but there are also examples of well-run supermarket chains who simply could not operate c-stores. Will Walmart be successful? Time will tell. Certainly a determinant will be whether they position the stores as something that helps bring customers to the location or as business that need to generate a standalone profit.
Ed Rosenbaum
Guest
10 years 6 days ago

The very thought of Walmart entering the c-store market should indicate we will be seeing lower prices and more competition in those areas the 200 or so stores will be going. I would guess the first group of stores will be connected to those locations where Walmart already sells gas. I can see this becoming another big step for them. Coincidentally, my wife just got a Costco membership primarily for the lower gas prices.

George Whalin
Guest
George Whalin
10 years 6 days ago

Walmart has a history of announcing big plans. Unfortunately, they rarely occur as announced. They planned on opening Sam’s Clubs all over the country to compete with Costco. It took them many years to open the numbers they announced and they’ve never really matched Costco’s success. The same has been true for their Neighborhood Market grocery store concept. I too have serious doubts about their ability to merchandise and operate hundreds of small c-stores in distinctive communities all over the country. Yes, they know how to open and operate a large number of supercenters and traditional Walmart stores with essentially the same merchandise. But c-stores are a very different business with different challenges.

Dan Berthiaume
Guest
Dan Berthiaume
10 years 6 days ago

Walmart c-stores will be one more blow against mom-and-pop or small local/regional operations. However, I don’t think the major chains like 7-Eleven and Circle K will feel that much pressure.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
10 years 6 days ago
Walmart will certainly expand the c-store format aggressively once they have perfected the model with a few stores in 2011 and 2012. Some people have commented that Walmart does not understand how to run c-stores or look at geographical data at that low a level so they won’t be successful. Please go back a few years and read comments regarding Walmart getting into the food business and how many people wrote about them not understanding the food channel. Walmart runs their business with data better than most. Once they figure out the model, they attack feverishly to gain market share. Current c-stores should be looking for ways to differentiate themselves now rather than waiting until Walmart is building miles down the road. Some ideas on how to protect yourself from Walmart: 1) Build a strong Private Brand strategy to help build customer loyalty 2) Focus on fresh items including Breakfast, Lunch and Snack food 3) Use data!!!! If you don’t have it, start collecting ASAP 4) Leverage your current relationships with DSD’s. You will need… Read more »
Mel Kleiman
Guest
10 years 6 days ago

This should be almost a non event except for the few stores that are located near the new competitor. If Walmart places the stores where they presently sell gas, it will be even less of an event. They already have the fuel sales and most of the people who are buying gas at these locations are gas shoppers, not c-store shoppers.

I think this is a good time for every c-store operator to ask a question they should be asking every year in their annual planning meeting. What action would you take if a major new competitor announced they were opening within 4 blocks of your locations?

Richard J. George, Ph.D.
Guest
10 years 6 days ago

Walmart certainly changed the paradigm for food retailers and in twenty years has become the world’s largest food retailer. I would not bet against Walmart when it comes to c-store penetration for a number of reasons noted in the article. It may take awhile to perfect the offering (consider what Supercenters looked like in 1990). However, the opportunity to offer convenience without convenience store prices is very attractive. Currently, dollar stores have added breakfast items with the goal of attracting customers and positioning themselves as a neighborhood convenience store without convenience store prices. I believe Walmart will become a major force in this channel.

Bill Hanifin
Guest
10 years 6 days ago

Walmart will have a challenge in outfitting its stores. Does it follow the familiar industry path and stock to match other nationally branded c-store chains, or does it somehow blend traditional c-store fare with items which they feel may give them a competitive advantage?

Check cashing and money transfer come to mind and it is possible that the smaller outlets could be used to highlight other merchandise at the typical discount.

How Walmart will cope with food and drink is up for grabs and the process of expanding “nationwide” is easier said than done. Cost of real estate or long term leases are imposing for the business plan and not so easy to unwind if it doesn’t work out.

Putting gas pumps in front of stores with a back court attached is the more conservative approach to building a free standing network.

Mark Burr
Guest
10 years 6 days ago
This is the type of “Napster” moment that I spoke of yesterday in relationship to Walmart. The comments of skepticism indicate that it just may be that. Many, if not most, have the opportunity to enter a market segment in the ‘hundreds’. The numbers I have read indicate a much higher number. These can work in combination with fuel and without. They can stand alone or collocate. They also can be the destination of pick up of internet-based shopping. The opportunity for Walmart in this area is as unlimited as their main stores were 35 years ago. We forget that Walmart didn’t even have 100 stores until 1975. That went from 100 to 1,500 in 15 years. The growth from that point they grew another nearly 2,900 stores in 20 years. Keep in mind that the cost of a c-store is less than 10% of a super-store to build. It’s even less if vacant locations are acquired and remodeled. When I hear ‘only a few hundred stores in 2011 and 2012’ I just smile. The… Read more »
Justin Time
Guest
10 years 6 days ago

Walmart will definitely try these as close to Giant Eagle’s Get-Go stations and Kroger’s Turkey Hill c-stores, as they can get, taking dead aim at them, for starters.

So in the near future, they should be cropping up in various parts of Pennsylvania and Ohio.

As a result, there will definitely be some fall out the industry. Wawa and Sheetz, should be able to stand up to the competition if Walmart tries them along the Mid-Atlantic.

Older competitors, like Stop’n Go and others, may fall by the wayside, and not survive in the competitive Mid Atlantic.

Tim Smith
Guest
10 years 6 days ago

The current setup in front of their stores is not conducive to getting a soft drink, candy or snack. I gas up there but don’t recall ever having bought anything else. If they go to a more traditional building with pricing like they have in-store now, I will seek them out for my afternoon soda and snack stop.

Gene Detroyer
Guest
10 years 6 days ago
There is no contest here. As a business operation, Walmart is so much stronger than any of the c-store operators. This move into c-stores will have an earthshaking effect on the category. As John Boccuzzi reminded us, remember the naysayers when Walmart entered the grocery business. Be assured the grocery business is leagues more difficult than the c-store business. Like in grocery, like in pharmacy, like in mass, Walmart will become the leader in c-store. It plays to their operating strengths. Remember, Walmart does not look at themselves as a particularly defined retailer. They look at themselves as a distributor of goods to consumers. They are indifferent as to what ways they get the goods there. Their basic mass business is near saturation. If they grow 50% faster than population, it may deliver 2% growth. They must develop other outlets to distribute the goods. Online, home-delivery and c-stores are all alternatives. Unlike most retailers, Walmart does not care where their profits come from. Unlike most retailers, if growth in revenue and profit meant closing the… Read more »
Ben Ball
Guest
10 years 6 days ago

Let’s start with how consumers define “convenience.” It has two essential elements–1)proximity, and 2) easy in and out. If the Walmart supercenter is the the closest store to you, it already has “proximity.”

And as Walmart well knows (or Herb Sorensen will tell you) many of the purchases going out of Walmart already are 1-3 items from the front end. But walking all the way across that big parking lot to get to the store is not what most people think of as “easy in and out.” Now Walmart can offer that with a c-store in the forecourt.

This in and of itself will be a game changer for any c-store operator located near an existing Walmart. But I’m betting there is a larger game at play here–the urban grocery market. If Walmart is successful with this concept in suburban locations, look for a battle royal between Walgreens, Walmart c-stores, Dollar stores and traditional inner-city supermarket locations for the urban dweller’s fill-in trip and quick trip mission grocery dollar.

Jonathan Marek
Guest
10 years 6 days ago

I suspect the effect on the industry will be small, apart from those c-stores that happen to be located nearby. It’s not a question of Walmart’s abilities to succeed in this format. Just the supply chain advantages they bring are tremendous. Rather, it’s an issue of trade areas. A large format Walmart or Sam’s adding gas draws from a large trade area–at least 10 to 20 times the size of a c-store trade area. Even if each site has a bigger impact on the nearby c-store, it would take ten thousand plus locations to come close to the impact that Walmart has already had on the business.

Having said that: all retail is local and I wouldn’t want to be next door!

Eliott Olson
Guest
Eliott Olson
10 years 6 days ago

The c-store is a different economic and operating model than a supercenter. There is no doubt that Walmart can run and operate convenience stores. The questions are why and at what cost? If you had a pile of cash, what would attract you to invest in convenience stores? Are there other businesses closer to your skill set that would give you equal or greater returns? What changes in your organization will you have to make to be successful and how will these changes affect your core business? When planting shrubs will the mighty oaks wilt?

Tony Orlando
Guest
10 years 6 days ago
Any fool who thinks Walmart can not steal market share in any segment of the food industry is kidding themselves. I have seen the destruction of many fine independents in the grocery industry, since the Supercenter took off. Anyone who reads my comments knows I do not like Walmart, but I do respect the tremendous power they have to dominate and eliminate. A convenience store concept for them can be mastered over time, and I would tell the competition to start brushing up on their fresh food concept. Walmart does not need high priced employees to run these stores, and the relationships built with Subway, and Mickey D’s will enable them to get into the food end without much trouble. The growth for convenient stores by Walmart will also focus on the food deserts of the inner cities, as they will be welcomed by the cities who probably will give them tax breaks to build new facilities there as well. Money will continue to flow their way, and we as independents must get better at… Read more »
Rick Reddick
Guest
Rick Reddick
10 years 6 days ago

Maybe the 3rd time is a charm. Walmart has been in the c-store (true c-store) business twice before and chose to exit that channel. Smaller format sites to compete with Dollar General? Yes that will work and is necessary for them. Dollar General is extremely successful in the small communities and expanding their offering even more to be even larger threat. I’m not sure Walmart will stick out the true c-store concept.

Craig Sundstrom
Guest
10 years 6 days ago

Maybe I’m a stickler for semantics, but I thought the defining characteristic of a “convenience” store is convenience: proximity, selection, and–for younger patrons–the clerk’s forgetting to ask for ID…I don’t see price mentioned. Maybe WM can makes waves, or maybe not; we’ll have to wait and see.

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