Walmart Closing Down Marketside Test

Discussion
Oct 17, 2011
George Anderson

Back in 2008 when Walmart opened four Marketside stores in the Phoenix area, it was largely believed to be the company’s response to Tesco’s entry into the U.S. market with the Fresh & Easy format. The thinking was that the smaller, somewhat more upscale, concept could help Walmart avoid a redux of the situation in the U.K. market where Tesco’s Express format filled a niche in which Asda had no offering.

Now comes word that Walmart is shelving the Marketside concept in favor of its new Express small store format. Walmart has opened five of the Express units with plans to have another 11 open by year’s end. The company sees the convenience store-sized units as a means to enter urban areas in need of groceries, but lacking the available space to build one of the chain’s bigger boxes.

Not all are convinced that the Express format will fare any better than Marketside for Walmart.

"We continue to believe it will take multiple years for Walmart to perfect this concept, if ever," Mark Montagna, an analyst with Avondale Partners, told Reuters.

From the very beginning, Marketside was a bit far afield of what most think of when Walmart is part of the discussion. According to Walmart, Marketside stores offered:

  • A large selection of organic foods, which represented roughly 20 percent of a store’s stock;
  • Freshly prepared hot entrees, sides and soups;
  • Produce sections with a focus on local suppliers;
  • A full-service deli;
  • A butcher shop;
  • A bakery;
  • Fresh cut flowers with a freshness guarantee.

Discussion Questions: What do you think Walmart learned from its Marketside test? Does the Marketside experience have implications for the Walmart Express business?

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20 Comments on "Walmart Closing Down Marketside Test"


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Dr. Stephen Needel
Guest
9 years 6 months ago

I don’t know what they learned, but what they should have learned is that Walmart means something to shoppers, for better or worse, and when you violate those expectations, you will fail. Do what you do well — small is not what WM does well. One might well predict similar problems for Express — it’s not what WM does.

Charles P. Walsh
Guest
Charles P. Walsh
9 years 6 months ago

Walmart was experimenting with the small scale format and learning how to operate them with the Marketside stores, just as they did with the Hyper Market Concept stores back in the late ’80s to early ’90s. The Hyper Market test gave them much needed experience on how to run larger store format which included grocery and from this experience came the successful Supercenters.

The Express stores are the successors to Marketside and are smaller and more focused on commodity and price while providing essential services such as pharmacy in some cases.

The Hyper Marts and the Marketsides were not failures, they were test platforms that provided empirical experiences to Walmart for what worked in merchandising and for “how to” in operations.

David Biernbaum
Guest
9 years 6 months ago

I don’t know what Walmart learned from the Marketside test, but I think what Walmart should have learned is that this was not the right business for Walmart to be involved with. I’m sorry, but Walmart is not in the “high-end” business and they should not be.

Ryan Mathews
Guest
9 years 6 months ago

Walmart constantly experiments with formats.

Clearly it needs a smaller format for urban centers and just as clearly it hasn’t quite figured out what that format ought to look like.

That said, Mr. Montagna’s comments are almost laughably naive.

I remember when analysts used to say similar things about Walmart’s potential as a food retailer.

Look, we are talking about the largest retailer on earth. It defies the imagination to believe that they couldn’t buy the talent needed to make small formats work.

The decision to terminate one format experiment doesn’t presage the failure of the next.

Walmart will keep tinkering until they get it right and — if they can’t and they still want to have a small format — they’ll buy a team that can do it for them.

Doron Levy
Guest
Doron Levy
9 years 6 months ago

With all this talk of grocery deserts in the US, I’m wondering why this failed. And isn’t the Express format just a rehash of what they had before? I think the trouble is the upscale direction of the Marketside stores. Consumers have a hard time equating Walmart with upscale. If their grocery selection in Canada is any indication of what’s available Stateside, I would say they were foolish to enter the ‘upscale’ market at all and should stick to just using their shrink ray to create a smaller box store.

Paula Rosenblum
Guest
9 years 6 months ago

Walmart brings commodities to the masses at a reasonable price. That’s what it’s good at. Tonnage. I don’t believe its core customer will be interested in the concept and more upscale customers won’t be interested either.

I’m fascinated to see comments that say “eventually Walmart always gets it right.” I believe Walmart got ONE thing right, and it was plenty transformative. The largest retailer in the world. Its market is pretty well saturated in the US. And that’s the way it is.

Joan Treistman
Guest
9 years 6 months ago

I don’t see the economies of scale for Walmart in a small store. My guess is that the prices in the small stores will reflect Walmart’s incremental costs per product. This is counter intuitive for a Walmart customer and I don’t think it will be attractive to prospects.

Liz Crawford
Guest
9 years 6 months ago

Walmart doesn’t do upscale. Sorry. It’s not in their DNA. I’m sure the entrees were terrific, but a nice quinoa salad doesn’t a store make.

However, the Express concept has legs. Urban markets have a need for convenience outlets, especially for grocery staples and basic housewares. Living in the city, it is challenging to find basics like a reasonably priced sieve or lunch box stuffers.

Mom-and-pop bodegas and many typical urban grocers (I don’t mean Fairway), don’t offer very choice items. On the other hand, a shopper can get a gorgeous sieve or fabulous organic lunch box stuffer, but pay a fortune. In either case, it’s a choice of money or second-best. Walmart Express could fill the gap.

Steve Montgomery
Guest
9 years 6 months ago

There is a significant difference in the positioning of Walmart’s Marketside and Express formats, with Marketside being more “Whole Foods” and Express being more c-store/drug store. I am sure that many were not surprised by Walmart’s lack of success with Maketside, but that does not mean automatic failure with their Express concept. Nor does is mean automatic success.

As many have learned, companies used to big formats have difficulty with smaller footprints. There is a big difference (no pun intended) between supplying/running a supercenter and an express, but I think it would be very foolish to count Walmart our before they have even begun.

Mel Kleiman
Guest
9 years 6 months ago

I think Walmart may be learning a message that is different from what most people are focusing on. That is that no matter what concept you run, it is hard to find great/good managers. If you find one of these managers, it is tough to put them in a 5,000 square foot store when you could have them in a 50,000 square foot store, or even a department in a larger store that will do more business than a small store.

Gene Detroyer
Guest
9 years 6 months ago

Walmart learns from every experience. There are no rules at Walmart. Though there are many who love to point out Walmart’s “failures,” every one has led to a success. The basic Walmart mass merchant business model in the U.S. is saturated. Unlike most retailers, Walmart understands they have to move in different directions if they are going to grow.

Be assured Walmart will get into the c-store business. When they do, they will do it better than anyone else. What c-store retailer will be able to operate more efficiently and more effectively than Walmart the company?

Walmart reminds us all the time and most people (especially those on Wall Street) don’t listen. Walmart is not a retailer. Walmart is a distributor of goods to consumers with no restraint on how they get there.

Camille P. Schuster, PhD.
Guest
9 years 6 months ago

The Marketside and Express concepts present a major challenge because the process challenges their traditionally efficient supply chain. Delivering sizable quantities of products to stores across the country is where Walmart excels. Managing a supply chain of small amounts of products with great variation among stores needing constant replenishment is a different challenge altogether. Never say never, but the experimentation will continue for some time.

James Tenser
Guest
9 years 6 months ago

The Marketside test stores were located in converted chain drugstores on major intersections in the East Valley suburbs of Phoenix.

This was far from an experiment at running walk-up food stores in the urban food deserts. More like planting drive-up convenience food stores in the actual desert.

When the stores opened in 2008 after a year or more of planning and development, the recession had barely taken hold and there may have been an expectation that a convenience oriented concept had potential.

It didn’t take very long before the Marketside story seemed to fade from prominence. I think these closings are probably a bit overdue, as their strategic context had changed almost from the day they were opened.

Matthew Keylock
Guest
Matthew Keylock
9 years 6 months ago

It seems like Walmart has had a few unsuccessful attempts at trialing others’ strategies in the last few years.

Being aware of competition is important, but not to the extent it drives your own strategy.

I think Walmart has learned this.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
9 years 6 months ago

Here in itty-bitty Lincoln, CA, construction has begun on a Fresh & Easy and Walmart has leased a location for an Express store. How about that! We’ll soon need an extended-stay hotel to barrack all of the researchers who will descend on our sleepy burg, and the Fighting Zebras of Lincoln H.S. will have larger audiences for sporting events (that’s about all there is to do on Friday nights around here).

Perhaps Walmart learned that the professed (but perhaps not actual, according to Jim Tenser) urban target for their Marketside format was ill-advised, because their Lincoln is definitely not urban. The locals are excited by the confluence of a major retailer locating on our main thoroughfare while the highway it currently hosts is being rerouted around center city. No more logging trucks clogging up our main artery, and more access for shopping. Should be interesting.

Anne Bieler
Guest
Anne Bieler
9 years 6 months ago

Walmart starts with a corporate vision of the new format/market and learns as it goes. Changing the value proposition was a surprise to the Walmart shoppers who expected similar assortments — the Express stores are probably closer to shopper expectations. However, Walmart also could research locations more effectively.

This seems to be a factor here, and was also major factor with Marketside, as well as in the retreat of Sam’s Club in Canada — all these club operations closed after a few years. These stores were located in areas well served by Costco, and the assortment was incomplete — despite good success with the Walmart discount center model. Since then, expanded food sections seem to have been well received in existing stores. Lessons learned?

Doug Stephens
Guest
Doug Stephens
9 years 6 months ago

The harsh lesson here is that Walmart’s success was predicated on massive population growth, credit comfortable consumers and cheap suburban asphalt. That was then and this is now. The new consumer is younger, ethnic, urban and credit depleted.

Walmart, like everyone else is going to have to grope around in the dark for a while until they figure this out. And the reality is, despite their size and resources, they might not.

Eliott Olson
Guest
Eliott Olson
9 years 6 months ago

The Phoenix market is overcrowded, hyper competitive and not a good place for a concept test.

Mark Burr
Guest
9 years 6 months ago

Neither Marketside or Walmart Express do anything for their real problem which is continued declining same store sales year over year as a result of out of stocks and poor execution.

They’ll figure out the smaller format. They’ll have success there. However, their core business would seem to be more of a concern in Bentonville.

No retailer has likely tried and failed more. No retailer has likely tried and succeeded more.

I’m not too worried about either problem. However, it is surprising that it’s taking so long to even achieve flat in same store sales. It’s even more surprising that all this has occurred in a market time when it should be ripe for Walmart’s taking.

A lot to learn from for other retailers. A lot to learn. Are they paying attention?

David Livingston
Guest
9 years 6 months ago

The Walmart Marektside stores I saw where in Phoenix. They were always dead. Felt too much like a convenience store. They had no butcher shop. Walmart doesn’t have butchers. There were full size Walmarts and other conventional grocers. My understanding is the express stores will be in zero store towns and food deserts. Time will tell.

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