Simon said the company plans to add 115 new outlets that have less than 60,000-square-feet of selling space this year. Walmart’s not abandoning the big box yet. Simon says to expect 125 Supercenters to open this year, too.
Though Simon asserts that about 90% of Walmart stores are in supersize territory, this isn’t Walmart’s first foray in shrinking store footprints. The company’s attempts include Neighborhood Markets which launched in 1998 and is designed to shoehorn its grocery offerings in smaller towns. The similar format Supermercado de Walmart followed in 2009 and are mostly located in areas with a high concentration of Hispanic residents.
Marketside, Walmart’s experiment to offer U.S. shoppers a convenient location to purchase prepared food, produce, wine and other groceries inexpensively launched in 2008 and shuttered in 2011. The world's largest retailer left the Marketside website up in what appears to be an online “suggestion” box for consumers.
If the company seems particularly bullish on these expansion efforts it may be because Walmart’s fourth quarter financials were looking good. Walmart U.S. added more than $10 billion in net sales during fiscal 2013 and fourth quarter comps at stores open at least one year were up 1%. Simon points out that Walmart has nearly $13 billion in free cash flow to invest “primarily in food and consumables, because we know that’s a traffic driver in our business.”
Groceries will certainly drive sales in smaller stores, not to mention health and beauty aids (hello aisles full of vitamin supplements and shampoos). Even with less shelf space and low prices, Walmart can still make bank in the volume of transactions as the formats catch on as customers seek value, not volume.
Lower margins could be offset by packing the selection with private-label merchandise, a strategy Walmart employed successfully in Mexico with its Bodega concept.
In an age when consumers are flocking to shop on the Web in bigger numbers, small format is relative. As Simon observes, existing Neighborhood Markets are all enabled with e-commerce and Site-To-Store capabilities, “So you have that endless aisle that we can offer that others might not be able to offer.”
image via Greer Today
