The move comes after rivals Tesco PLC, J Sainsbury PLC and Marks & Spencer Group PLC, which also run big store formats, have successfully opened hundreds of small stores in the center [image-nocss] of towns in recent years, picking up new shoppers looking for convenience purchases on top of their main shopping trips.
Tesco's U.S. small-format convenience/grocery stores, Fresh & Easy Neighborhood Markets Inc., based in El Segundo, Calif., continue to struggle in America, although the company is standing by the concept and is still opening new locations. (In fact, it just opened four new stores in California and Arizona and is poised to open four more in the Los Angeles area beginning later this month.)
Asda CEO Andy Bond said that Asda's new store format would not be in high-street locations or as small as the convenience stores that the rivals have opened in recent years and was not an attempt to move into that market.
Instead, Asda's smaller supermarkets would still be large enough for customers to complete a weekly shop, and due to their size and less expensive locations on the edge of small towns, would still fit into the company's cost base and business model it uses to operate its 371 large-format out-of-town stores.
A move into small convenience stores like those run by Tesco would have threatened Asda's business model. Like U.S. parent Wal-Mart, Asda uses large-volume, large-format stores to drive down prices, marketing itself with the slogan "saving you money every day" and operating a nationwide pricing policy, in contrast to its rivals which have more flexible pricing.
This price transparency, which means a loaf of bread in London costs the same as one in Scotland, is important from a marketing and advertising perspective, but means small stores are less economic as the costs involved running them are inherently higher than the cost of running large supermarkets.
Asda has been preparing for the move to smaller stores--Bond said the group has spent the last few years building the big-format business while also working on the capability to handle smaller store formats while retaining the same cost base; however, the opening of new smaller stores could help Asda overcome a problem that became apparent during the coldest winter in the U.K. for many years. Bond said Asda had suffered more than rivals during heavy snow and ice that affected all of the U.K. in late December and early January because it has fewer stores spaced further apart and out of town. Its customers had further to travel for their main shop.
Bentonville, Ark.-based Wal-Mart opened the four Marketside combination grocery and fresh-foods markets on Oct. 4, 2008, in the suburban Phoenix towns of Gilbert, Chandler, Mesa and Tempe. The stores are approximately 20,000 square feet in size.
In addition to its 2,435 Supercenters and the four Marketside stores, Wal-Mart also sells food at 128 Neighborhood Markets, a grocery format the company launched in 1998. Neighborhood Markets include a full line of groceries, including a fresh bakery, frozen foods, meat and dairy products and fresh produce and variety of organic offerings throughout. They also feature a full deli offering rotisserie chicken. And cosmetics, toiletries, pet products and hardware items are also available. They are open 24 hours a day, seven days a week and include six full-service and six self checkout lanes. At about 35,000 square feet, the Neighborhood Markets are roughly the size of a traditional U.S. supermarket.
Click here for previous CSP Daily News coverage of Marketside and other smaller-format stores. Also,click here for previous coverage of Tesco's Fresh & Easy.
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