CVS, which has more than 7,000 retail locations, is using data collected from its loyalty-card [image-nocss] program to change its product mix in urban areas, where consumers shop the stores for everyday items, CVS CFO Dave Denton said in an interview with the news agency.
The exact product assortment is still evolving, he said.
"We have a select group of stores currently reconfigured where we are tailoring our assortment to how the consumer shops that store," Denton said. "One of those items is expanding grocery and different food products that meet the busy lifestyle of people in those kinds of locations."
CVS plans to alter store hours and checkout procedures in urban locations, which represent about 20% of the Woonsocket, R.I.-based company's store base, the drug chain said on a May 4 conference call cited by Bloomberg.
Separately, while it is trying to secure approval for a second store in the city, Wal-Mart Stores Inc. is also trying to get the city's permission to turn its only Chicago location into a supercenter that sells groceries, said The Chicago Tribune.
The Bentonville, Ark.-based retailer plans to spend $5.4 million to remodel the 150,000-square-foot discount store on the city's West Side to create space for a grocery with "fresh food," according to a building permit issued April 22 by the city and obtained by the newspaper.
The renovation, already under way, means Wal-Mart is on track to operate a grocery store within the city's limits before the year is out.
"The rationale for doing it is fairly simple," Jim Hertel, managing partner at Willard Bishop, a Barrington, Ill.-based supermarket consulting firm, told the Tribune. "It drives traffic, and it drives up basket size. You get somebody in there buying food, and they will probably buy consumer electronics or apparel."
The average shopper visits a discount store about once every six weeks, Bishop said. But consumers shop for groceries about seven or eight times a month.
The world's largest retailer opened its first Chicago store in September 2006 amid controversy, said the report. To placate opponents, Wal-Mart avoided putting in groceries and instead built a discount store, an older format that carries pantry items such as milk, canned goods and frozen pizza, but no fresh food.
By converting the Austin store into what in essence is a mini-supercenter, Wal-Mart is clearing the way to stock perishables such as meat, produce, deli, bakery and frozen items.
The grocery business, which accounts for 51% of Wal-Mart's annual revenue, is at the heart of Wal-Mart's urban expansion predicament, the report said. Wal-Mart, a nonunion company, is the nation's largest grocer and private employer, with 1.4 million workers. Employees at Chicago-area traditional grocery stores, including Supervalu's Jewel-Osco and Safeway's Dominick's, are union members.
Labor leaders and politicians with influence in large metropolitan areas, including Chicago and New York, have put up roadblocks to Wal-Mart's city growth, charging the company with doing a poor job at taking care of its employees. They want Wal-Mart to agree to pay higher wages and health benefits as a condition of coming into the cities, the report said.
Wal-Mart is in the midst of a nationwide effort to convert hundreds of discount centers into mini-supercenters that sell groceries, said the report. At an average of 108,000 square feet, the discount centers are about 40% smaller than the typical 185,000-sq.-ft. supercenter.
To make room for groceries in the smaller store, Wal-Mart is getting rid of bulkier merchandise such as furniture and treadmills, analyst Sandra Skrovan, who tracks Wal-Mart and Target for the Columbus, Ohio-based Kantar Retail market research firm, told the Tribune. Instead, Wal-Mart encourages shoppers to buy those bulky items online and pick them up in the store, leaving space to bring in the fresh food that draws shoppers more frequently into the stores.
That formula, at work in the Austin store, is "providing Wal-Mart the vehicle it needs to strengthen its presence and generate more sales in key major metropolitan urban markets" such as New York, Los Angeles, Chicago and Philadelphia, Skrovan said in a report. The strategy would translate into "a lot more food dollars and market share" for Wal-Mart, she said.
"It would also mean a newfound and much-needed shot in the arm for domestic growth in the coming years," Skrovan said.
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