BENTONVILLE, Ark. -- Rumors have floated around for years claiming that retail giant Wal-Mart was testing various convenience concepts in an effort to expand its reach, and that continued this past week as the Bentonville, Ark.-based retailer opened its 112th Neighborhood Market.
Now rumors are circulating that Wal-Mart Stores Inc. is mulling the launch of a smaller, convenience-type format in the United States that could conceivably counter Tesco's Fresh & Easy market entry planned for later this year, according to a report in Progressive [image-nocss] Grocer.
So far, Wal-Mart has declined to comment on speculation of plans for a new format; however, Wal-Mart's U.K. branch, Asda, is a major competitor to Tesco overseas.
Industry observers are pointing to the company's announcement that former Tesco executive David Wild has been named senior vice president of new business development at Wal-Mart's U.S. division, according to the report. Wild, who joined Wal-Mart in 2004, worked in various executive positions at Tesco, including supply-chain director and chief executive of the company's central European operations. In the early 1990s, he was active in fresh food and nonfood, helping to expand the company's c-store operations.
However, as early as 2003, analysts were predicting that Wal-Mart would look into alternative formats to continue its U.S. growth, and to counter its competitors.
Retail Forward's Sandy Skrovan, for one, told Progressive Grocer in 2003 that "there's a strong likelihood that Wal-Mart will explore rolling out their own drug chain and/or dollar-store chain, and will get more into the convenience/fueling station business." She reasoned that those formats would raise fewer red flags with local opposition in urban areas.
Such a format would presumably be smaller than Wal-Mart's Neighborhood Market concept, which was established in 1998 and includes sites of about 40,000 square feet. The newest Neighborhood Market, a 47,000-sq.-ft. site, opened on February 28 in Lexington, Ky.
Neighborhood Markets are designed to offer customers a smaller convenient place to shop for grocery, beauty and other everyday needs at the low Wal-Mart price, store manager Jeff Singleton said in a press release. It's our mission for customers to feel that this is their neighborhood store, with friendly service and great values on items they need.
The new site includes a full line of groceries, including a fresh bakery, frozen foods, meat and dairy products and fresh produce and variety of organic offerings throughout.It also features a full deli offering rotisserie chicken. Cosmetics, toiletries, pet products and hardware items are also available.It will be open to customers 24 hours a day, seven days a week and will include six full-service and six self checkout lanes. The store will also feature a pharmacy and a one-hour photo lab.
Meanwhile, Tesco is set to launch its convenience-oriented supermarket, Fresh & Easy Neighborhood Market, later this year. The stores, expected to be about 15,000 square feet on average, will be located on the West Coast in the Phoenix, Las Vegas and Los Angeles markets.
Tesco got a boost this winter when Warren Buffett's Berkshire Hathaway Inc. increased its stake in Tesco Plc, according to a Bloomberg news report citing the U.S. insurance and investment firm's annual letter to shareholders.
Berkshire Hathaway owns 229.7 million Tesco shares, or 2.9% of Britain's biggest retailer, the new information shows. According to the previous regulatory filings, Omaha, Nebraska- based Berkshire had held a stake of 2%.
Buffett, the world's second-richest man, first bought shares in Tesco last year after the Cheshunt, England-based retailer announced plans to open c-stores on the U.S. West Coast. The outlets will take on chains such as 7-Eleven Inc. and Trader Joe's to win time-pressed shoppers in southwestern U.S. cities.
Buffett is realizing that with Tesco moving into the U.S. with a fantastic format and great management, they are the ones to back, Chris Gower, an analyst at Man Securities in London, told Bloomberg. I wouldn't be surprised if other investors start piling in. They look at Buffett as the shining light.
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