What's Next Step in Wal-Mart's Small-Format Rollout Strategy?

Walmart Express test enters "third phase"

Greg Lindenberg, Editor, CSP

Walmart Express (CSP Daily News / Convenience Stores)

BENTONVILLE, Ark. --Wal-Mart Stores Inc. is entering the third phase of it Walmart Express small-format pilot process. "We're exploring tethering this format to our larger supercenters," Bill Simon, president and executive vice president of Walmart U.S., said during the company's first-quarter earnings call.

The first phase was the "proof of concept" rollout of 10 of the convenience-store-like retail outlets in 2011 and 2012. The Bentonville, Ark.-based retail giant opened the first Walmart Express store in Gentry, Ark., in June 2011 and opened nine more in several markets including Chicago and North Carolina.

The second phase was the "density" part--determining through construction, logistics and performance metrics how many of the stores the company could build, would need to build and that could be sustained in the designated markets.

"The … top line is higher than we expected it to be; that has resulted in a bottom line that has been better than we believed it would be," said Simon in 2012. "[We] believe now that there's the opportunity for us to do some really innovative things. ... Imagine if you could get to a density market where you actually do the trailer drops to a supercenter that's nearby, [with] a small truck to run a route of Express stores. You could almost use a supercenter as a cross-dock opportunity to deliver to a smaller store. That's the mindset were in as we move to refine [Walmart Express]."

On Thursday, Simon reiterated that strategy. "In this test, customers will be able to order supercenter merchandise at a rural Express store and receive it on the same day. On May 2, we opened the first fully tethered Walmart Express store in North Carolina. Customers are buying products, such as bicycles and swimming pools, which they can't traditionally get inside a 10,000-square foot box."

Overall during the quarter, Wal-Mart opened 13 Neighborhood Markets and 25 supercenters, including 16 new and nine conversions. The company is on track to deliver about 115 supercenters, between 180 and 200 Neighborhood Markets and 90 to 100 Walmart Express stores this fiscal year, said Simon.

Wal-Mart currently operates 20 Walmart Express stores, approximately 15,000 square feet in size. The company also is testing several 2,500-square-foot, college-based convenience store-type retail outlets called Walmart on Campus and recently opened its first true gasoline c-store, called Walmart to Go," in Bentonville. The company called it a "one-off project."

On the call, Simon mentioned several other developments: "The team is diligently focused on improving sales by introducing increased innovation across the box. Just in the first quarter alone, we brought everyday low prices to the money transfer industry through our unique Walmart-2-Walmart service. We also rolled out Wild Oats, a new line of organic food products in nearly half of our stores. We launched a video game trade-in program. We expanded our Savings Catcher pilot to seven markets, and we introduced an online Walmart auto insurance comparison service. And finally, beginning Sunday, May 18, we will re-launch our Great Gas Rollback program."