Filling the Gap

Slowly but surely, Walmart Express turning from a test concept into a formidable format.

Erik J. Martin, CSP Correspondent

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Two years since if rest leaving the station, the little engine that could significantly affect the increasingly competitive railway that inconvenience retailing is still chugging along, only perhaps not on the fast track that was forecast earlier.

But while some consider this smallfootprinttrain a long shot to outpace its rivals, its engine is powered by Wal-Mart—a juggernaut force that seems determined to leave c-stores, dollar stores, pharmacy chains and other retailers in its dust.

When it opened its if rest two WalmartExpress stores in northwest Arkansas in the summer of 2011, Wal-Mart got the retailing world’s attention by introducing a mini-mart version obits Supercenter in an approximately15,000-square-foot box—roughlyhalf the size of most dollar stores. The Express formula for success would focus on the if all-in trip for shoppers in urban and rural locations that lacked a Supercenter[CUSP—July ’11, p. 42].

Wal-Mart Express functions as a c-store hybrid that features a broad selection of grocery items, including fresh produce, dairy and meats, as well as a wide variety of consumables, health and beauty aids, and over-the-counter medicines. Most Express units offer 11,000 to 13,000SKUs, pharmacies, if facial services such as food-stamp acceptance and check cashing, and “site-to-store” pickup availability for online purchases at Some locations are also equipped with gas pumps.

“Wal-Mart Express is a pilot format designed to serve customers who have limited access to Wal-Mart’s everyday low price promise,” says Bill Wertz, director of communications/East for Wal-Mart.“At 12,000 to 15,000 square feet and 20to 25 [employees], Wal-Mart Express is smaller than most Wal-Mart stores, buts designed to provide our customers an everyday-low-price experience in a more convenient format.”

When asked if and how WalmartExpress’ strategy has changed or evolved since its rollout two years ago, Wertz says that strategy “has remained pretty much the same.”

Offering small-format stores allows the company to access parts of the country where customers currently have limited access to Wal-Mart, including food-desert areas that lack healthy and staple food options due to economic distress or location.

“Wal-Mart Express can be part of the solution in urban and rural communities where residents don’t have convenient access to healthy, affordable food, “says Wertz.

Gradual Growth

Six months after the debut of the firstWalmart Express, 10 more opened their doors. Four new Express units opened in the if rest quarter of 2013, and the latest debut was in Coats, N.C., where an approximately 12,000-square-foot store opened in July.

However, Express stores haven’t exactly been popping up on street corners from coast to coast. There are only Wal-Mart Express locations open in three states—North Carolina, Arkansas and Illinois (metro Chicago). In fact, the 10,000-square-foot Express site in Chicago’s West Chatham neighborhood closed one year to the day after it first opened in July 2011.

Considering that there are approximately 149,000 c-stores, 61,000 pharmacies and 20,000 dollar stores nationwide, Wal-Mart Express has a lot of store building to do if it intends to steal serious market share from its competitors.

Its parent company certainly has the muscle—Bentonville, Ark.-based Wal-Mart Stores Inc. enjoyed if scald-year 2013 sales of approximately $466 billion; it has more than 10,600 stores under 69 banners in 27 countries and e-commerce websites in 10 countries. But Wertz says  Wal-Mart has not provided a projection for the number of Express stores it may build annually, despite reports in the media in 2011 that Wal-Mart swathe potential to build approximately 350 Express stores per year.

Wertz says Wal-Mart expects to “test, learn and refine these (Express) stores during this pilot phase. No decision has-been made on a larger-scale program for this format.”

Smaller-Store Playground

Express isn’t the only small-footprint concept that Wal-Mart has rolled outing recent years. The retailing giant alohas approximately 260 Neighborhood Market units across the country, which generally span from 40,000 to 50,000 square feet. The first store opened in 1998, and the latest—a 49,000-square foot unit—debuted in Levittown, N.Y., in July. The company estimates it will have 500 Neighborhood Market locations across the country by fiscal year 2016, yielding more than $10 billion in sales.

Wal-Mart also dabbled in a 15,000-square-foot experimental grocery concept it called Market side in 2008 in four Arizona locations, but all four stores closed by late 2011.

Wal-Mart has pushed the small-format strategy in response to evolving habits of time-strapped consumers who desire simpler, closer shopping solutions and alternatives to big-box retailers. The choice to go small was also a reaction tithe lingering economic downturn and the chance to open and succeed where Wal-Mart’s Supercenters cannot. Also, units with smaller footprints are generally considered less risky because they require a smaller investment, are easier to find and aim for a smaller, more targeted niche of customers.

Earlier this year, Bill Simon, president and CEO of Wal-Mart U.S., said Wal-Mart Stores Inc.’s plans for smaller-format locations would account for 40% obits new store openings in the next fiscal year—which amounts to 95 to 115 small-format stores (including Neighborhood Markets and Wal-Mart Express units) planned for fiscal year 2014. The company added 76 small-format units in fiscal year 2013.

Lately, Wal-Mart’s emphasis on small has paid dividends: In fiscal year 2013, the company reported double-digit positive comparable sales and positive traffic every quarter for Wal-Mart Express stores (with particularly solid growth in prescription drugs), as well as more than a 2% increase in traffic every quarter for Neighborhood Markets across all geographies.

Getting the Industry’s Attention

Wal-Mart’s slow but steady momentum in small-format retailing has made many industry experts sit up and take notice.

“By creating Express stores, Wal-Mart’s able to create a more consumer-centric environment and adapt to the needs and desires of the next generation of consumers. These consumers prefer environments they perceive as being convenient and offering affordably priced products, “says Kevin Coupe, owner/editor of, a retail news blog.

Craig Johnson, president of Customer Growth Partners, a New Canaan, Conn.-based retail trends consulting and research firm, says he’s impressed with the fact that Wal-Mart is “at least exploring this as an opportunity and doing it very slowly and methodically. They’ve been ceding a lot of the convenience trip and the small-basket market to other operators, whether it’s the classic convenience stores, dollar stores or drug stores. Soundless [Wal-Mart] did something, they’ll lose this small-basket trip, which is the fastest-growing shopping mission.”

Wal-Mart Express is strategically positioned to fill a void that Wal-Mart corporate itself created after its Supercenters helped push out independent grocery stores in many markets during the past three decades or so, according to Jim Fisher, founder/president of IMSTCorp., a Houston-based retail sales and fuel forecasting firm. He likens a Supercenter to a mother ship that is supported by carefully positioned satellites in the form of Express stores that collectively make up a powerful network that fills multiple niches—including fill-in shopping—in each market they serve.

“In small markets, [Express stores]can be the fill-in or even primary locations for shoppers,” says Fisher. “The greatest opportunity for Express is in thinner-city and urban areas experiencing renewal and regeneration. The fresh produce and meat with pharmacy concept can do very well in high-density core urban areas that need to be developed.”

Fisher sees Express locations as magnified versions of supersized specialty retail formats that offer fresh produce and packaged meat offerings. “It’s an expansion of the ‘usherette’ concept of an enlarged convenience/specialty store that offers specific categories of fresh foods, like the INGA of the ’70s and ’80s,”says Fisher.

“Wal-Mart Express and Neighborhood Market stores are very similar to convenience stores—they have the same beer, beverages and beef jerky. But they’re different in that they’re heavy up on groceries, not just salty snacks but fresh produce and meats,” says Johnson. “That will bathe big differentiator between Express stores and traditional c-stores, dollar stores and drug stores. Conventional-stores will have shelf-stable foods, butte big improvement Express offers is fresh. You don’t have to drive 15 to 25 minutes to a real grocery store to get good quality, fresh produce and meat.”

However, Johnson says the small format grocery concept is by no means salaam-dunk for Wal-Mart. He cites Tesco’s failed Fresh & Easy stores as a cautionary tale. Five years following the launch of the grocery chain, Tesco is pulling out of the U.S. market and is looking to sell its approximately 200 stores—each about 10,000 square feet in size—in California, Nevada and Arizona.

“The real key for success in small-format grocery is fresh meats and produce,” says Johnson. “You have to do this right and display these products well or it’s a recipe for failure. I’m sure Wal-Mart has been watching these competitors closely over the last few years to avoid the same mistakes.”


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