Anything other than rolling out a new format, after testing, would be inconsistent with W-M’s desire to corral more upscale consumers, to include upgrading purchases of some of the present middle income shoppers.

W-M is looking for new growth, and it isn’t coming from current outlets.

The break up of Wal-Mart is somewhat of a chuckle. If they did, who do you think would supply Sam’s Club? Secondly, Sam’s Club business is a minuscule dollar amount to total Wal-Mart business. Someone is right on target. Hmmmmm

I have thought recently that the industry has to at least give Wal-Mart management credit for acknowledging what we have always perceived as some of their shortfalls. Issues like cluttered stores, customer service, assortment, and for the sake of argument cultural issues that seem to make them a poor option to Target in many shoppers minds. Having said that, I think we need to allow management to implement solutions to those acknowledged opportunities.

If they have announced plans to reinvest before expanding, we need to take that at face value.

At the same time, I see no contradiction in continuing to test new formats and fine tuning existing vehicles. To break up the company seems to be a radical option to satisfy an audience that does not seem to be the focus of Lee Scott and his team.

I think it is fair to say that as wonderful as Wal-Mart is at merchandising around the position of low, low prices, they have been continually frustrated at their attempts to expand into other marketing niches, particularly more upscale.

But the problems they currently have with growing their overall business at the same astonishing rate going forward as they have in the past, are problems most retailers can only dream about. With that said, new formats and customer propositions that are not consistent with their low price imagery, whether it be Hispanic or otherwise, will likely be less than glorious success stories.

Alternatively, if new Wal-Mart formats help them penetrate price-driven new markets that are not conducive to Supercenters, without cannibalizing their existing sales in their base formats, you may see a new wave of aggressive capital expenditure to support these new facilities.

I have no reason to believe this to be true. WM’s capex press release emphasizes continued Supercenter growth and expansion. Comp store sales growth has been and will be generated by the expansion of product categories (food and gas). No pressure has been generated on WM to improve sales per square foot, or per unit profitability. Smaller formats usually deliver against two distinct value propositions. At a high level, they allow location expansion into areas with insufficient demand to support a full line store. Careful analysis of demographic and lifestyle data in the area can be used to intelligently edit the assortment. Alternatively, the assortment can simply be edited for depth, giving the customer fewer choices within a product offering. Wal-Mart’s internal branding and assortment do not, at the moment, lend themselves to creating distinct formats, with the possible exception of the lifestyle segments they have already identified. However, my understanding of those segments is that they are, in general, large enough to support full line locations. This analyst may be privy to inside information.… Read more »

As a resident of Plano, TX, my wife and I have shopped at the standard Wal-Mart, the Wal-Mart Supercenter, and the Wal-Mart Neighborhood Grocery Store. Of late, we have been shopping at what is being called “the Wal-Mart experiment.” This store, located in one of the highest income areas of Plano (Willow Bend), is across the street from Willow Bend Mall – which houses Neiman-Marcus, Saks Fifth Avenue, and Macy’s, to name a few. The fact that Wal-Mart chose to open the store in that area was a shock. The fact that the “experiment” is doing well, is an even bigger shock. The Grocery portion of the store carries Gourmet, Organic, and Major Name Brands, plus it boasts a Sushi Bar and Coffee Shop. The lighting and flooring is more what you would expect to find at an upscale store, not a Wal-Mart. Personally, being a regular shopper at “the experiment,” I can only hope that Wal-Mart continues down this path. We have many friends and associates who never would have thought to shop at… Read more »

You can’t be everything to everyone and you can’t fight everyone. Wal-Mart should consider focusing on what they do best and make it better. The USA doesn’t automatically accept every retail concept from every country. Americans like to be American. They will choose in their time. Focus on who the Wal-Mart consumer is, what they want to buy by demographics and give it to them at a good price. Wal-Mart is not invincible and if they begin to believe that, things could get ugly.

Wal-Mart would be well served to take advantage of the available space in the marketplace. Many shuttered grocery stores could be converted into Wal-Mart “community stores.” Small Wal-Mart’s are easily possible with their sophisticated distribution systems.

Sears was able to open hundreds of small stores out in the boonies that offered very limited merchandise in store, but delivery of anything in the catalogue in a few days. Wal-Mart could easily find existing vacant locations and develop a system to make it work.

Wal-Mart and their in-store media partner PRN have been experimenting with new content strategies along with display configurations and design in their new location in Plano, TX. The results relevant to these changes and updates are a significant improvement over the suspended television sets throughout the store. Last May, John Fleming, Wal-Mart’s Executive VP and Chief Marketing Officer, declared, “The most important media channel that we have is our store.” The latest design and execution seem to reflect Mr. Fleming’s statement. Wal-Mart will continue to improve and evolve their in-store media implementation based upon lesson’s learned. Wal-Mart continues to remain bullish on the future of the whole “store-as-media” concept, evidenced by Fleming’s statement that “while the company continues to value and rethink its advertising mix in other traditional channels, ‘our primary focus is using the store as a media channel and figuring out ways to add to the customer experience but give them the information that they need to make good product decisions.'” In furtherance of this remark, Wal-Mart Mexico will deploy a multi-channel digital… Read more »

Michael Howatt’s comment is both hilarious and right on target. As for testing new formats being in Wal-Mart’s game plan — who is surprised by that? The implication that it might be a radically new format and a much broader launch than normal Wal-Mart testing is intriguing however. One has to think they are watching the expansion of smaller formats in the U.S. — particularly TESCO and the DG Markets? Linking that to the Hispanic trend and Wal-Mart’s traditional appeal to that segment is provocative thinking to say the least.

The route Wal-Mart has taken regarding formats has always been predicated on ROI. The Neighborhood Markets, while considered successful in some ways, still are not producing close to the supercenter format, thus, their growth has been limited. Wal-Mart decided to put their time, effort and $ in the supercenter concept. I would find it shocking for them to move too far away from what they are doing now and I expect any format revisions to be correlated to market demographics (as in the Plano store). I think they should give thought to the Fresh Market type store, smaller market but with higher margins and with their logistical capability, they could have immediate impact in the more upscale markets, and with a better ROI than the Neighborhood Markets.

I remember several years ago marvelling at MVI’s growth map for Wal-Mart displaying a billion dollar market with a variety of formats spaced to serve every 100,000 people — all built around a central core distribution center; spokes of a wheel in every direction. It was amazing to me at the time. Several comments have focused on the Neighborhood Market format not being what they’d hoped. I think the learning curve may have been longer than they’d hoped, but I still believe they can do it more efficiently and with greater mass than any of the national grocery chains…it may just be a matter of time. Along with that learning curve and building out that format, comes the recognition of the opportunity area that a Bodega-like, or fresh format, could fill. Both take time… Remember when retailers made as much from buying as they did selling? Wal-Mart is the one retailer with the power to do that again. Maybe not in the way grocery did years ago, but definitely by dominating markets at every level.

In my view, Wal-Mart will begin to expand the Neighborhood Market format rapidly in the next couple of years, as well as begin to develop a “dollar-killer” format. They need to get into this format since it represents their biggest threat in terms of stealing their core customer base. Plus, a retail format in this segment would allow them more flexibility in developing sites since they would not need as much real estate, plus the development costs would be much lower, allowing them to open sites much faster thus improving their ROI. Additionally, there’s every reason to believe Wal-Mart will one day spin off Sam’s as a separate company to help drive their stock price. Sam’s has been a drag on the earnings side for years compared to the Discount and Supercenter side of the business.

Mr. Walsh is correct — WM should capitalize on its Neighborhood Market concept if they find it is working — especially if they can find a way into areas that may not support a supercenter or are to close to a supercenter but still can support a smaller format. While it is true that you don’t want to cannibalize your own customer base, the smaller store concept really shouldn’t do this if locale is correct, especially in low penetration areas such as more urban settings. I agree that breaking the company apart is absurd and not likely in their possible potentials, nor should it be. You don’t need to fix what is not broken and breaking the company is a painfully poor short term view that would afford some other investor group great return at the expense of the WM group.

It’s hard for a single American retail organization to successfully operate multiple formats simultaneously. Major supermarkets don’t also run convenience stores, for example. McDonald’s couldn’t run Boston Market successfully. Wendy’s was forced to spin off Tim Horton’s. Federated has only 2 formats, Bloomingdale’s and Macy’s, instead of a dozen different department store brands. Aeropostale did a lot better after its spin-off from Macy’s. Saks sold Bergner’s, Boston Store, Carson Pirie Scott, Herberger’s, Parisian, and Younkers. Wal-Mart’s home runs are its conventional stores and Sam’s Club. Making a major commitment to a third format would certainly lead to calls for a spin-off or two.

I think Ms. Genereux should go to Sam Walton’s grave and tell him about her proposed break-up. However, she better not get too close (remember the end of “Carrie”). Who’s to say that the new format doesn’t fit some white space Wal-Mart has identified?

While neither the prediction on the new format nor the recommendation to break up the company are likely to happen, I find the second to be quite shocking in its absurdity.

Wal-Mart’s International expansion is a growth strategy. ASDA, Wal-Mart de Mexico and Wal-Mart Canada are either the largest, or second largest retailers in their markets. Selling off a whole retail market such as the UK does not bolster shareholder value, it diminishes it.

Wal-Mart may well tinker with new formats as they have done many times over the years. Some of the test formats are unsuccessful (early 90’s venture into a “Tractor Supply” concept store), others are much more so (HyperMart concept test led to Supercenters).

The relatively youthful Neighborhood Market has plenty of room to grow in the US and expanding that model which they have made profitable has a large upside.

I believe Walsh, London & Dennis are on the right track.

Everything old is new again. Wal-Mart started out in small stores serving small markets and opportunity remains underserved in smaller “community” stores which is the idea behind Neighborhood Markets.

The Sears example by Ed Dennis is a good one, which I would add Walgreens as further evidence; planning 7000 stores by 2010. Smart density planning is about location, location, location.

Serving up the basics plus a bit more without significantly cannibalizing existing business is a good plan. Providing convenience and accessibility for the customer to maximize opportunities to visit each week.

Gregg London mentions the much-debated upscale experiment. The Willow Bend store, juxtaposed with high-end retailers, designed with a bit more style, is precisely the formula required.

You fish where the fish are and you bait with what they’re biting.

The Cadillac Escalade is mostly a Chevy Suburban underneath, but General Motors does a decent job of satisfying both consumers….

Wal-Mart’s supercenter slowdown is inherent with any retail concept as a rollout reaches saturation. While more care and energy will be needed in the development of more superstores, more are sure to come. A small store concept makes sense, viewed in the context of the dollar store’s success. The concept will fit into smaller towns not large enough for a Wal-Mart and as fill-ins in urban trade areas. If they use existing buildings they could be in cheaper than their ground up neighborhood market. I smell a winner.

One has to wonder about the Neighborhood Stores format. Not knowing their landed-cost(s) of goods, the P&L shows about an indicated going-in gross (GIG) of about 24% overall. I would guess the GIG on groceries is closer to 19.5-20.5%. Even without advertising expense and ad markdowns that is a slim number to work with.

The Supercenters can handle these food GIGs when you can get a profitable mix on your “other” sales.

The Neighborhood Stores that I have seen don’t appear to have more GM and “other” sales to get a good mix. I think the Aldis and Save-A-Lots have low-priced control brands and more and more GM and are less than 33% the size.

In short, I don’t think they can get the growth and grosses out of standalone food operations.