Are Convenience Stores in Wal-Mart’s Future?
Back in August 2005, Wal-Mart’s CEO Lee Scott said that the company’s Asda division had been losing ground to Tesco in the U.K. because that chain had gone places and identified opportunities that its company had not.
At the time, Mr. Scott said, “A lot of Tesco’s growth has come from the small convenience chain. Andy (Bond, the chief executive of Asda) and his team have got to look and see where the opportunity is for us with that kind of space,” he said.
Well, coming up on 18 months later, Asda has still not developed a convenience store strategy. That makes it all the more strange that a number of reports have suggested that Wal-Mart has hired David Wild, a former international managing director of Tesco, for the expressed purpose of getting into the convenience store channel in the U.S. and cutting off the British chain before it becomes too strong here with its Fresh & Easy format.
While most believe Tesco will provide a challenge to retailers in America, many also suggest that it will be far from a cakewalk.
“I think there are a lot of problems with Tesco’s idea,” an unidentified executive told The Sunday Times. “The name for a start sounds like a chain of chicken ranches. More than that, you have to question if the supply base is there. Tesco is starting from scratch. People underestimate the differences between European and U.S. retailing. The density of the market, land costs, and the cultural and life-style differences are enormous. Nobody in the U.S. really buys ready meals now. Does Tesco think it can change that?”
With the amount of money the company is investing in the U.S., the answer would clearly appear to be yes.
Discussion Questions: How much of a competitive test does Tesco pose for Wal-Mart in the U.S.? Does David Wild’s addition to the Wal-Mart executive team mean the company is getting into the convenience store business? If it is, does it make sense that it would begin its test in the U.S. or the U.K. where Asda is losing ground to Tesco in part because of that chain’s convenience store business?