iStock.com/J. Michael Jones
May 30, 2024
Is Bigger Better for Walmart’s Neighborhood Markets?
Walmart is testing two Neighborhood Market locations that span 57,000 square feet of selling space, about 17,000 square feet larger than average. The new prototype also adds pickup and delivery space.
First opened in 1998, Neighborhood Markets had 673 locations in the U.S. as of April 30, 2024, and the concept remains Walmart’s smallest concept even at the expanded size. In the U.S., Walmart also has 3,559 Walmart Supercenters averaging 178,000 square feet and 357 Walmart Discount stores at 105,000 square feet on average.
“Since 1998, Walmart customers have looked to the convenience of Neighborhood Markets to get what they need,” said Kyle Kinnard, SVP of Neighborhood Markets at Walmart U.S., in a blog entry. “A smaller size meets a stellar assortment, creating a store that places the community at its very center. And that’s not changing.”
Kinnard said the expanded space at the two stores in Santa Rosa Beach, Florida, and the Vine City neighborhood of Atlanta “will allow us to sharpen our focus on value, speed and convenience.”
Around value, the larger layout will enable Neighborhood Markets to offer broader assortments, with the biggest gains coming in Walmart’s fresh departments, including bakery, produce, meat, and dairy. An expanded service deli will offer additional hot case options.
“We work hard to maintain price leadership,” said Kinnard. “So, whether customers are looking for last-minute necessities for the beach or a meal for the family, they can be confident they’re getting their items at the Every Day Low Price they can count on at Walmart.”
Supporting speed, the updated stores feature wider aisles to ease navigation for in-store shoppers, while the additional pickup and delivery space quickens the purchase path for online shoppers. Kinnard said, “The larger space includes dedicated room for refrigerated goods, so associates can keep orders moving at an even faster pace.”
Finally, the two new stores aim to support convenience by adding a Health Services Room to their pharmacies to provide customers with privacy for vaccinations and consultations as well as a Mother’s Room for nursing moms. The new pickup spots also add convenience.
The initiative follows Walmart’s announcement in January that it will add more than 150 supercenters and Neighborhood Markets in the U.S. over the next five years. Kinnard said Walmart is taking a “thoughtful” approach to remodeling, converting, and building new Neighborhood Market stores.
The larger locations promise to help Neighborhood Markets compete better with conventional grocers that have been reconfigured in recent years to support pickup and delivery. Kroger’s average store size is 66,000 square feet. Publix’s average store size ranges from 45,000 to 50,000 square feet, although it recently began testing an experiential store prototype at around 56,000 square feet featuring additional hot food offerings, upstairs and outdoor seating, and a bar.
Discussion Questions
Would a larger format make Neighborhood Markets a more formidable competitor in the grocery space?
Do you see more benefits than drawbacks of a larger format?
How do Neighborhood Markets help Walmart address the grocery category?
Poll
Loading …BrainTrust
David Biernbaum
Founder & President, David Biernbaum & Associates LLC
Cathy Hotka
Principal, Cathy Hotka & Associates
Brian Numainville
Principal, The Feedback Group
Recent Discussions
More Discussions
Retail Experts on Holiday 2025: Consumer and Retailer Confusion, and AI Expectations
Retail experts suggested private label is here to stay, AI is no mere hype machine, and…Are Restaurants Shrinking the Thanksgiving Opportunity for Grocers?
Restaurants could be stealing some valuable spend from grocers traditionally affiliated with Thanksgiving dinner. Do you…Would Recording In-Store Associates Help as a Training Tool?
Ethosphere is banking on AI-driven recordings of in-store associate practices as the next big thing in…
Walmart has sometimes struggled with their smaller format stores but, fundamentally, they remain a good idea as they allow Walmart to reach communities that will not support a much larger traditional Walmart outlet. Moreover, the way some Americans shop for essentials is changing with more top-up shopping and a greater desire for localness. Neighborhood Markets should fit this need, and they allow Walmart to more effectively counter the expansion plans of players like Aldi. The latest formats are slightly larger than the previous incarnation, creating a better shopping experience. But, most importantly, they allow Walmart to use the stores for online fulfillment and pickup, so they’re a central part of the omnichannel ecosystem the company is building.
57K gsf is not a “neighborhood market”. [full stop]
They probably should rename these as Walmart Markets. The larger format will create a one-stop shop so that customer won’t go complete their shops elsewhere. They will serve as fulfillment centers to better serve their customers as well. One more point- these new store will use the same colors, signage and lettering as the bigger Supercenter stores, tying both together and recognizable to both customers.
I agree it’s partly semantics; but’s it’s also…reality: how big can “small” get and still be small. I think we just answered that: not this big. (Of course underlying this is the question of whether/not small was ever a goal W/M should be pursuing. As you might guess from how I’ve phrased this, I wasn’t a fan.)
It’s all about the SKUs. With more space, Walmart can add more variety and create a compelling shopping experience.
A larger format for Walmart’s Neighborhood Markets might succeed in certain types of markets, but not in major metro markets where bigger isn’t better without above average quality, and that isn’t what NM’s are all about.
Otherwise, trends right now, and especially post-Pandemic, are moving away from monster-size stores, gigantic parking lots with long walks to the building, overcrowded, germ-traveling environment’s, mediocre prepared foods, and long lines at check-outs whether traditional or self-serve. Db
Enlarging the Neighborhood Markets format can help Walmart fortify its grocery leadership with a superior store experience.
The new layout allows fast, easy navigation and the assortment expands with more in-demand perimeter categories. These changes may entice customers to visit more frequently throughout the week for fresh food.
In addition, customers will appreciate thoughtful touches like the privacy of the Health Services Room and the Mother’s Room.
Yes, larger footprint stores will definitely help Walmart Neighborhood Markets, so long as they utilize this space to address some of their major weaknesses in the CPG market. This means increasing inventory to avoid out of stocks, diversifying selection for the customer, offering better pricing in each market. By enhancing the product mix, price, and availability, Walmart will address some of their top retail weaknesses as they expand their footprint in their Neighborhood Market stores.
First, I must admit that I have not yet visited either location, but I can imagine that the space is being utilized differently. With a focus on convenience, efficiency, and health services, the extra space is not necessarily simply expanding assortment. Accommodating pick-up in store and delivery, improving health consultations and vaccinations, and expanded deli (grab and go) offerings ALL require space. This is still 40%+ smaller than conventional Walmart footprints and are indeed “Neighborhood Markets.”
I’ve been to several Neighborhood Markets and I like the size and feel of them. I do think this strategy is solid and will be successful for Walmart, however, bigger store size doesn’t necessarily translate to better. We’ve all been to very large stores and have had horrible shopping experiences. Understanding the dynamics of a ‘neighborhood’ and providing relevant merchandise with smart assortments at fair prices is how stores win. Walmart has an incredible track record of executing these strategies at very large scale and I have no doubt they will succeed with these smaller concept stores.
From Neighborhood Market to supercenter, Walmart has developed a range of footprints designed to serve different communities. That just makes abundant sense. Depending on the size of the market and the demographics, Walmart can drop in the appropriate size store and serve the community. Sounds like a pretty straightforward strategy about regionalizing and localizing store size and content. The cookie cutter days of physical retail are gone. Efficiency is paramount. So localizing is paramount. We’ve heard the same from Macy’s, and Nordstrom, and……
Jeff, This isn’t the great new thing from Walmart. As you say, “Walmart has developed a range of footprints designed to serve different communities. That just makes abundant sense.”
The increase in footprint is functionally focused on adding more perishables and deli items, wider aisles, privacy spaces in the pharmacy, and better flow for order pickup and deliveries. These are solid items to improve the customer shopping experience. The new store size remains differentiated from Walmart’s Discount or Supercenter stores while being more comparable to conventional grocery stores. Walmart’s Neighborhood store may be a less appropriate moniker, but it fits within a healthy store portfolio for the company.
Walmart has always had varying sizes of different formats so this is simply the continued evolution of the format to meet perceived shopper needs. With Neighborhood Markets, the original play was to fit the stores into markets where a supercenter didn’t work. This size unit allows for another range of departments in services in areas where the footprint works.
Smaller space grocery stores have proven to be difficult to sustain. Look no further than the U.K’s Tesco’s small store incursion into the U.S. market (“Fresh and Easy”) which ended up in bankruptcy. There is market share to be had with smaller store formats, however a large big box merchant like Wal Mart may or may not have a formula for success here. Much of their success is based on assortment and pricing power-a smaller format is a different animal.
That is not to say this will not work, simply that it is a tough mountain to climb. Good luck to them.
Walmart’s move to expand its Neighborhood Markets to 57,000 square feet is a smart shift. Customers today want more variety, quicker services, and added convenience. By making stores bigger, Walmart can offer a better range of products, fresher food, and improved pickup and delivery options. Plus, adding things like health services and nursing rooms shows they’re really thinking about what communities need. It’s clear Walmart knows the retail landscape is changing and is making these changes to stay ahead and keep customers happy.
Will the larger format succeed? That depends on the marketplace — who the shoppers are, who the competitors are and the size of their stores. Mainly, it would have to be determined if shoppers in a certain marketplace want a larger Neighborhood Market.
The biggest gain I see here is for store pickup and delivery. Given the steady rise in online shopping, especially for grocery, it’s smart for Walmart to position Neighborhood Markets to tap into this growing revenue stream.
Customers will appreciate the Health Services Room and Mothers Room but it’s unlikely these additions will have a meaningful impact, if any, on revenue.
The real space to watch with this new prototype is Fresh. Its curious to see Walmart adding much more space here given it’s a business where they’ve long had room for improvement in terms of food being, well…fresh, particularly in produce. Unless new processes in supply chain or inventory life cycle management come with this new format to keep Fresh…fresh, then it’s unclear what Walmart plans to accomplish.
Still, being unclear on what Walmart plans to accomplish does not mean they won’t accomplish something…just means it’s unclear. Knowing this retailer, there are several more business objectives behind this larger format. It will be worth watching Neighborhood Markets to see if initiatives here show up elsewhere across the chain at some point.
The concern with ever-growing NHMs is that Walmart is getting further away from its focus on groceries, with ever more non-consumables taking up shelf space. Simply put, there is no need for motor oil to be sold in a small format Walmart store – thus, if their merchants exercise restraint and focus on high-volume, top-selling SKUs only, then the stores should naturally max out at a certain size.