Wal-Mart Emphasizes Convenience in the U.K.
By George Anderson
Back in August, Wal-Mart’s Lee 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.”
Evidently, Mr. Bond, Andy Bond, has looked into it because Wal-Mart’s Asda subsidiary is opening its first convenience store in Northamption, England, reports The Wall Street Journal.
Asda plans to build six of the convenience stores that will operate under the “Asda Essentials” banner. The units will measure 8,000-square-feet and focus on private label offerings with some iconic brands included in the mix.
“There’s nothing quite like it here in Britain,” said Asda spokesperson Sian Horner.
Richard Hastings of Bernard Sands LLC applauded the move by Asda. “This is definitely the way for them to go in the U.K., although it is unfortunate they didn’t do it sooner. They need to learn how to do it, because it will help them to do better in Europe and other places abroad.”
Wal-Mart, according to the WSJ article, has no plans to open convenience stores in the U.S.
Moderator’s Comment: Is Wal-Mart on the right track with its Asda Essentials venture in the U.K.? Do you expect that the format or something similar
will eventually be imported into the U.S.?
The description of the Asda Essentials stores made us think more of a limited assortment grocery store (Aldi, Save-A-Lot) than a convenience store as defined
by U.S. standards. –
George Anderson – Moderator
One has to think that Wal-Mart will get around to the U.S. C-store business fairly soon. They watched the inefficient supermarket business for awhile, then went after it in a big way. And, the C-store business is very fragmented, with a lot of inefficient, overpriced stores.
If Asda really wants to take a leaf out of Tesco’s book, Andy Bond should take more notice of the consumer backlash that is much like what is going on with Wal-Mart in the US. People are not really loving Tesco as much as they used to, especially now that their convenience store format is in every town while their superstores are on every side of the edge of every town. Although I’m sure both stores would say competition is good for the soul, I think more and more consumers are getting more and more cheesed off so this is not really the best of times for them. And not likely to get better, especially as there is likely to be a big official investigation into market share taking all formats into account.
Wal-Mart has a sense of c-store business with its McLane distributor purchase a while back. Don’t think Wal-Mart will not be in this business soon.
Isn’t Tesco opening its first convenience store format in Washington State, U.S., as well?
Supercenter, Neighborhood, Tesco c-store, under the Wal-Mart distribution, and inventory processing programs will surely wake up many types of grocer and food outlets.
Is it time to prepare with some understanding on how to keep current, and gain new shoppers? It will not be pricing to keep the shopping base. Hmmmmm.
You make a good point, as always, Al. Our research seems to indicate that the c-store organizations have adopted high-price convenience as a profit and differentiation strategy; whether this has been driven by their embedded inefficiency is the question. Off the record interviews suggest they couldn’t seem to overcome their inefficiencies so adopted high-prices as a strategy.
WM has more obstacles to overcome than other players, including its darkening reputation (which is more pronounced in UK than the US). But given the c-stores’ inefficiencies, it can easily make a splash in the UK (or anywhere else), convincing large segments of the consumer market that it has low prices, good quality, and good selection, just as it has convinced consumers of these myths all over the US. What a great insight Lincoln had when he said, “You may fool all the people some of the time, you can even fool some of the people all of the time, but you cannot fool all of the people all the time.” Either WM will gradually adjust its course (not likely, since its entire business model depends on the shaping of perceptions, according to our data), or it will gradually lose power. The UK c-store experiment will not likely alter these fundamental issues, which will be, in my view, those that shape WM more than any other factor. In a way, it doesn’t matter in the long-term what WM does or doesn’t do, given the force of these underlying dynamics. Many of you have disagreed with me on these topics, but I’m only reporting where the data seems to point.
Given the shopping environment in the UK, the C-store orientation makes sense for Wal-Mart. Tesco and others in the UK have done a great job of offering fresh prepared meals. Assuming that Wal-Mart can develop the appropriate relationships and supply chain (which I believe that they can), then this format could be very successful. Also, the UK experiment can assist Wal-Mart in perfecting their “Grab it & Go” sections in the Neighborhood Market. Finally, I don’t think it is a coincidence that Wal-Mart is going after a very successful Tesco format in the UK, given Tesco’s recent announcement that they intend to enter the US market in California using a C-store format. Some of Wal-Mart’s plan could be perceived as a defensive strategy to both occupy and learn from this Tesco perfected format.
I have long held the view that Wal-Mart needs to be in C-store retailing in the U.S. It’s the only format in which they don’t operate. I expected to see it years ago when they acquired the McLane Company, but it never materialized.
Of course, the focus has been on the big boxes and even the Neighborhood Markets have not expanded to any significant degree. I am sure Wal-Mart has a team at Bentonville or elsewhere exploring the potential of C-stores in the U.S. — they are too smart not to!
It will be interesting to see what they finally create. Tesco’s concept of the C-store in the UK is not your corner 7-11. It is more like a small High Street supermarket and a concept that works for the urban shopper. It’s not about beer and butts. It’s about prepared foods, lots of private label and extending the Tesco brand in a smaller footprint.
Wal-Mart can source at very low cost, which is a major plus for the new convenience concept. They key is whether Wal-Mart is willing to build convenience chain organization, systems, and procedures, as well as a distinct marketing plan. Opportunities for smaller footprint locations are infinitely greater than opportunities for traditionally-sized Wal-Mart stores, due to very conservative UK land-use rules.
Small-format convenience store locations (such as Tesco’s) is the way to go in the UK, and in most of Europe. Asda’s biggest challenge now will be to secure good or even decent locations, in a timely manner, which is almost impossible in the UK. In the meantime, I suppose Tesco will launch a counteroffensive.
As to importing the format into the US, we heard a few weeks ago that Tesco is planning on opening its first store in California, much like the formats it already manages at home. The jury’s still out as to whether it will be as successful as in the UK.