In July 2011, Walmart opened an Express store to much fanfare in Chicago. This was the start of a push that small food store owners operating in urban neighborhoods dreaded. It was also exactly what Wall Street analysts had ordered.
With that as a backdrop, I found it interesting that some seem ready to declare Walmart's urban venture a failure because it closed the Chicago Express store a year after it opened.
The chain said it made the decision because the store was located near one of its Supercenters and wasn't really needed. In essence, it didn't see the point, in an area where there wasn't a great deal of competition, to go up against itself. Seemed reasonable here, but maybe there was something I wasn't considering.
In fact, something that Leon Nicholas, director of insights at Kantar Retail, told Crain's Chicago Business got me thinking.
"The supercenter was supposed to be the place for once-a-month big trips, and the Express would be for convenient fill-in trips during the week," Mr. Nicholas told Crain's. "They weren't supposed to cannibalize each other, so the fact that it didn't work indicates the strategy was wrong."
Anyway, it could very well turn out that Walmart's various smaller store efforts fail in the long run, but then I remembered that just this past May, U.S. CEO Bill Simon told attendees at a Morgan Stanley conference that the Express stores were turning a profit inside of 12 months.
Of course, it's entirely possible that the strategy was wrong for the Chicago location, but may work perfectly well elsewhere. Walmart is testing Express stores in both urban and rural locations, the latter closer to the company's heritage, so what if it turns out that the concept is made more for the boondocks than Broadway?
Another sign of potential trouble is that Walmart is not opening Express stores all over the place.
Yes, with profitable stores it isn't hard to make the leap that Walmart might open an Express on every corner not currently covered by Walgreens, CVS or 7-Eleven, but no one associated with the company actually said that is the plan, to my knowledge.
What Mr. Simon said in May was that Walmart had more tinkering to do first.
"We're going to work on the construction costs and distribution costs — already profitable, but we want to get those up to the 'fleet' average or hopefully beyond that," he said. "We're also going to work on density — how many can you build in a market and to what point do you have to get to for this to matter on our large base?"