Walmart Opens Itty-Bitty College Store
Walmart in mid-January opened a 3,500-square-foot full-service pharmacy and general merchandise store on the University of Arkansas campus in Fayetteville.
Called Walmart on Campus, the store replaces the 26-year-old Pat Walker Health Center Pharmacy, which closed in December. The store is open to both UA students and other residents.
Advertising Age, which first reported on the opening nationally in December, said Walmart on Campus appeared to be part of Walmart’s test of smaller-format stores. It noted that Walmart U.S. CEO Bill Simon told investors in October that Walmart planned to open 30 to 40 small and medium-format stores of varying sizes in 2011, partly to provide it with more flexibility in exploring urban markets. The medium size of these stores was said to be 30,000- to 60,000-square-foot range, including the retailer’s existing Neighborhood Market format. He also said a healthy pharmacy business had made Neighborhood Market more profitable.
Of the smallest stores, Mr. Simon said, "You won’t see a material amount of capital spent here, but we will be building these stores to learn from them."
Beyond its own experience, he said, Walmart intends to learn from competitors with small stores in overseas markets.
"There are hundreds and hundreds if not thousands of opportunities in the U.S. for small formats," Mr. Simon said.
Advertising Age speculated that if Walmart found a 10,000-square-foot concept that worked, it could easily acquire a drug chain such as Rite Aid to ease its entry into urban markets.
Walmart has not spoken to the business trade on the project. But comments to the college community appeared in a statement first announcing the opening.
"We are excited about the opportunity to partner with the university and to bring a great place for the students and the surrounding community to purchase prescriptions and other items," Keith Keltner, associate marketing manager with Walmart, said in the statement. "This is Walmart’s first store of its kind. Our full-service pharmacy that accepts a wide variety of insurance plans will be a great way to help the campus and neighborhood community save money with programs like $4 generic prescriptions. I think it’s a really good fit."
Discussion Questions
Discussion Questions: What do you make of the learning opportunity for Walmart in its “on Campus” store? What opportunities and challenges do you see for Walmart as it opens smaller format stores?
This isn’t just another small store but a college campus store. With all the new dormitory and housing projects underway at a number of college campuses, many of which are more oriented towards independent lifestyles, this opens up many opportunties. It also creates new challenges. I know of retailers who are learning to crack the code on how to operate small college stores successfuly with regards to both location and format.
For chain stores like Walmart, it’s more difficult because of their cookie-cutter mentality and inability to cater to local tastes. I feel independents are best suited to operate small stores with unique demographics. Otherwise you are just another plain vanilla convenience store
First of all, let’s take the company at its word — this is clearly an experiment.
Now, if the experiment works it could be modeled in a number of venues including (but not limited to) other universities; retirement communities; urban neighborhoods; very small rural community “downtowns”; and office parks.
When you are as big as Walmart you have to keep testing formats. You don’t have much choice.
Not only do large footprint retailers have issues in urban markets, but also consider (1) the increasing impact of multichannel (i.e. what’s actually stocked in the store)and (2) an aging population where physical convenience (size of store, size of parking lot, and driving distance) is important.
Flexibility in size, location, and assortment of the physical footprint will be critical for bricks and clicks retailers — more innovation from Walmart and others is inevitable.
Smart to test the concept, and the Walmart brand will link the sales opportunities.
The merchandising mix, pricing points, associate levels (management and hourly), and distribution hurdles all will be outside of Walmart’s core competency at this stage. Store rents per square foot are going to impact this play, as well. That doesn’t mean that Walmart can’t or won’t learn from it. The volumes (revenue per square foot) have will to pretty substantial in order to keep Walmart’s interest for a large number of stores around the country.
The e-commerce investment of making the delivery might have a stronger upside for attention of Walmart. There is a strong group of entrepreneurs who can play this “C-Store” approach better than Walmart.
This is Walmart’s research lab; much like their partnership in the RFID lab. The caution will be in the analysis of the demographics, since these are college kids.
Given the saturation of Walmart’s standard format, they are right to experiment with alternative formats and demographics. College campuses are an interesting choice and pose some real challenges–transient population, need for micro-merchandising, general anti-big business bias from faculty and students (who do you think carries most of the placards at an anti Walmart rally?).
The other big challenge is learning how to succeed with a much reduced ability to leverage payroll and capital vis a vis the big box. I agree with David that this is where the local independent actually has an advantage. In focusing strictly on the local market, they can typically present better assortments with higher margins to cover a higher expense base.
If Walmart thinks they can come in with generic assortments and win by low price alone, my sense is that they will not be happy with the results.
If Walmart were opening small and smaller stores with any kind of scale, they could learn a lot about the wants and needs of a new breed of shoppers that could eventually re-energize the supercenter format, which is where they excel in efficiencies and scale.
I’m not sure one tiny store on a local college campus gives them much more than goodwill in the community. The other smaller store formats they plan to test are still quite large…are they about the size of Rite-Aid stores?
That rumor about Walmart potentially buying Rite-Aid stores is the topic of a lot of buzz. Wait and see. We know Walmart is not averse to shaking the trees hard and fast!
As promising as this sounds, Walmart is decades behind other retailers when it comes to small-format success. The college bookstore chains don’t have anything to worry about…yet.
If the great retailers of the past were like Walmart, they would still be around today (that list includes Sears and Kmart). Walmart has over a dozen initiatives on exploring ways to be the retailer of the future. These include demographic, geographic, and technological.
Walmart understands what most retailers don’t or won’t. Retailing as we know it will be unrecognizable in 15 years. Retail will change in the next 15 to 20 years as much if not more than it has changed in the last 50 years.
Walmart does not see itself as a mass merchant. Walmart is not wedded to its brick and mortar structures. Walmart is a retailer that does not assume its customers will continue to flock to their stores. Walmart asks the question, “Where will we find our customers?” And then they go there.
If there is business on college campuses, Walmart will be there. If there is business in China, Walmart will be there. If there is business online, Walmart will be there. And if they find that their current stores no longer meet the shoppers’ needs, they will change them or close them.
I am seeing a couple of conflicting points with Walmart’s entry on the college campus. First, they will be competing in some ways with the college bookstores that sell more than books. I am sure they looked at this when negotiating with the University of Arkansas. Yet, UA is the home state school where Walmart’s influence might be greater than in other states.
Next issue I see is Walmart has a big box mentality. That is difficult to convert to a small footprint. Just because it is Walmart does not mean it will work and be successful.
On the other side of the issue, I see this as a means to have an availability of services at a lower coat to the students. There is enough “good” in this venture to pursue it and see where it takes them in the boardroom when a major decision will need to be made.
I think testing this concept makes a lot of sense. Many of the items that are sold in college stores, whether on campus or just off, are right up Walmart’s alley.
The one challenge, I believe, is local customization. That’s a much bigger factor in these stores than in Walmart’s larger stores. Still that could be overcome. Many college-logo products come from a relatively narrow range of vendors.
The one category I can’t see Walmart getting into is college texts. To play this out, what could emerge, if this were to work and Walmart were to pursue the strategy, is a split between the textbook business and the general merchandise business. This would open the possibility of college bookstores coming under extreme pressure as they would no longer have the benefit of the volume and margins from the general merchandise side of the business.
As someone who has done extensive work with college stores, I can tell you that this test is a big deal to them.
As book revenue has dropped, these stores are trying to reinvent themselves, and are looking to some of the very products that Walmart offers at lower prices and lower margins.
I’m sure there are a lot of folks in the college stores that hope the experiment is failure.
Retail is all about filling peoples’ needs and desires. That requires getting the products and services together with the people. The only real question is how far do you go to get the stuff to the people, vs. getting the people to come to the stuff? For most of the first part of the past 100 years, self-service retail (massively efficient all the way around) was to tell the shoppers to get their butts over here where the stuff is.
With further maturation of self-service, smart retailers moved more and more to reach the shopper, rather than expecting the shopper to reach them. Hence, the small store movement, well exemplified by C-stores, but including a lot of other players as well. The advent of online retailing has started a sea change in the reach department. But without teleportation, online has a difficulty dealing with the other massive societal movement: immediacy.
Much of the small store movement is driven by the issue of immediacy, and is complemented by the fact that even in a Walmart supercenter, ONE is the most frequent number of items purchased (this is true of any store in the world.) So why do so many people come into a store and buy only one or two items? BECAUSE THEY NEED IT RIGHT NOW! Self service retailers have steadily ignored this fact, focusing their attention instead on the big basket, stock-up shopper. Everything to build the big basket, and to hell with those shoppers wanting only one or a few things, even though that is half of all shopping trips, and a third of the dollars in many stores.
So the small store movement is all about reaching the shopper, not expecting them to reach you, and immediacy is a dominant motif. This is matched by the shrinking role of the home pantry, instead very local stores are becoming communal pantries. Why stock stuff at home when you can get anything you need, fresh and right now, very nearby? Reach, immediacy and the communal pantry are driving the small store movement, Walmart included.
With a child in college and the most convenient store to the campus already being Walmart, it is an inevitable visit on back to school weekend and on weekend visits. When visiting their store on back to school weekend over several years, I was astonished (shocked, maybe more like it) at how the store was totally geared up for that event. I am not talking a back to school ‘section’. I am talking the entire store, and I mean the entire store, was ready and merchandising was laser focused on the event about to occur – thousands of students returning. Does this mean that for us as consumers they won the back to school top spot? No. It means that they won it for the overwhelming majority and I do mean overwhelming majority.
Does this mean that they can transfer this type of merchandising skill and focus to a smaller store? It might not guarantee it, but it gives a very strong indication that they absolutely have discovered that they likely could. They have the opportunity and the ability to capture this market at lightening speed. If our child’s campus is any indication, there is a vacuum waiting to be filled.
Discussing our experience from the Walmart closest to our campus, I asked a few at that time what it was like at other college and university areas (some much bigger than ours). Based on our experience, I wasn’t surprised it was the same.
According to the US Department of Education, there are over 4,800 colleges and universities with over 18 million students as of 2007. Do you honestly think that Walmart couldn’t wind up successfully with a store of this size on over 3,000 of them in just a couple years? Think again. I am sure they know the numbers.
Walmart is about the exploitation and domination of every market possible. This is only one. While everyone else is hand wringing, Walmart is looking at dozens upon dozens of options for its attack. If it’s not Rite Aid locations, they’ll find another venue if they think it will work. Considering we already know about this, they probably already have the plan completed.
Walmart has a culture: price oriented mass merchandising. The further from that culture that they wander, the quicker will be their demise. As Glinda told Dorothy “Follow the yellow brick road.”
This sounds like a competitor to Walgreens or CVS, not a downsized Walmart.