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Walmart looks to Neighborhood Markets to boost lagging salesBigger isn't always better, even when it comes to Walmart.
The world's largest retailer is looking to its bite-sized Neighborhood Markets — like the one that opened Wednesday along Gunn Highway, north of Tampa — to boost lagging sales and better compete against aggressive rivals.
The stores are part of Walmart's plan to broaden its customer base and win back shoppers who have flocked to fast-growing dollar stores and other discount retailers. In Florida, of course, the retailer is also trying to take away business from Publix, the state's top grocer.
Averaging about 41,000 square feet, Neighborhood Markets are about one-fifth the size of the largest supercenters and sell mostly groceries, which account for more than half of Walmart's revenue. There are more than 380 of them nationwide, relatively few compared with the 3,348 supercenters.
The smaller stores cater to shoppers seeking quick trips to the grocery store without having to navigate cavernous supercenters and their supersized parking lots. Rather than stocking up at a big store, shoppers can do fill-in trips for more daily needs at a smaller one.
Florida has more than 50 Neighborhood Markets, including about a dozen in the Tampa Bay area. The latest, at 4525 Gunn Highway in Carrollwood, took over a former Sweetbay supermarket that had closed in early 2013 before Winn-Dixie bought the remaining Sweetbays and renamed them Winn-Dixie. Where Sweetbay failed, Walmart believes it can succeed.
At 47,082 square feet, the store is the third-largest Neighborhood Market nationwide and includes a pharmacy, bakery and deli, general manager Julien Schneider said. The extra space allows the store to stock a broader selection of products that appeal to its large Hispanic clientele.
The 24-hour store, while adding convenience, is expected to relieve crowds at Walmart's supercenter 21/2 miles up the street. Through Walmart's Site to Store program, shoppers can buy items online and have them shipped to smaller stores for free, regardless of whether the store carries all of the products.
The nearest Publix is 11/2 miles away.
Neighborhood Markets have proven a bright spot in Walmart's otherwise dull bottom line. Comparable sales at Neighborhood Markets rose 5.6 percent during the second quarter ended in July compared with last year, and shopper visits rose 4.1 percent. Overall, Walmart's U.S. sales were flat and traffic fell 1.1 percent.
Corporate folks in Bentonville, Ark., want as many of the Neighborhood Markets as they can get. Earlier this year, the chain announced it was doubling the number of new small stores it initially had planned for this year to between 270 and 300. Meanwhile, it kept its plans for 115 new supercenters.
"Customers' needs and expectations are changing," said Bill Simon, Walmart's U.S. CEO who stepped down in July amid sluggish sales. "They want to shop when they want and how they want, and we are transforming our business to meet their expectations."
Smaller stores give Walmart the opportunity to expand in urban and rural areas that don't have the real estate for a supercenter or don't have a large enough customer base to support one. They also serve as bridges between larger stores, creating more efficiency in getting goods to stores.
The emphasis on Neighborhood Markets coincides with Walmart's nationwide launch of the Savings Catcher program, which lets shoppers enter a number on their Walmart receipt online and Walmart compares the prices to those of local competitors. If a price is lower elsewhere, Walmart will load the difference onto a Walmart gift card to spend at stores or online.
It appears Walmart's future is getting even smaller. The chain has opened about two dozen Express stores averaging 12,000 square feet. It's also testing a mini Walmart To Go to compete with 7-Eleven, Wawa and other convenience stores.
The Express stores have performed well enough that Walmart plans to expand them beyond the initial pilot phase. None are in the works for Florida but that could change.
Publication date: 8/25/2014
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