Small formats promise easy access

Walmart’s first small-format Express stores have only been open about six months, but strong initial consumer acceptance, coupled with increasingly flexible real estate, points to the near certainty of an eventual rollout.


The stores range between 10,000 and 15,000 sq. ft., offer about 13,000 products and were developed so Walmart could tap potential growth opportunities in rural and urban markets. Walmart expects to end its current fiscal year in late January 2012 with 11 Walmart Express stores following the opening of the first units in northwest Arkansas.


“We are testing a lot of things in this box,” Pam Kohn, Walmart EVP merchandise services, told attendees recently at a Center for Retailing Excellence conference on the campus of the University of Arkansas in Fayetteville, Ark. “Some have pharmacies and some don’t, and some have gas and some don’t. We are really playing with this format. But our customer reaction initially is very, very positive, and we are excited about what this experiment is going to show us.”


Walmart’s small-format development initiatives, including Neighborhood Market, are under Kohn, who is in a relatively new role where she is responsible for centralizing merchandising shared service functions of merchandising execution, store layout, format, and space productivity and replenishment. She joined Walmart nearly a decade ago and early on, as SVP operations, she was responsible for Neighborhood Market before she was elevated to a series of operations and merchandising roles. Now it appears expansion of Walmart Express could happen on her watch.


“We are definitely in the pilot phase,” Kohn reminded attendees at the retail conference, before adding, “our next step will be to test a density pilot so we get more stores in a concentrated area so we can really understand the dynamics.” And those dynamics will be considerably different, as Walmart’s distribution network was built to serve really big stores where the sales velocities were such that they could accommodate large pack sizes and full pallets of goods.


“As we experiment with Walmart Express, and grow and expand more quickly with our Neighborhood Market, it poses a supply chain challenge that we don’t have a ton of experience with yet,” Kohn said. “Now we have to figure out how to do stuff a lot quicker, smaller and more frequently.”


While much of the retail industry is fixated on Walmart’s smallest prototype, of which between 15 and 20 additional units are slated to open in 2012, the more immediate opportunity rests with the medium-sized Neighborhood Market, where financial returns are said to be near those achieved by supercenters. In development for more than 13 years, Walmart in October finally allocated a larger percentage of its $6 billion to $6.5 billion U.S. capital budget to accelerate expansion of Neighborhood Market stores. “We’ve had five consecutive quarters of comp-store sales and traffic growth [with Neighborhood Market], and we are competing very, very well with our grocery competition,” Kohn said.


There currently are about 160 Neighborhood Market stores, but that figure could increase by as much as 50% next year as the plans call for between 65 and 80 of the approximately 40,000-sq.-ft. stores, according to Kohn.