Walmart turns attention to small-format US stores

At its annual investor conference last week, Walmart announced plans to roll out 30 to 40 medium and small-sized stores in the US next year. Consisting of locations measuring less than 30,000 sq ft, it will target urban areas and small towns. The company will also look at medium-sized stores, which will range from 30,000 sq ft to 60,000 sq ft and be based on the needs of an individual market.

In 2009 Walmart opened seven small-format stores and by the end of 2010 will have opened just one such store. Therefore the plans to open 40 small-format stores is a significant change in strategy. Walmart has suffered from five consecutive quarters of negative like-for-like sales growth in its supercentres, highlighting that it can no longer rely on its big-box format to drive sales growth.

Walmart will look to draw on insights from its international operations when developing its small-format stores. The retailer has witnessed great success in Latin America where its Bodega Aurrera Express, Mi Bodega Aurrera, Changomas Express, Super Ahorros and Todo Dia formats in Mexico, Puerto Rico, Brazil and Argentina have wooed consumers through key characteristics such as narrow assortment, low prices and high private label penetration.

Outside the US, Walmart plans to add 21 million square feet of space this fiscal year and between 23 and 24 million sq ft next year. “Our capital investment for next year will drive new store growth with particular emphasis in the emerging markets of China, Brazil and Mexico,” said Walmart International president and chief executive Doug McMillon.

Particular focus will be placed on China, with Walmart chief financial officer Charles Holley saying it planned to take between 5% and 10% of the market, a sizeable chunk in such an unconsolidated market. Russia remains on the cards with Walmart admitting that acquisition remains its most likely route to market.

The investment in an additional 155 to 165 US supercentres outlines that big-box stores remain at the heart of Walmart’s strategy. Perhaps the most telling statement came from Walmart US president and chief executive Bill Simon, who said: “Walmart US will move toward a three-format portfolio, which will drive expansion to urban markets and small towns.” Walmart couldn’t be borrowing a three tier format strategy used by a certain UK-based retailer to drive growth in a saturated market, could it?

Greg Hodge, research director, Planet Retail. For more information contact us on:

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