Why Convenience Stores are a Good Idea for Wal-Mart

Lessons to be learned, new consumers to be courted

Published in CSP Daily News

Walmart conveniece stores: Lessons to be learned, new consumers to be courted

BENTONVILLE, Ark. -- Two weeks after Wal-Mart Stores Inc. announced it will enter the convenience store industry with its first quick mart in Bentonville, Ark., analysts and retail-watchers are generally backing the idea as being good for the company as a whole, according to a City Wire report.

Wal-Mart continues to report weakening traffic and a decline in stock-up trips over the past several quarters, according to the report. Part of the reason may be a need for a lesson or two in consumer convenience and speed. At the same time the company has recognized a meaningful jump in those consumers purchasing smaller baskets of fresh items.

Analysts applaud Wal-Mart for this latest test in the convenience format, as the retailer has the opportunity to leverage huge scale for the low prices, but also give the consumers the time savings they crave.

“Testing a Wal-Mart-branded convenience store makes sense given the retailer’s push into smaller Express and Campus stores. They still have a lot to learn in this area and testing multiple small store formats allows them to zero in on what works and what doesn’t,” Jason Long, CEO of Shift Marketing Group, told the newspaper.

Carol Spieckerman, CEO of New Market Builders, said convenience is the key word for Wal-Mart and other retailers, because that’s want consumers are demanding.

“Although they have downsized from the mega supercenters to smaller Neighborhood Markets and Express formats (at 45,000 to 10,000 square feet, respectively,) it may be a stretch to call them convenience stores,” Spieckerman said.

With nearly a half billion dollars in annual sales, one might ask: What can Wal-Mart can hope to gain with its own version of a 7-Eleven, Kum & Go or Casey’s General Store?

A former Wal-Mart buyer told The City Wire there is plenty the retailer can learn from a testing lab in its own backyard, including pricing strategies, traffic patterns, consumer behaviors in the quick-trip format and experimenting with unique merchandise offerings that could turn the convenience store model on its head.

Spieckerman said if Wal-Mart initial tests prove successful, Wal-Mart will gain access to a new customer base.

“Given Wal-Mart’s highly developed supply chain, particularly in fresh, it will go in with a huge advantage. This is particularly true as convenience stores evolve from selling beef jerky, cigarettes and hot dogs on metal rollers and into becoming destinations for healthy snacks and meal occasions,” she added.

In the highly competitive world of retail, Wall Street continues to watch Wal-Mart’s deteriorating comp sales while other big boxes like Costco remain their “darling choice.”

“Testing a convenience store is a big signal to Wall Street that the company is working diligently to turn around its recent sales woes. It could also be a competitive signal to current and would-be competitors that Wal-Mart isn’t going to blindly stand by and concede sales to smaller stores any longer,” Long said.