BENTONVILLE, Ark. -- Wal-Mart Stores Inc. announced during its earnings call with analysts Tuesday that it expects to open its first "Walmart Express" store in the second quarter of this year. "This will be a new format for both rural and urban locations," said William Simon, executive vice president and CEO of Walmart U.S., during the call.
"We're very pleased with the reception customers are giving potential Wal-Mart stores in cities such as Chicago, Washington, D.C., New York and San Diego," he said.
The new store format will be smaller than 30,000 square feet, according to a report from Supermarket News. Although, Walmart did not say where the first Express store will open, the announcement comes at the same time The Chicago Tribune reported that Wal-Mart will open a new store in the Presidential Towers apartment complex in Chicago's West Loop, marking the discount chain's first small grocery store in Illinois.
The world's largest retailer intends to spend $1 million to build out 26,491 square feet on the ground floor of the apartment towers, according to a building permit filed on behalf of Wal-Mart, the newspaper reported.
The announcement follows news from earlier this year that Wal-Mart is looking at smaller store formats.
"Over the next few years, we will introduce new formats to help us enter new markets," said Simon last October. "Walmart U.S. will move toward a three-format portfolio, which will drive expansion to urban markets and small towns, as well as fill in gaps in existing markets. The large format is our supercenter, which sells a broad assortment of groceries and general merchandise. We have integrated efficiencies into our supercenter design that have allowed us to decrease the average square footage for our supercenter format. The medium format, between 30,000 and 60,000 square feet, will be based on the needs of an individual market. The small format, which is less than 30,000 square feet, will be targeted to urban markets and small towns."
(Click here for previous CSP Daily News coverage of Wal-Mart's formatting forays.)
Wal-Mart is in the midst of its worst U.S. sales slump ever, reported The Wall Street Journal. Its struggles are the result of a misstep: To jump-start lethargic growth and counter the rise of competitors such as cheap-chic rival Target Corp., executives veered away from the winning formula of late founder Sam Walton to provide "every day low prices" to the American working class. Wal-Mart, the world's biggest retailer by sales, instead raised prices on some items while promoting deals on others.
A foray into organic foods did not catch on with discount shoppers. A push to sell trendy fashions like skinny jeans bombed. And an attempt to cut clutter in stores to attract higher-income customers wound up undermining Wal-Mart's appeal to its traditional audience, said the report.
The chain's up-market push, which began before the recession, succeeded in attracting some well-heeled customers, but at great cost. Wal-Mart lost its iron grip on U.S. households earning less than $70,000 a year--which made up 68% of its domestic business--to other discounters.
"The basic Wal-Mart customer didn't leave Wal-Mart. What happened is that Wal-Mart left the customer," former Wal-Mart executive Jimmy Wright, who supervised the company's distribution networks from 1992 to 1998 before leaving to co-found consulting firm Diversified Retail Solutions, told the newspaper.
Company executives acknowledge having miscalculated and are adjusting their strategy again, the report added. Wal-Mart has shuffled top U.S. executives in the past nine months and is going back to basics in an effort to recover market share.
The Bentonville, Ark.-based company remains an unequaled force in retailing, and cannot be counted out. But the company has "lost some of its swagger," said the Journal. Wal-Mart finds its business being nibbled away by dollar stores, discount grocery chains and online merchants. The company also lost some of its once-unassailable hold on suppliers.
Some analysts believe it could take years for Wal-Mart to rebound, unless it quickly opens smaller locations to counter the explosion of dollar stores, which plan to add more than 1,000 locations this year. Wal-Mart is trying to break into New York City and other untapped urban markets but initially plans to open just 30 to 40 smaller stores, which top out at 40,000 square feet, nationwide. Wal-Mart's flagship supercenters average 185,000 square feet.
Wal-Mart also got away from its promise as a one-stop-shopping destination that offered across-the-board low prices all the time. As growth slowed and Wal-Mart began running out of room to build new supercenters, the chain began touting more discounts on select products--Wal-Mart calls them "rollbacks"--while raising prices on other items, according to interviews with more than a dozen current and former executives and vendors.
That "high-low" tactic, as it is known in retailing, is the opposite of what was preached by the firm's founder, widely known as "Mr. Sam." Rollbacks reached a climax last spring, spurring healthy sales on products that were discounted, such as Coca-Cola, but failing to lift overall revenue.
"The whole rollback thing spread like a cancer, and it is systemic," Scott Edwards, a former regional vice president of operations at Wal-Mart who left the company in 2005, told the paper. "Now Target doesn't have to lower prices, because we have raised ours. I think we have alienated a lot of blue-collar shoppers," he said.
Wal-Mart now is de-emphasizing rollbacks, returning to its claim of daily low prices.
Click here for Wal-Mart Stores financial report for the fourth quarter and year ended January 31, 2011, including a link to a replay and transcript of the conference call.