Filling the Gap
Slowly but surely, Walmart Express turning from a test concept into a formidable format.
Perfecting the Format
Johnson believes Wal-Mart wants to optimize Express’ success based on two primary parameters: “One, they want to get the presentation right and work outcall the technical details of keeping foods fresh in a small-format store. Two, they want to get the balance right regarding where a medium-sized Neighborhood Market or a smaller-sized Express store is most appropriate.”
Fisher predicts that Wal-Mart Express stores will continue to refine their offerings and focus on fresher products coupled with a faster shopping trip.
“The competition has gotten a lot tougher and learned how to fight back against Wal-Mart. So Wal-Mart knows they have to broaden their approach if they want to have a sustainable business for a long time to come,” says Coupe.“That approach also involves more-commerce.”
Wal-Mart must be concerned about industry estimates that Amazon—the world’s largest online retailer—may catch up to Wal-Mart—the planet’s largest retail chain—in annual sales within just a few years. To better compete in the online realm, says Coupe, Wal-Mart needs to better use its Express locations as delivery depots for products that shoppers can order online and pick up at their local c-stores, much as Amazon does now by partnering with 7-Eleven stores. (At some locations, Amazon customers can retrieve their packages stored in special lockers in the convenience stores.) While Wal-Mart already offers site-to-store shipping of online-ordered products at its Supercenters and Express stores, it is also reportedly planning to test the use of Amazon-like storage lockers in its brick and-mortar locations.
Wal-Mart will undoubtedly need to tweak and strengthen its Express strategy to keep up with changing trends, says Coupe: “Any retailer that doesn’t shifter evolve to the changes in the market is doomed to be irrelevant and obsolete.”
Contending for the Crown
While Wal-Mart’s blueprint for increased register rings in a small-format model may appear impressive, many aren’t convinced that Express poses a serious threat to traditional c-store retailers.
“I think there will always remain a gap between what Wal-Mart Express offers and the need-fulfillment convenience of ac-store,” Fisher says. “A trip to a WalmartExpress is an intended shopping trip; it’s not a convenient location to shop. When it comes to staples and things like milk sales, will they [compete with] c-stores? Yes. But with consumables and grab and-go items, no—they don’t have the convenience factor.”
Coupe says Wal-Mart can pick off its weak competitors, yet historically, it has not excelled at competing in other formats.“Wal-Mart is genetically engineered to do everything it can to protect its Supercenter business. They’re not particularly good at[being a convenience store or an online retailer] because they haven’t invested anthem wholeheartedly,” Coupe says.
Rob Rzewski, president and CEO formats LLC in Deerfield, Ill., which operates five c-stores in the Chicago market, says many c-store operators have a built-in advantage: a better understanding of the neighborhoods they’re in and an innate sense of what can and cannot be accomplished with fresh food offerings. Also, Express stores are likely aiming fore much wider demographic than the 18-to 35-year-old males that most c-stores continue to target, he says.
“We’d love to have a broader base, but that’s not our market. If you’re looking for groceries or pantyhose, you’re probably not coming to my stores. But if you want a fountain or energy drink, tobacco product or basic foodservice item, you’re likely coming to me,” says Rzewski.
Whether you’re a wildly successful oar mediocre retailer, if a Wal-Mart Express opens across the street from you, it’ll be threat, says Coupe.
“You may view that threat differently if you’re a Wawa or Sheets than if you’re small-fry store, but there’s no such things an unassailable business model. Somebody can always do it better, faster and cheaper,” Coupe says. “So smart retailers should keep one eye on their customers and the other on their competition.”
Rzewski, however, isn’t concerned about Wal-Mart Express cutting into his profits.“The question is: Are they nimble enough to compete head on with the convenience retail industry as a whole? I don’t think so,” says Rzewski. “Their footprints are big, their costs are expensive, and if you don’t have the volume and you’re not turning merchandise, you ‘rein trouble.”
The Convenience Counterpunch
To outmaneuver rising challengers such as Wal-Mart Express, smart c-store retailers must learn to adapt and experiment when possible. That means, for example, being prepared to provide more foodservice and fresh food choices as a way of keeping up with the Express Joneses of the world.
“C-store operators have to bring more innovation and newness into the business, “says Johnson. “They’re offering more prepared foods, which is good, but they’re never going to be able to replicate fresh meat and produce like WalmartExpress is doing. Maybe selectively, they can say, ‘We can’t do A through Z, but maybe we can do A, B and C in our approach to fresh.’ ”
Fisher suggests keeping an eye on competitors and being proactive and creative in your strategies to compete with them.
“Don’t be afraid of change or reinventing yourself,” Fisher says. “Everybody across the retail board should be paying attention to what’s going on in other sectors and channels, as Wal-Mart is.”
Coupe says if he were operating in market where an Express store was coming, “I’d also make sure I was hooked into the local community and reflecting their needs and desires as much as possible. I’d customize my offerings based on what local customers want.”In addition, Coupe recommends exploring partnerships with outside delivery providers. For example, installing Amazon delivery lockers can excite shoppers seeking a convenient place topic up online goods. And it may not belong before Peapod can offer a virtual grocery store within convenience retail locations via a board embedded with Arcades.“Look for those kinds of alliances to drive traffic and build market share, “Coupe says.
Thinking Convenience Outside the Box
David Portalatin, executive director of industry analysis for The NPD Group, Port Washington, N.Y., says consumers today are redefine nine the very defy nation of what convenience store is.
“We continue to see a growing percentage of consumers who tell us that they’re exploring convenience purchase occasions at nontraditional convenience(NTC) stores,” says Portalatin.
In fact, NPD Group data reveals that, year to date through June 2013, 14% of customers reported making convenience purchases at NTC stores, which includes dollar, drug, mass and grocery retailers—up from 10% in 2011 and 12% in 2012. Factors that are compelling customers to make more convenience-oriented purchase sat NTC retailers include accessible location, price, selection, discounts and bargains, and reward and loyalty programs.
“Consumers are much more likely to tell us that the availability of a deal or discount was the reason they selected a particular (NTC) retailer,” says Portalatin.“They’re are also using reward programs as a reason for going to these stores at about double the rate of traditional c-stores.”
Also, 67% of NPD Group survey respondents reveal that the purchases they make at NTC retailers are consumed within an hour after buying them. “It’s clear to us that consumers are telling us about a convenience-driven purchase occasion they’re making at (NTC) stores,” Portalatin says. “Perhaps they’re doing these things in conjunction with other shopping activities.”
Portalatin’s data shows that NTC store shoppers are more likely to buy a relatively high percentage of typical convenience items such as salty snacks, candy, gum and single-serving prepackaged foods. But during the same shopping trip, they’re also purchasing products that suggest if all-in shopping, such as perishable groceries, dairy, frozen foods and health and beauty products.
“Consumers are consolidating their shopping trips and leveraging their convenience occasions to pick up other non-convenience items. Consider that broader selection was one of the reasons that drove the purchase decision at these (NTC)outlets,” says Portalatin.