Inside This Issue - News
Walmart goes urban
October 4th, 2010
NEW YORK – Walmart is on the verge of a major push into urban markets with new, smaller store formats.
A recent report in the Financial Times cited commercial real estate brokers who said that the retailer has begun scouting sites ranging between 20,000 and 50,000 square feet in such markets as Chicago, Los Angeles, Detroit, Sacramento, San Francisco and Reno. The story set off a wave of speculation about what the urban format might look like.
But the move was clearly signaled before the Financial Times piece appeared by Bill Simon, president and chief executive officer of Walmart U.S., during a presentation at the annual Goldman Sachs Global Retailing Conference here. In discussing domestic growth opportunities for the retailer, Simon noted its recent breakthrough agreement in Chicago that has resulted in approvals for three stores with plans for several dozen more over the next five years. That success, he said, was the result of a new approach that involved working closely with Mayor Daley’s administration.
"Years and years of City Council votes of 64 to nothing against us, and we’ve had three approvals in the last six weeks from the City Council, and we are very, very optimistic about Chicago, and particularly about our opportunities in urban markets," he told investors and analysts. "We will have to be a little creative with formats, more so than we’ve been in the past. There are not a lot of big, empty lots that we can build 200,000-square-foot Supercenters on, nor do we want to anymore. So we will have a mix, a healthy mix, of Supercenters and small formats, including our grocery format, neighborhood market and smaller formats."
Simon pointed out that Walmart International, particularly the Walmart Americas unit, has a wealth of experience in developing and profitably operating small formats, some based on the bodega concept geared specifically to low-income urban shoppers. "We are going to beg, borrow, steal and learn from them as quickly as we can, because it is important for our urban strategy,” he said. “Supercenters still deliver the best return on investment. They will be smaller than they have been, but we will mix them with some new formats."
Simon remarked that Walmart will take the "Chicago approach" with other cities, but he added that the retailer still sees growth opportunities in nonurban markets, including suburban and even some rural areas in the United States.
In addition to its new format plans, Walmart is leveraging its Site to Store program to penetrate urban markets where it does not yet have stores by means of a partnership with Federal Express. Through a pilot project currently under way in Los Angeles and Boston, consumers can purchase products online from walmart.com and have them shipped free of charge for pickup at a FedEx location (formerly Kinko’s) in either of the two cities. In Los Angeles 26 locations are available, while Boston offers 18 sites.
"Just because customers live in a city doesn’t mean they shouldn’t have access to national brands at the very best prices and an everyday low-price promise," said Simon. "So we are focused on that everywhere there’s an opportunity."
In addition to outlining Walmart’s growth options, Simon discussed the economic environment and recent changes effected since he took his current position in June. The chain’s core customers, whom he described as “a microcosm of the U.S. economy,” remain hard pressed, living from paycheck to paycheck.
"It is our responsibility to figure out how to sell in that environment, adjusting pack sizes, and to figure out how to deal with what is an ever-increasing amount of transactions being paid for with government assistance," he said.
Simon elaborated on adjustments being made to Project Impact, including restoring mass displays to “action alley,” the large cross aisle at the front of every Walmart, and retiring the intense promotions, or rollbacks, in favor of a return to Walmart’s traditional everyday low-price strategy.
He also had reassuring words for the chain’s suppliers. "I’ve met with most of our large suppliers personally and many, many of our medium and small suppliers," he said. "The message that I’m delivering is that we are open for business, and we want to sell your product, that assortment is important to us and that new products are our engine, as well as yours. We can launch a new product for a supplier better than anybody in retail."