Wal-Mart unveils smallest store format

June 3, 2011

Wal-Mart unveiled a blueprint for some stores this week that will be a fraction of the size of the big-box giants it helped popularize.

Executives at the company said they plan to use the new stores — dubbed Wal-Mart Express — for “urban offense and rural defense.” The world’s largest retailer has struggled to gain a foothold in metropolitan areas such as Washington and New York, where real estate is expensive and limited. It is also hoping to compete against the dollar stores in urban and rural markets that siphon away customers who want to make a quick trip.

“Small stores are going to be a very good growth opportunity for us, because they allow us to get into places where we’re not in today,” said Bill Simon, head of Wal-Mart’s U.S. operations.

Two Express prototypes are slated to open next week within an hour’s drive of the retailer’s headquarters here in northwest Arkansas. At 15,000 square feet, the store in Gentry, Ark., is roughly one-tenth the size of a typical Wal-Mart super center. Soda and ice machines and a RedBox DVD kiosk sit outside the front doors. Shelves of ready-to-go meals are the first products inside. The store carries about 13,000 items, compared with 125,000 in a traditional format.

Executives said they are still testing the variety of merchandise the stores should carry and the optimal size of the footprint. The Gentry store includes a pharmacy and check-cashing service, but other locations might sell gas and other items.

Thirteen pilot stores are under construction in North Carolina and Chicago and are expected to open later this year. Those stores could be as large as 30,000 square feet. The company said it hopes to open hundreds of stores during the next few years. None of the stores opening in the Washington area will be Express.

The move comes as Wal-Mart tries to turn around its flagging U.S. division, where sales at existing stores slipped 1.1 percent in the most recent quarter. It has put 8,500 products back on its shelves after efforts to get rid of clutter in some stores backfired. Simon said sales of air fresheners are up 88 percent since the retailer reintroduced the cheapest brands.

Wal-Mart is also resurrecting its philosophy of consistently low prices rather than relying on discounts, or “rollbacks,” as it has in recent years. For example, stores last year sold packs of soft drinks for $5 — less than it cost the company to buy them — only to raise the price later. Executives said the change confused customers and allowed an opening for competitors. Now, soda goes for $5.98 every day.

The rollback program is “not the model we ran for 45 years, and that’s not the model we’re going to run going forward,” Simon said.

The need to boost U.S. sales came up repeatedly during executives’ remarks Friday at the company’s raucous annual shareholders meeting at an arena here named after Bud Walton, brother of the chain’s legendary founder, whom employees still call Mr. Sam. Chief executive Mike Duke outlined five priorities for the retailer during the next year, including e-commerce, low costs and prices, training and recruitment, and social issues such as hunger and environmental sustainability.

But foremost, he said, was growth. “We need to exceed the expectations of the next-generation customer, all over the world,” Duke said.

Still, the star-studded event remained more pep rally than board meeting. A video montage welcoming 14,000 Wal-Mart employees from around the world included greetings from stars such as Eva Longoria, Tavis Smiley and Steve Carrell. Artists Alicia Keys and the Black Eyed Peas performed, while actor and guest host Will Smith joked that the retailer’s name should be changed to “Will-Mart” and reminded Chairman Rob Walton that he wants to be adopted by the family.

Employees rattled bells, blew horns and shouted the company’s trademark cheer, which ends, “Who’s number one? The customer! Always!”

“Wal-Mart’s culture — Sam Walton’s greatest legacy — is our greatest responsibility,” Duke said.

Ylan Q. Mui is a financial reporter at The Washington Post covering the Federal Reserve and the economy.
Comments
Show Comments
Most Read Business