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Wal-Mart sees Marketside as $10bn chain
London Financial Times
August 7, 2008
Wal-Mart, the world's largest retailer, says the new small Marketside grocery stores it is to launch this autumn could expand to a chain of more than 1,000 stores, delivering $10bn-plus in annual sales.
The retailer plans to open 10 of the 15,000 sq ft Marketside stores initially, including four in the Phoenix area, where they will be competing directly with Tesco's recently launched US Fresh & Easy store concept.
Wal-Mart's executives have described the Marketside stores as a pilot project, although it is the first new store format to be launched by the company in a decade. But a job advertisement for the retailer indicates the scale of its ambitions for Marketside, saying the format "is expected to start with 10 stores and evolve to between 1,000-1,500 stores with over $10bn annual sales".
At less than a 10th of the size of the average Wal-Mart superstore, Wal-Mart said the new stores would be aimed at "the needs of a time-starved, higher-income consumer that is interested in convenience and premium fresh, natural and organic offerings".
The approach contrasts with Wal-Mart's experience with the Wal-Mart Neighborhood Market stores it launched 10 years ago, which are about the size of a traditional US supermarket.
In response to an inquiry from the Financial Times, Wal-Mart stressed the Arizona stores were a pilot project. The retailer subsequently removed from its website the job advert that included the more ambitious targets.
Wal-Mart's superstores are built around high volume and low cost, and the group has faced challenges in adapting to the supermarket-sized Neighborhood Market stores it launched in 1998, opening more than 140 outlets. The Marketside stores will require a fast turnover of stock, which could be a difficult fit with Wal-Mart's distribution system.
Tesco has opened more than 60 Fresh & Easy stores in California, Arizona and Nevada since November and plans to have several hundred operating during the next two years.
Wal-Mart, the largest US grocer with more than 20 per cent of the market, is developing the Marketside format as growth slows at its 2,500-plus superstores.
The Marketside format is also expected to spearhead a broader drive by the retailer to improve its overall grocery offering.
Safeway and SuperValu, two of the largest US supermarket chains, are also experimenting with small, local formats.