Monday, June 9, 2008

Small-Format Food Retailing Special Report: Is Reno, Nevada Next After Arizona For Wal-Mart's Small-Format Marketside?

Natural~Specialty Foods Memo has learned Wal-Mart is likely to locate one of its small-format Marketside combination basic grocery and fresh, prepared foods markets in a new retail development in Reno, Nevada set to be built at Plumb Lane and Virginia Street, where a commercial developer has recently demolished the old Park Lane Mall to make way for the new mixed-use development. Our source is a knowledable Reno-area Wal-Mart employee who asked we not use his or her name for obvious reasons.

Wal-Mart is set to open four of its brand new Marketside small-format 15,000 square foot grocery and fresh foods stores this summer in the Phoenix Metropolitan region in Arizona. All four of these store locations are within just a few miles of Tesco's Fresh & Easy Neighborhood Market grocery stores, which are of a similar size (10,000 -to- 13,000 square feet on average) and are a similar combination basic grocery and fresh foods format, although the Fresh & Easy stores' prepared foods are made at a central kitchen in Southern California and shipped to the stores DSD-style, while Wal-Mart plans to prepare fresh foods in-store with its Marketside format stores.

The Reno, Nevada Marketside store would be the first location outside of Arizona (which aren't even opened yet) if it's build in the new development.

The new mixed-use development in Reno, where the Wal-Mart employee says the Marketside store will go, is to include retail shops, residential housing and public venues in a new-urbanism-style village design. The area around the old mall and new development in Reno, which has a population of about 200,000, is undergoing much change and gentrification. New urban residential housing including lofts and condominiums are going up nearby and a new public market, perhaps similar to the famous Pike's Place Public Market in Seattle, Washington, is being planned for nearby.

Locating a Marketside small-format grocery and fresh foods store in such a development would make sense, since as we reported here a part of Wal-Mart's strategy with the food stores is an urban one. Over time there is going to be lots of foot traffic in this Reno neighborhood, including thousands of new residents.

Wal-Mart currently has eight stores in the Reno Metropolitan region, which has a population of about 410,000, according to 2007 U.S. Census Bureau statistics.

Seven of the stores are Supercenters and one store is a Wal-Mart discount store, which sells a limited assortment of dry and perishable food and grocery items (no fresh produce or meats though) and lots of non-foods like cleaning products and other household items, in addition to general merchandise, hard goods and soft goods

Three of the seven Supercenters (as well as the Wal-Mart discount format store) are in Reno; two Supercenters are in Carson City, one is in next door Sparks, and one is in Fernley.

As the blog Fresh & Easy Buzz reported here on May 22, Tesco plans to open its first small-format, convenience-oriented basic grocery and fresh foods Fresh & Easy grocery store in northern Nevada in the Silver State shopping center center at Prater Way and McCarren Blvd. in Sparks, which is next door to Reno.

Tesco also is in the process of negotiating for other Fresh & Easy grocery store sites in Reno and the Metropolitan region. For example, according to Karen Melby of the City Works Department, Tesco Fresh & Easy representatives are interested in a site at Sparks Blvd. and Los Altos, in an area called Spanish Springs, in Sparks.

Sources also tell us other potential Tesco Fresh & Easy store locations include South Reno, other parts of Reno, Carson City and Fernley. Additionally, they've mentioned Incline Village in Lake Tahoe as a location Tesco Fresh & Easy representatives are looking at.

Wal-Mart is looking in Southern and Northern California for sites for its small-format grocery and fresh foods Marketside stores.

The Sacramento Metropolitan region and the Reno Metro region are considered generally as part of the same food and grocery market region in terms of market share numbers and advertising buys. Therefore, locating one or more Marketside stores fits in well with the strategy to open stores in Northern California (and Southern), as well as in Arizona, for Wal-Mart.

After all, this is part of the same logic and strategy Tesco is using by opening 19 stores in the Sacramento market, which will start opening early next year, then looking for locations in the Reno Metro region market.

Wal-Mart also has eight Supercenters in northern Nevada, which is a pretty high concentration based on the region's population of about 420,000 residents.

By eventually opening say three -to- four small-format Marketside stores in the Reno Metropolitan area, Wal-Mart could focus on that "fill-in" shopper strategy Wal-Mart USA chief Eduardo Castro-Wright discussed in this piece we published earlier today, while preventing any cannabalization of the Supercenters because unlike Tesco's strategy of being grocery stores for all consumers (supermarkets in the pure definition of the term), Wal-Mart's focus with Marketside is more narrow generally speaking because of its three-format food and grocery retailing strategy.

No comments: