Small-Format Food Retailing Memo: Does Wal-Mart Plan to Build A $10 Billion A Year 'Small-Mart' Empire?

The Financial Times is reporting today that Wal-Mart, Inc. had an advertisement it later pulled on its Marketside.com website that described the small-format Marketside combination fresh, specialty, natural foods and basic grocery stores to eventually be a chain of over 1,000 stores doing about $10 billion in annual sales.

Below is today's report from the Financial Times:

Wal-Mart sees Marketside as $10bn chain

From the: Financial Times
By Jonathan Birchall in New York
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.

Natural~Specialty Foods Memo Analysis

As our readers know, we've been covering Wal-Mart's Marketside format development closely as part of our extensive coverage of what we termed the small-format food and grocery retailing revolution in the U.S.

The Marketside stores, which will feature in-store, fresh prepared foods (and in-store seating for about 9-10 customers along with take out), specialty and natural foods and groceries, fresh meats and produce, along with a limited selection of basic grocery items, will average about 15,000 -to- 20,000 square feet--which is a fraction of the size of its Supercenters, which are about 180,000 square feet on average, and less than half the size of its 45,000 square foot Wal-Mart Neighborhood Market supermarkets.

The format's focus will be on consumers who desire quality foods at reasonable prices. The first four Marketside stores are scheduled to open in the phoenix, Arizona Metropolitan region this fall.

We started covering the Marketside format development last year, and have broken numerous stories about its progress. During this more than one year coverage of the story, we've developed some very good sources.

We talked to a couple of our Wal-Mart sources today about the Financial Times report. One of those sources, who has been very good thus far, told us the mention of an eventual 1,000 store, $10 billion a year Marketside chain was on the job advertisement online board. However, the source says not to take it too seriously, not to think it means plans call for such a chain in the near future.

Rather, the source says its an internal long range goal number, and it didn't belong on the job board website, which is why it was taken down after the Financial Times reporter contacted the company about it.

This doesn't mean Wal-Mart doesn't plan to be aggressive with its Marketside format--just not 1,000 stores, $10 billion a year aggressive in the short to medium term.

As we've reported, Wal-Mart is looking for additional Marketside sights in Arizona, in addition to the four set to open this fall. The retailer also is looking throughout California and Nevada (Tesco Fresh & Easy country along with Arizona), as well as in other U.S. states.

Thus far we've reported for example that Wal-Mart is considering signing a lease for site in Reno, Nevada, along with in various particular California locations for the stores.

The current poor U.S. economy also has factored into Wal-Mart's planning for its Marketside small-format fresh food and grocery stores, according to our source. That source says because the stores will be more upscale in design and positioning--along with putting an emphasis on fresh, prepared foods--the retailer is exercising caution as it is well aware of the current consumer trend in the U.S. to trade down to discount food stores like its Wal-Mart Supercenters.

This fact isn't putting the brakes on Marketside. Rather, its providing a moderating theme to how fast the retailers grows the stores.

After all, there is no need to open Marketside stores in the way for example that Tesco is opening new Fresh & Easy Neighborhood Market stores--about at a pace of one new store every three or four days on average--since Wal-Mart's strategy with Marketside is part of a multi format strategy while Tesco is engaged in a single format--Fresh & Easy--U.S. food and grocery retailing strategy.

Having said that, we are currently working on reporting about a couple possible Marketside store sites in California. We hope to write about just where those locations are soon. Like we said, Wal-Mart is taking a moderate, but still plenty aggressive, approach with its new, small-format Marketside retail development and format.

Small-Format Food Retailing Memo: Wal-Mart Launches New Website For 'Marketside' Small-Mart Stores; Says Arizona Stores Will Open in Fall

Wal-Mart has launched a new, colorful website for its Marketside small-format (15,000 -to- 20,000 square foot) community grocery stores and has announced its first four combination grocery and fresh foods stores in the Phoenix Metropolitan/East Valley region cities of Gilbert, Mesa, Chandler and Tempe will open in the fall rather than this summer as the retailer originally had planned.

View the new Wal-Mart Marketside website here.

Natural~Specialty Foods Memo first reported in August-September, 2007 that Wal-Mart would open the first four of the new Marketside format stores in these Arizona cities. Wal-Mart confirmed this two months ago when it created the website workformarketside.com where it listed job postings and began excepting online applications for store manager and assistant manager positions at the four Marketside stores in these four Arizona cities.

Wal-Mart originally planned to open at least one or more of the four stores this summer, according to our sources. In fact, it was hoped the first store would open before August 4, when David Wild, Wal-Mart's senior vice president for business development and the head of the Marketside format development team, leaves the company to become CEO of Halfords, a United Kingdom-based car part and bicycle retailer.

Based on Wal-Mart's announcement today, that's not going to be the case. Wal-Mart offered no specific month or date this fall when the first store would open; just that they will open in the fall of 2008.

As we've reported previously, Wal-Mart's Marketside will have its own offices in Tempe, Arizona, rather than being operated out of Wal-Mart corporate headquarters in Bentonville, Arkansas. Starting on June 30, Marketside will open a recruiting office to hire for the Arizona stores at this address: 800 E. Southern AvenueTempe, AZ 85282. Marketside has already been accepting applications and conducting interviews for positions. But the opening of this recruiting office will kick the process into high gear, according to our sources.

The new Marketside website positions the stores as we've been reporting for months now, as small "community grocery stores" with a focus on fresh foods and basic grocery items. In fact, on the new website, Wal-Mart describes Marketside this way "Marketside is a small community grocery store owned by Wal-Mart Stores, Inc."

Interestingly, Tesco originally planned to name its Fresh & Easy USA division and stores, Fresh & Easy Community Market, but changed it to Fresh & Easy Neighborhood Market after the retailer said research with focus groups demonstrated a preference for "Neighborhood" over "Community" in the name. [This has been publicly stated by both Tesco PLC CEO Terry Leahy and Tesco Fresh & Easy Neighborhood market CEO Tim Mason. Tesco makes no mention on its Fresh & Easy website that Fresh & Easy Neighborhood Market is owned by Tesco, like Wal-Mart mentions about Marketside being owned by Wal-Mart on the new Marketside website.

Ironically, Wal-Mart's original small-format supermarket (at least small-format for Wal-Mart at the time at 45,000 square feet), which it continues to expand in terms of store count, is called Wal-Mart Neighborhood Markets. Wal-Mart built its first Wal-Mart Neighborhood Markets store in the mid -to- late 1970's.

The Marketside website plays up the stores' and its workers passion for food, especially fresh foods, with pictures and text about food and Marketside's commitment to offering "the freshest food available in-store and the best customer service."

As we've reported, the Marketside stores will have in-store kitchens where the fresh food items will be prepared, along with a seating area that will sit about 10 customers at any one given time. Take-out is expected to be the big draw for the fresh in-store, prepared foods in the stores however.

Tesco's Fresh & Easy Neighborhood Market makes its fresh, prepared foods at a central kitchen in Southern California and ships the items to its current 61 stores in Southern California, Nevada and Arizona.

The new website also makes an effort to reinforce the message that Marketside prices will be value-oriented, rather than having high prices like some publications have been suggesting recently in various stories using the angle that Wal-Mart plans to open upscale and high-priced small-format stores.

Wal-Mart's positioning for Marketside--fresh, quality foods at affordabel prices--is clear from reading this key introductory statement on the website reprinted below in italics:

Welcome to Marketside

"Marketside provides fresh, innovative answers to the daily question, "What's for dinner tonight?" Our unique product and shopping experience will change the way you shop for — and think about — fresh food, and our prices will keep you coming back."

It's clear Wal-Mart is positioning Marketside as a small, community grocery store as it calls it, featuring basic groceries and fresh foods with a clear value proposition.

Our sources have told us all along, and we have reported, that the Marketside stores will be slightly upscale but also will offer value pricing, which is Wal-Mart's stock in trade across all of its formats.

The new Marketside website also has photographs of the uniforms (burnt red-color grocery aprons with Marketside in gold lettering) store-level employees will wear. The uniforms, which are in the same colors used in the website and in other Marketside design and marketing elements and materials (hint: look for these to be the design colors used in and outside the stores) are designed to depict "freshness," which is the key marketing and positioning element for Marketside.

The website also features a sign up area here called "Stay in the Know," where consumers can sign up to receive a Marketside newsletter on a regular basis as well as receiving email up dates about Marketside.

The new Marketside website incorporates Wal-Mart's earlier job listing-only website (http://www.workformarketside.com/), including having listings in its "Join Our Team" section for the new store-level Pantry Controller and Meal Specialist positions as we reported in this piece, Small-Format Food Retailing Memo: Wal-Mart's Marketside Hiring For More Positions; Getting Closer to Summer Opening Date In Arizona yesterday, along with the store manager and assistant manager positions we've previously reported on.

Wal-Mart is looking for sites for the Marketside community grocery stores throughout California.

Natural~Specialty Foods Memo also reported in this piece, "Small-Format Food Retailing Special Report: Is Reno, Nevada Next After Arizona For Wal-Mart's Small-Format Marketside?" about Wal-Mart's interest in locating a Marketside Small-Mart in a new and upcoming development in Reno, Nevada.

In terms of the Arizona market, Wal-Mart plans to use Marketside as part of its three format--Supercenters, 45,000 square foot Neighborhood Markets and now Marketside--food and grocery retailing strategy in Arizona to become the market share leader in the state.

Secondarily, Wal-Mart plans to use Marketside, along with its other formats, to attempt to strike a serious competitive blow to the start up Fresh & Easy chain.

It looks like readers and others will have to wait until the fall to see the Fresh & Easy vs Marketside Small-Mart battle begin (the first four Marketside stores are very close to existing Fresh & Easy stores) rather than this summer.

That gives Tesco time to open more Arizona Fresh & Easy stores as well, which it will soon start doing after ending its three month new store opening pause on July 2 when a new store opens in Manhattan Beach in Southern California. New Arizona stores will start opening shortly after that date. Their currently are about 20 Fresh & Easy grocery markets open and operating in Arizona.

The launching of its new Marketside website by Wal-Mart though is a clear indication things are getting serious with the world's largest retailer when it comes to its new Small-Mart development, Marketside. After all, fall is just around the corner.

Related Reading:

Click here to read recent coverage and analysis by Natural~Specialty Foods Memo about Wal-Mart's Marketside Small-Mart community grocery store development.

Retail Memo Special Feature: New Multi-Supercenter and Multi-Format Strategies Are Showing Wal-Mart to Be A More Agile Grocery Retailer in the U.S.

The new Supercenter in Austin, Texas (above) isn't your 'father's' Wal-Mart Supercenter

Mega-retailer Wal-Mart may have found a solution (or two) to all the community-based opposition in many parts of the U.S. to the retailer's building of its Supercenter stores.

Last month, the brawny big-box bruiser from Bentonville (Arkansas) decided to kill 47 new Supercenter store projects it had on the books for a variety of reasons, all having to do with either opposition to the stores from city and country governments or community-based groups in the cities and neighborhoods where the respective stores were to be built.

Don't feel sorry for Wal-Mart though. The world's and United States' largest retailer will still open at least that many (47) new Supercenters in the U.S. this year, plus a handful more.

The municipal government and community-based group oppostion is a serious impediment to Wal-Mart's Supercenter growth plan in the U.S. however. But it's not a new problem. It's been going for for years.

However, what is new is Wal-Mart's response to the oppostion, which historically has only been one-dimensional: To lobby city governments and community groups, trying to change their minds, or to fight the oppostion in court.

Until now, that is.

The Modesto Supercenter Strategy

In the Central Valley city of Modesto in Northern California, Wal-Mart is gutting an old 105,000 square foot long-empty big-box retail building, which most recently was divided in half and housed a store belonging to the now gone local discount warehouse grocery chain SavMax in one half of the building and a Rite-Aid drug store in the other half.

Wal-Mart is turning the 105,000 square foot building into a scaled-down version of its Supercenter format store. The Modesto Supercenter, which is located at 3848 McHenry Blvd. a popular shopping street in the city of about 210,000, will have all the departments--fresh produce, meat, perishables, dry grocery and the like--that its larger Supercenters have, which average about 185,000 square feet and run as big as 225,000 square feet.

The only difference between the more petite Modesto Supercenter and nearly all of the retailer's other, larger Supercenters, is that those departments will be scaled down and the store's overall product selection will be a bit less expansive than in the traditional Supercenters.

To compare the size difference of this new Supercenter in Modesto to Wal-Mart's other stores of the same format, lets compare it to the retailer's Wal-Mart discount store format stores, one of which the retailer has in Modesto. That store, like all the Wal-Mart disount format stores', carries only a limited assortment of grocery products in a few aisles plus some basic frozen and perishable foods. However, it's still 115,000 square feet without the supermarket inside, which is 10,000 square feet larger than the new full food and grocery Supercenter set to open early next year on Modesto's McHenry Avenue.

The Modesto Supercenter scheduled to open early next year isn't first smaller-size Supercenter Wal-Mart has opened, nor the first it's located in an old big-box building it's gutted and completely remodeled. Last year, the retailer opened a Supercenter in Sanger, California that's just a bit larger than the Modesto store. Sanger is a suburb of Fresno and is about 100 miles south of Modesto in the southern Central Valley.

The main reason Wal-Mart is doing this Supercenter scaling-down in California, and especially in the Central Valley, is becuase the state as a whole, and the region particularly, has been one of the most difficult places in the U.S. for the mega-retailer to get approval to build it's 185,000 -to- 225,000 square foot new, from the ground-up Supercenters.

For example, Wal-Mart planned to build a roughly 200,000 square foot Supercenter in a shopping center in Modesto in 2001. However, after a couple years of rangling with the city planning commission and city council, as well as opposition from numerous small business groups, it abandoned those plans.

In 2004, Wal-Mart proposed building a brand new 225,000 Supercenter in Turlock, which is a city of about 75,000 residents located just 10 miles from Modesto. The Turlock City Council not only rejected Wal-Mart's proposal--even though the retailer already had a Wal-Mart discount store in the city and promised to keep it open along with the new Supercenter--it ended up passing a big-box ordinance which prohibited any retailer from opening a store of at least 100,000 square feet that devoted at least 5% of its floor space to grocery items.

The Supercenter ban was specifically designed to prevent Wal-Mart from locating a Supercenter in the city. However, through its language it left the door open for big box retailers like Costco Wholesale and even Wal-Mart's Sam's Club

Wal-Mart filed a law suit against the city of Turlock in February 2004, one month after the city council passed the ban legislation. The case was in the courts for two years. In 2006 the court ruled in favor of the city and Wal-Mart announced it would no longer try to build a Supercenter in the city.

Big box bans like Turlock's are common in California. Two other cities in the area, Oakdale which is next door to Modesto, and Patterson, which is about 25 minutes away from Modesto, have both passed laws similar to Turlock's, designed specifically to keep Wal-Mart Supercenters out of their respective cities.

Wal-Mart pulled the plug on a Supercenter in another nearby city in 2006, when the city of Ripon, just a few miles from Modesto, fought against the retailer's proposal to locate a Supercenter in the community. At the time the issue of contention was over where the Supercenter would be located in Ripon. Wal-Mart announced it would not build on the site but would look for a more suitable location in the city. That was two years ago and the retailer is yet to announce a site in Ripon.

Last year Wal-Mart did get approval to build a 225,000 square foot Supercenter in Ceres, which is right next door to Modesto. However, the community of about 45,000 was far from the retailer's first or second choice in the region. But since the city is aggressively seeking retail and streamlines the permit process, Wal-Mart went forward with the proposal. The Cerers Supercenter is currently being built--not without community protest of sorts--and is scheduled to open later this year.

Bay Area and SoCal also tough for Supercenters

Its not just the Central Valley that opposes Wal-Mart Supercenters so strongly. In fact, the nine county San Francisco Bay Area, which is about 90 minutes from Modesto, opposes the mega-stores as much or even more than the Valley's municipalites and communty groups.

Wal-Mart has only a couple Supercenters in the 7-million population strong Bay Area. Those stores are out in the fringes of the region where opposition and the need for tax dollars of any kind are far more desired than in the major Bay Area cities and suburbs. As a result, opposition to the Supercenters is less intense.

Try as it might, Wal-Mart has failed to build numerous new Supercenters its proposed in many of the most desirable Bay Area cities; cities where it wants to be with that format.

Wal-Mart hasn't had much better luck in the Southern California region, where more than half of California's residents live. It has some Supercenters in the region, but nowhere near the number it wants--or has tried to get approval for.

In fact, it's in Southern California where Wal-Mart has come up with phase two of its plan to open more Supercenters in the Golden State, albeit somewhat smaller than average like the Modesto and Sanger stores, and of a somewhat hybrid nature

The retailer just announced plans to add an additional 25,000 -to- 50,000 square feet on to a number of its Wal-Mart discount stores in Orange County, therby turning them into hybrid Supercenters.

According to John Mendez of Wal-Mart, the stores--like the Modesto Supercenter--will have all the same departments and sell the same food and grocery products that a standard, larger Supercenter does. The departments will just be scaled-back and have a more limited overall product assortment.

Wal-Mart's discount stores sell perishable items like milk, juice and eggs, have some frozen foods, and contain aisles where a limited assortment of grocery products is offered.

The expanded discount stores would still retain all the non-foods departments they currently have but would add a smaller-version of a full-fledged Wal-Mart Supercenter supermarket inside.

Wal-Mart becoming more agil

These two developments, along with Wal-Mart's new, small format (about 15,000 -to- 20,000 square feet) Marketside grocery markets which will make their debut this summer in the Phoenix, Arizona Metropolitan region, are showing that a mega-retailer can also be a nimble one when it comes to format adjustments and creations.

By choosing a Supercenter strategy which includes remodeling existing, smaller buildings like in Modesto and Sanger, and adding on square footage to Wal-Mart discount stores like the retailer plans to do in Orange County, Wal-Mart is showing a new adaptability after years of sticking with the single Supercenter mind set and format.

As a result, the retailer will be able to garner much more of the grocery dollar market share in states like California where the opportunity is there but the jumbo sized singular Supercenter format has proven a barrier to entry.

Additionally, the small-format Marketside stores will give Wal-mart an urban strategy for city's like San Francisco, Oakland, San Jose and Sacramento in Northern California, and Los Angeles and San Diego in Southern California, if it chooses that strategy.

For example, it's impossible for Wal-Mart to get approval, even if it found the space, to built a Supercenter in politically-charged San Francisco. However, it's likely it could get approval--with a bit of a fight still--to buildl a 15,000 -to- 20,000 square foot Marketside store, or two or four in the highly dense city.

The same is the case in urban Los Angeles and San Diego. In terms of the Modesto model of locating a Supercenter in a smaller, existing building, doing so makes it difficult for a city to stop Wal-Mart because the application and permiting process is much different than when building a new store from the ground up. Essentially, a city like Modesto can't prevent Wal-Mart from putting whatever type of store it desires in an existing building like the 105,000 square foot former combined supermarket and drug store location on McHenry Avenue, as long as it files the proper paperwork and meets existing city laws.

The same is the case for the square footage additions the retailer plans to do with some of its Orange County Wal-Mart discount stores. Should the respective cities in Orange County try to hold up or prevent Wal-Mart from adding the additional square footage to those stores, the retailer would easily win in court, since such additions are done by retailers of all types regularly, and preventing Wal-Mart alone from doing it would likely be ruled descriminatory.

Localizing and shrinking new Supercenters

Another strategy Wal-Mart is employing is to design its Supercenter to fit in with a local communities geographic location, setting, culture and history. For example, the brand new Wal-Mart Supercenter in Austin, Texas pictured at the top of this piece, sure looks a bit different than the typical Wal-Mart square, big box Supercenter, doesn't it? It's designed to fit into the more hip, upscale style that is Austin.

The retailer has designed similar "local" Supercenters in Colorado that fit in with the regions rugged mountains and woods, using different roofing and siding on the buildings, in addition to numerous other local touches. One Supercenter in Colorado even has a complete bicycle shop in the store, and Wal-Mart built and paid for bike paths and bike racks on land around the store because the communtiy is a major bicycling area.

These localization design strategies also include shrinking the Supercenters a bit if need be. Wal Mart has built a couple of the mega-stores so far that are in the 130,000 sqaure foot range rather than the average 185,000 size

Marketshare is key regardless of format

Last year, Wal-Mart overtook Kroger Co. as the number one grocery sales market share leader in the U.S. It's a close race between the two retailers though.

What Wal-Mart seems to have finally figured out with its new format flexibility as detailed in this piece, is that grocery marketshare is king, and it doesn't have to just come from a 185,000 -to- 225,000 square foot Supercenter.

In addition to putting the scaled-down Supercenters in the old bg-box buildings like the retailer is doing in Modesto and Sanger, adding the additional square footage for groceries onto the existing discount Wal-Marts in Orange County, and introducing the new, small-format Marketside grocery stores this summer in Arizona, Wal-Mart also is building more of its average 45,000 sqaure foot Neighborhood Market supermarkets this year and next than it has in many years.

This new, muti Supercenter and multi grocery store format strategy should give Wal-Mart additional market share, allowing it to increase its lead over Kroger. The main reason this should be the case is because these strategies will allow it to increase its grocery sales square footage in places like California where it currently has a minimal food and grocery retailing presence because of the inability to open any where near the number of traditional, new Supercenters it has wanted to for over a decade.

The mega-retailer plans to use it hybrid Modesto Supercenter strategy and the Orange County add-on discount store strategy in other parts of the U.S. in which gaining approval for new, built from the ground up Supercenters is a problem.

The Modesto Supercenter strategy also will be used in places like urban areas, where space is of a premium and the idea of acquiring an empty big box building and turning it into a Superstore is a good option.

Further, expect to see Wal-Mart add additional square feet on to other discount stores in other parts of the U.S. this year and beyond. Food and grocery sales are what's allowing the retailer to post strong sales and profit gains like its recently released quarterly profits.

Wal-Mart wants to be able to sell more food and grocery products in all categories in all of its stores--as well as in more places in the USA. As a result, the strategies detailed in this piece will be implemented, along with the buolding of new Supercenters, wherever the brawny big box retailer from Bentonville thinks they make sense.

Retail Memo: Wal-Mart's New Small-Format 'Marketside' Grocery Store Logo Unveiled

Mega-retailer Wal-Mart has published the logo (pictured above) for its new, small-format grocery stores called Marketside, as part of a government trademark filing the retailer made this week.

The new stores, which should open this summer in the Phoenix, Arizona metropolitan region to start, will be about 15,000 square feet.

Thus far, Wal-Mart has applied for liquor licenses for three Marketside "Small-Marts" in the Pheonix region, according to filings there. We know the size of the stores--15,000 square feet--because its listed in the liquor license applications. We also expect the retailer to file at least one more liquor license application soon for a fourth store in the region. As we reported earlier, our sources tell us Wal-Mart's initial plans are for at least four of the small-format markets in the Phoenix suburban area.

The Marketside stores at 15,000 square feet are nearly a third the size of the retailer's current smallest-format grocery store, the 45,000 -to- 48,000 square foot Wal-Mart Neighborhood Market. Le Petite Wal-Mart the Marketside format is indeed.We were one of the first publications to break the story about Wal-Mart's development of the Marketside format back in 2007, when a group of the chain's executives were camped-out in the San Francisco Bay Area researching the small-store format. We've continued to write about the development extensively.

Here is a summary of what we know about the Marketside format thus far:

>The Marketside stores will feature a limited assortment of basic grocery items and a selection of more upscale specialty and natural foods dry grocery items. The stores also will feature fresh meats and produce. The small-format grocery markets will have a selection of fresh, prepared foods' items similar to what Tesco's Fresh & Easy Neighborhood Market format stores in California, Arizona and Nevada have. However, we don't know how extensive the Marketside "Small-Marts'" prepared-foods item mix will be. Fresh & Easy's selection is extensive, and ranges from basic items like macaroni and cheese and meatloaf, to more upscale items like beef steak tips in burgundy sauce and gourmet ethnic prepared foods selections. Fresh will be a major positioning statement and merchandising element of Wal-Mart's Marketside stores.

>Wal-Mart has trade marked two "brand" names, "City Thyme" and "Field & Vine." We suspect these will be two private label brand names the retailer will use for grocery and fresh foods' products in the "Small Marts."

>Two commercial real estate sources tell us Wal-Mart executives have looked in Southern California and Northern California for store locations for the small-format Marketside stores, in addition to Arizona where the first three or four stores will open. [Most of Tesco's Fresh & Easy grocery stores in Arizona are located very close to where Wal-Mart will locate its first stores in the Phoenix metro region. Southern California is the largest target market region for Fresh & Easy stores. Tesco will open at least 18--and probably as many as 40--Fresh & Easy markets in the San Francisco Bay Area beginning in late 2008 or early 2009.]

>Wal-Mart has been working on a major project for some time to develop one or more brands/lines of fresh, prepared foods. We've talked to suppliers in the product development and prepared foods businesses who've told us they've had conversations with Wal-Mart executives regarding the program. We expect the Marketside stores will play a big part in the merchandising of these prepared foods items when they are completed. We aren't sure if Wal-Mart will have certain brands like the ones mentioned above exclusively in the small-format grocery stores. In fact, it's likely the retailer will merchandise the new, prepared foods brands in all of its retail food store banners--Wal-Mart Supercenter, Neighborhood Market and Marketside--as a way to create and extend brand equity.

>Sources have told us Wal-Mart is looking at an urban strategy, as well as a suburban one (the three Arizona stores to date are suburban) for the Marketside "Small-Marts." The retailer is particularly interested in being able to locate the 15,000 -to- 20,000 square foot grocery markets in places they've been unable to put Supercenters because of local government and community group opposition. These regions include the San Francisco Bay Area, other parts of Northern California, and in portions of Southern California. Look for a Marketside store or two in the heart of San Francisco sometime in the not to distant future.

Wal-Mart's Marketside stores are obviously directly targeted at Tesco's Fresh & Easy Neighborhood Market, although the world's largest retailer from Bentonville, Arkansas says they are merely an extensive of the chain's on-going new format development program.

Tesco has to date opened 43 (in only three months) of the small-format (10,000 -to- 13,000 square feet), convenience-oriented Fresh & Easy grocery stores in Arizona, Southern California and Nevada. Fresh & Easy stores sell a limited assortment of everyday grocery items, specialty and natural/organic groceries, fresh produce and meats, some nonfoods, and an extensive selection of fresh, prepared foods. About 65% of the items in the store are sold under the Fresh & Easy store brand. Everyday low-price, especially on the basic grocery items, is a major part of Fresh & Easy's positioning, along with "fresh."

The Marketside banner will be the first new banner in the U.S. for Wal-Mart in about 20 years, according to some esxtensive research we did on Wal-Mart retail format development a couple months ago.

The Marketside logo, which was published on the U.S. Patent and Trademark Office Website as part of the filing, features marketside in lower-case green lettering, next to an attractive pile of fresh food items stacked one atop the other. The logo screems "Upscale," yet minimal; "Green," not just because the lettering is the color green, but subtextually in the environmental sense of the word as well; and "Fresh," depicted by the stacked fresh food items. The logo also has a minimalism to it as we mentioned above, perhaps suggesting the small size of the grocery stores and the "simple" convenience of shopping in them?

Resources:

>Read a couple of our most recent pieces on the Wal-Mart "Marketside" format here.

>To locate numerous other pieces we've written on what we call the "small-format food retailing revolution in America" just type in (one phrase at a time) keywords like small-format grocery stores, Small-Marts, Fresh & Easy Neighborhood Market and small-format revolution in the search box at the top of the blog.