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.

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 Special Report: Raising (the stakes in) Arizona: Wal-Mart On-Track to Open First Marketside Stores in Arizona This Summer

Wal-Mart, Inc. is on track to open the first four of its new small-format Marketside grocery stores in Arizona this summer. Natural~Specialty Foods Memo was one of the first publications to report and write about the development of Wal-Mart's small-format Marketside last year.

The mega-retailer has added an employment web page to its WalMart.com website to recruit store managers and assistant managers for the four 15,000 square foot Arizona stores, which will be in the cities of Chandler, Tempe, Mesa and Gilbert. You can view the website at: http://www.workformarketside.com/.

As Natural~Specialty Foods Memo described the Marketside format in our previous pieces, Wal Mart is positioning the 15,000 square foot food and grocery markets as being for consumers who "have a passion for fresh and delicious food."

As a result, the stores set to open this summer will offer a mix of basic food and grocery products across all categories, with an emphasis on fresh foods: produce, meats, cheeses, perishables of all kinds and most interesting, fresh, prepared foods prepared right in the stores.

The stores also will offer a limited but strong assortment of basic food and grocery products, including new store brands designed especially for the Marketside stores.

In fact, according to planning documents filed in Arizona, Wal-Mart plans to offer the in-store prepared foods for eating right in the store as well as to take home. The planning documents show in-store kitchens in the Marketside stores, along with food counters or eating bars and seating for about nine -to- 10 people at a time.

The Financial Times newspaper was the first to report this aspect of the Marketside stores on Thursday. Natural~Specialty Foods Memo confirmed it with our Arizona sources, who were among the first to tip us off last year about Arizona being the first U.S. region in which Wal-Mart would open the small-format grocery markets.

Our Arizona commercial real estate sources, who were right on before, also tell us Wal-Mart is searching for additional locations in Arizona for its Marketside stores, especially in the Phoenix Metropolitan region.

In-store venues mixes-up prepared foods game

Preparing fresh foods in-store, and including an in-store eating venue, really mixes-up what is currently the norm in prepared foods' category merchandising in the majority of small-format food and grocery retailing chain stores in the U.S. to date.

For example, although Tesco's Fresh & Easy Neighborhood Market grocery stores have as a major part of their offering the merchandising of lots of fresh, prepared foods; the ready-to-eat and ready-to-heat prepared foods items are all made at a central kitchen in Southern California. [Arizona, along with Southern California and Nevada, are the three market regions where Tesco currently has its 61, 10,000 -to- 13,000 average square foot Fresh & Easy combination basic grocery and fresh foods markets.]

Virtually none of the chain's operating small-format grocery stores--Trader Joe's, Aldi USA, SuperValue Inc.'s Sav-A-Lot, Safeway's new "The Market" small format, and others--prepare ready-to-eat foods in-store in a kitchen and offer "eat"-in seating for customers.

In the case of Safeway, as we reported on Thursday, the grocery chain opened its first "The Market" small format store, called the "Market by Vons," on Thursday in Long Beach, California. Although Safeway isn't preparing foods in-store, it owns a restaurant named Citrine in Redwood City in the San Francisco Bay Area, who's chefs created the prepared foods for sale in the "Market by Vons."

The fresh, prepared foods items, branded under the "World Cuisine" label, are prepared using the chefs' recipes at a central facility or kitchen, then distributed to the store, as they will be to all of Safeway's "The Market" format stores, which average about 15,000 square feet like Wal-Mart's Marketside format.

Tesco's Fresh & Easy Neighborhood Market also had chefs create the prepared foods recipes for its fresh & easy brand ready-to-eat and ready-to-eat items it sells in its small-format stores. The items are made in a large kitchen facility at the grocery chain's distribution center in Riverside County, California and then delivered to the stores in Southern California, Arizona and Nevada.

In-store prepared foods as a point of difference

Wal-Mart could be on to something by preparing the foods in-store rather than at a central commissary. Consumer surveys for years in the U.S., asking shoppers if they prefer in-store prepared foods or those prepared at an outside kitchen and shipped to the stores, have overwhelming shown a preference on the part of consumers for in-store prepared foods rather than those produced at a central commissary or kitchen and shipped to the stores.

Consumers say they believe in-store prepared foods are fresher, healthier and taste better than those from a central kitchen facility. They also say in the surveys they like the idea of knowing the prepared food items were prepared right in the store rather than outside and shipped in because that way they have a better idea as to the freshness of the product.

Having a kitchen along with seating in the Marketside stores also should add a better since of place and atmosphere to the small-format grocery markets, something Tesco's Fresh & Easy grocery stores are lacking in our analysis. It also could offer a significant point of difference for the Marketside stores, especially compared to Tesco's Fresh & Easy stores.

The in-store kitchen and seating area also should reinforce Wal-Mart's "freshness" and "quality" positioning for the Marketside stores, since generally preparing food in-store like Whole Foods' Market and many other upscale grocers do is a sign of a commitment to freshness, especially in terms of consumer perceptions.

Of course, the food prepared in the Marketside stores for eating in-store or taking home needs to taste good and be fairly healthy in terms of ingredients, otherwise in-store prepared vs. central kitchen prepared really becomes a moot point. Quality-control also must be high. After all, the kitchen is right there for all to see. Do it wrong or do it in a messy way and its a negative.

As we reported here, Wal-Mart's Marketside team did its initial research and development for the small-format food stores in the San Francisco Bay Area, spending time staying in the region and studying various successful upscale grocers' in-store prepared foods programs while there.

Team Marketside also met with a number of culinary professionals while in the bay Area, as well as doing so elsewhere, to discuss potential fresh, prepared foods concepts, ideas and strategies.

We've learned Wal-Mart retained a chef or two, we can't confirm they are from the Bay Area but believe so, to create the recipes for the Marketside menu, both the foods prepared in-store for eating there and those prepared in-store for take-out.

In other words, it appears Wal-Mart not only did its research, looking for best practices in in-store prepared foods operations, but also retained highly-trained, experienced chefs to create the recipes for the retailer's prepared foods program. It's going to be very interesting to see the quality level of the Marketside in-store prepared foods when the stores open in a month or two in Arizona.

We also know pricing in the Marketside stores, in dry grocery as well as fresh foods, is going to be discount and competitive. We've learned that although the grocery prices might be a bit higher than those in Wal-Mart's Supercenters, if so it won't be by much at all.

Additionally, the Marketside store prices will be no higher than those in the retailer's Wal-Mart Neighborhood market supermarkets, which at about 45,000 square feet are still three-times larger than the Marketside format stores.

Wal-Mart plans to introduce some new store brand grocery items when it opens the Marketside stores. These new private label products will be discount-priced. As we reported before, the retailer has trademarked two brand names, "City Thyme" and Field and Vine," which we expect to see on various food and grocery products when the Marketside stores open this summer. There could be other brand names as well.

Wal-Mart also is opening an office in Phoenix, Arizona, which the retailer will operate the Marketside stores from, which also indicates more units will be on the way. Retailers seldom open central offices for just four stores.

Going for market dominance in Arizona

That Wal-Mart chose the Arizona market to launch its new small-format Marketside stores is hardly an accident. Arizona is one of the retailer's top U.S. markets. It's also one of Wal-Mart's top U.S. growth markets.

Wal-Mart currently operates 60 Supercenters in Arizona, ranging from about 180,000 square feet -to- its two newest units which are over 200,000 square feet, including even more of that space devoted to selling food and groceries than earlier Supercenter format stores.

The brawny big-box (and now small-box as well) retailer from Bentonville (Arkansas) also operates 14 of its Sam's Club Warehouse stores, which sell lots of groceries and fresh foods, and 17 of its 45,000 square foot Neighborhood market supermarkets An the state.

Wal-Mart also has a couple more Supercenters in the works for the state, and has plans to open at least three more Neighborhood Markets this year and early next year.

We don't need to do the math for you; as you can add up, Wal-Mart has lots of food and grocery retailing square footage in Arizona, with more on the way, both with the additional Supercenters and Neighborhood Markets, and the four new Marketside grocery stores set to open before the summer is over.

Just add up all the current and coming on line food and grocery retailing square footage for Wal-Mart in Arizona. Even if Tesco were to open 100 more Fresh & Easy stores in the market, it wouldn't come close to matching Wal-Mart's total square footage.

Of course, Arizona also is the number two target market for Tesco, after Southern California, for its Fresh & Easy small-format grocery stores. The retailer currently has about 18 of the combination basic grocery and fresh foods markets in Arizona, with many more on the way.

However, although we believe Wal-Mart is likely to open more than the four initial Marketside stores in Arizona, the retailer isn't looking at a mass store rollout like Tesco is doing in the state with its Fresh & Easy.

[At a recent commercial real estate industry conference in Arizona, Tesco's Fresh & Easy Neighborhood Market said it believes Arizona has room for it to open an additional 100 of its small-format grocery stores in the state. We aren't real sure about that. In fact, we think the Arizona market is approaching "over-stored" status.]

After all, with Marketside, Wal-Mart will be conducting a multi-format food and grocery retailing strategy in Arizona: Supercenters, Wal-Mart discount stores (which also sell lots of food and grocery products) Neighborhood Markets and Marketside. Therefore, we believe the retailer will use the Marketside format more strategically in the Arizona market in conjunction with the other formats it operates in the state.

Wal-Mart also recently opened its first store dedicated entirely to Hispanic consumers in Texas. Since Arizona has one of the highest per-capita Hispanic or Latino populations in the U.S., don't be surprised if Wal-Mart adds this other new format to the mix in Arizona. [Read our piece on Wal-Mart's new Hispanic format store here.]

Marketside & Fresh & Easy

However, it's important to note all four of the initial Arizona Marketside stores are being located near existing Tesco Fresh & Easy Neighborhood Market stores. While Wal-Mart says the Marketside format is merely an evolution in ongoing new format development for the retailer, the stores basic grocery and fresh foods positioning--with a few twists like the in-store prepared foods--also is directly aimed at Tesco's Fresh & Easy.

And Wal-Mart's initial location targeting could be tough for Tesco's fledgling Fresh & Easy chain, especially in Arizona where it now won't only be faced with competing against Wal-Mart's Supercenters and Neighborhood Markets (a number of which are close to Fresh & Easy stores as well) but also the myriad of other grocers in what is arguably today the most competitive food and grocery retailing market in the U.S.

Along with Wal-Mart in the Arizona market, there's hometown-based Bashas, Safeway Stores' Arizona division, Albertsons, Trader Joe's, Whole Foods Market, Sprouts Farmers Markets, Sunflower Farmers Market, and a host of others including some very competitive independents and and ethnic grocers. It seems to us there's only so much "share of stomach" in any market, and it will be interesting to see if all these players can survive in Arizona.

As we've written before, in addition to possibly putting Tesco on the ropes, Marketside offers Wal-Mart a host of other win-win options.

For example, it allows the retailer a format it can pop into places where getting one of its Supercenters approved by a county or city is impossible, or will require a big fight.

Marketside also gives Wal-Mart an urban format. For example, it can now have a food and grocery retailing presence in cities like San Francisco and urban Los Angeles in California, New York City and Boston on the east coast, and elsewhere (Seattle, Denver) where urban density (and often politics) prohibits a Supercenter, and in many cases even a Wal-Mart Neighborhood Market, from being located.

For example, the city of Chicago just last week shot down plans Wal-Mart had to build a Supercenter in the city. We doubt the city of Chicago would be as likely to deny Wal-Mart a permit for a 15,000 square foot (or numerous 15,000 square foot) Marketside grocery stores in the city, especially in the inner-city where there is a shortage of grocery stores.

Wal-Mart isn't using the Wal-Mart name on Marketside, like it does with all of its other formats. This is by design, as the retailer believes it will do better with the small-format, more upscale stores by branding them merely Marketside, sans the Wal-Mart name.

Interestingly, Tesco doesn't use "Tesco" at all in regards to its Fresh & Easy Neighborhood Market small-format USA venture: not in the name, in the branding, or even in its press releases. This is the opposite of what the United Kingdom-based international retailer does in the rest of the world, where it uses and associates the Tesco name in all its retail formats, like "Tesco Express," Tesco Extra," and the like.

On the other hand, Safeway is using the "Safeway" name and brand prominently in its new small-format food retailing venture. It's 'The market" format co-brands the region's chain banner with the "Market" name. For example, the first store which opened in Long Beach, California last Thursday is called the "Market by Vons." Safeway operates Vons-banner stores in the region. All "The Market" format stores in Southern California will be named the "Market by Vons."

In Northern California, the Pacific Northwest, Arizona, Colorado, and the Washington D.C.-Maryland-Virgina tri-state region where Safeway's stores fly under the "Safeway" banner, the stores will be named the "Market by Safeway." In other Safeway market regions the stores will go by whatever banner the retailer operates in that given region: "The Market" by...Dominick's, Genuardis, Carrs, for example.

Small-format food and grocery retailing revolution marches on

Last year, Natural~Specialty Foods Memo proclaimed there is a small format food and grocery retailing revolution going on in the United States. Some people said that was an exaggeration. We politely told them to wait and see.

Well, the largest corporation and retailer in the world as well as in the U.S., Wal-Mart, is now a participant in the small-format food retailing game in its home country of the U.S., with its 15,000 square foot Marketside stores soon to open in Arizona. (Wal-Mart has operated small-format stores, not Marketside but somewhat similar, for some time now in parts of Latin America.)

Additionally, the world's number three retailer, Tesco, is staking much of its reputation and cash on its Fresh & Easy USA small-format grocery retailing venture.

Further, the number two--SuperValu, Inc.--and number three--Safeway Stores, Inc.--supermarket chains in the U.S. are participants in the small-format food and grocery retailing revolution in in the U.S. SuperValue, with its small-format discount Sav-A-Lot chain and Safeway, with its new "The Market" format venture.

If that's not enough evidence, major small-format players include Wawa Markets in Pennsylvania, which has been a successful operator of hundreds of small-format hybrid convenience/grocery stores featuring lots of fresh, prepared foods along with basic groceries for decades.

Then there's Aldi USA, with nearly 900 small-format discount stores in the USA, and plans to build up to 100 new stores per-year over the next five years. [Aldi doesn't mess around with banners. It's uses Aldi on its small-format stores throughout the world.]

Whole Foods Market, Inc. also is entering small-format retailing with its Whole Foods Express format, which will feature lots of fresh, prepared foods, along with natural and organic products in a 15,00 -to- 20,000 square foot format store. The first Whole Foods Express store is set to open soon in a converted Wild Oats natural foods market in Boulder, Colorado.

The small-format food and grocery store retailing revolution might not be televised, but its happening anyway. And, we are covering it completely, and regularly. Stay tuned.

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.

Small-Format Food Retailing Memo: Wal-Mart to Open Small-Format, 'Small-Mart' Marketside Stores in Arizona on October 4

From the Natural~Specialty Foods Memo Editor's Desk: Wal-Mart will open its four small-format grceory and fresh foods Marketside stores in Chandler, Gilbert Mesa and Tempe, Arizona in the Phoenix Metropolitan market on October 4, according to its marketside.com website and a report in the blog Fresh & Easy Buzz.

As our readers know, we've covered Wal-Mart's Marketside format ('Small-Mart's being a term we coined for the stores) development extensively, beginning in September of 2007.

The Arizona stores are the first for Marketside units for Wal-Mart. Wal-Mart thus far plans to open two Marketside stores in Southern California, one in San Diego and another in the nearby city of Oceanside, according to our sources. Wal-Mart has not publicly announced the two California locations.

Additionally, we've reported Wal-Mart has plans to open more Marketside stores in Arizona -- besides the first four opening in 11 days -- as well as doing the same in Southern California, along with opening some of the small-format grocery and fresh foods markets in Northern California, particularly in the San Francisco Bay Area. Also, Wal-Mart has looked at opening a Marketside store in the Reno area, in Northern Nevada.


Below is the report from Fresh & Easy Buzz. Natural~Specialty Foods Memo is working on an analysis piece regarding the Marketside stores opening on October 4. We hope to have it published soon.

From Fresh & Easy Buzz: Wednesday, September 24, 2008

Breaking News: Wal-Mart to Open its Four Marketside Food and Grocery Markets in the Phoeniz, AZ Metropolitan Region on October 4

As we've been reporting on Fresh & Easy Buzz for months, Wal-Mart, Inc. has planned an early Fall, 2008 opening of its small-format, combination grocery and in-store fresh, prepared foods Marketside stores in the Phoenix, Arizona Metropolitan region.

Wal-Mart has now announced and confirmed on its http://www.marketside.com/ website the specific date the four Marketside grocery markets will open in the Phoenix Metropolitan region cities of Gilbert, Mesa, Chandler and Tempe.

All four Marketside stores are set to Open on Saturday, October 4, just 11 days from today, according to the announcement on the Marketside website. [Click here to see the announcement (look in the right corner) on the website. Click here for maps showing the location of each store in the four Arizona cities.

Click here to read the rest of the story from Fresh & Easy Buzz.

[Editor's Note -- the photos: The photograph at the top is of the Wal-Mart Marketside store in Mesa, Arizona. The picture was taken in late August, 2008. The second photograph shows what the inside of a Marketside store looks like (at least a small portion of it). Additionally, the aprons the three clerks in the picture are wearing are the Marketside store employee uniforms. The photo is from the Marketside.com website.]

Small-Format Food Retailing Special Report: Wal-Mart USA Chief Confirms NSFM 'Marketside' Reports and Adds A Little News At Friday's Annual Meeting

From the Wal-Mart Annual Meeting, June 6, 2008

Eduardo Castro-Wright, chief executive of Wal-Mart, Inc.'s United States operations, confirmed a number of developments we've been reporting on about the mega-retailer's new small-format Marketside grocery stores, the first four which are set to open this summer in Arizona's Phoenix Metropolitan region--which is one of Tesco's current three key market areas, along with Southern California and the Las Vegas, Nevada Metropolitan region--for It's small-format Fresh & Easy combination basis grocery and fresh foods stores--on Friday at Wal-Mart's annual shareholder's meeting in Arkansas.

Castro-Wright said Wal-Mart's retail positioning in the Arizona market with the 15,000 square foot Marketside stores is primarily as a grocery shopping "fill-in" venue, along with being a store where shoppers can buy fresh, prepared foods for tonight's dinner and tomorrow's lunch.

Wal-Mart's theory behind Marketside for the Arizona market is that shoppers might shop at a Wal-Mart Supercenter once a month, shop its 45,000 square foot Neighborhood Markets supermarkets say every two weeks, and use Marketside--which will offer a limited assortment of grocery products and have a focus on fresh foods--for fill-in shopping, as well as for what will be its extensive selection of fresh, prepared foods made right in the store.

Wal-Mart currently has about 70 Supercenters in Arizona, ranging in size from about 170,000 square feet to 200,000 square feet, and is opening and building more. The mega-retailer also has about 20 of its 45,000 square foot Neighborhood Markets in the state, the majority of which are in the Phoenix area, with three more to be opened this year.

Additionally, the brawny big box retailer (and now small box too) from Bentonville (Arkansas)has a number of its discount format stores, which sell a limited assortment of grocery items including perishables in them, in the state. However, it isn't building more of these stores in Arizona. Rather, the focus is on more new Supercenters, Neighborhood Markets and now the Marketside stores. That's a pretty strong three-format food retailing strategy in a market.

As we've reported previously in Natural~Specialty Foods Memo, the Marketside stores also will have an in-store seating area next to the kitchen where the foods will be prepared, with room for about 10 people at a time, where customers can sit and eat-in. Take out will be the primary focus, and potential sales generator, for the stores' fresh, prepared foods offerings though.

This fill-in shopping strategy might not be the case in other market regions however. For example, in parts of Southern California and the San Francisco Bay Area (where Wal-Mart is scouting sites for Marketside stores), which are areas where Wal-Mart has relatively few Supercenters or Neighborhood Markets, the small-format Marketside stores could take on more of a primary and secondary shopping positioning focus, especially in higher density urban locations.

Castro-Wright wouldn't confirm or deny a question asked by a Natural~Specialty Foods Memo correspondent, which was: "Has Wal-Mart found any locations for the Marketside stores yet in Southern California or the San Francisco Bay Area that it's ready to announce?" The Wal-Mart chief said no; but our correspondent said he smiled when he gave the two word answer.

Castro-Wright said Wal-Mart doesn't talk much about its Marketside stores. He did confirm those first four stores will be opening this summer in the Phoenix Metro market, as we reported here though.

The Wal-Mart USA chief also confirmed the Marketside stores will offer a limited assortment of grocery items, even compared to its 45,000 square foot Neighborhood Market stores, and will put a major focus on fresh foods--produce, meats, perishables and especially the in-store fresh, prepared foods.

Castro-Wright offered the retailer's positioning for Marketside in a sentence: "The neighborhood market for busy people with a taste for fresh and delicious food."

"The intent is to capture more of the quick trip customers," he added.

This is a much different strategy than Tesco has with its Fresh & Easy grocery stores, which the retailer is positioning as primary, and to a limited extent secondary, neighborhood grocery stores for "everybody." In other words, while Wal-Mart seems intend to be happy if it can garner the "quick trip" and "fill-in" business, Tesco's strategy as we often discuss is to get as much of a shopper's food and grocery dollar as it can in its Fresh & Easy grocery markets.

Of course, Wal-Mart has a multi-format strategy--food and general merchandise Supercenters which average about 180,000 square feet, Neighborhood Markets of about 45,000 square feet,

Wal-Mart discount stores which sell lots of food and grocery products in them, ranging from 75,000 -to- 130,000 square feet, and now Marketside--while Tesco currently has a single-format food retailing strategy in the Western U.S.

Wal-Mart's Marketside stores though are intentionally striking at the heart of Tesco's two-pronged merchandising focus--a limited assortment of store brand and national brand basic groceries at everyday low prices, combined with fresh, prepared foods (and other fresh foods) produced at a central kitchen and shipped to the stores.

Marketside's fresh, prepared foods focus--which differs from Fresh & Easy's in that the foods will be prepared right in the store--could eat into the fresh, prepared foods focus of Tesco's, which is central to the Fresh & Easy stores positioning and merchandising. It's sort of a half grocery store, half fresh foods market, to put it simply.

We expect Wal-Mart to make a very big deal about the fact Marketside's fresh, prepared foods will be made in-store rather than at a central kitchen and shipped to the stores like is the case with Tesco's Fresh & Easy. One isn't superior to the other merely on the face of it though. For example, if Marketside's in-store fresh, prepared foods don't taste as good as Fresh & Easy's, the point of differentiation won't exist. Further, since Wal-Mart isn't known as a fresh foods expert retailer--they have brought some in for Marketside though--it will be interesting to assess the quality of the in-store prepared foods when the first Marketside store opens in Arizona.

However, American consumers generally show a preference for fresh, prepared foods made in-store vs. those prepared at a central facility and shipped to the stores, even if shipped daily. Although taste and quality--including no or few artificial preservatives, additives, colorings and the like--are what's key.

You can see this "super fresh" positioning for Marketside in that one sentence positioning statement though. And, of course, Wal-Mart is attempting to make that same statement in the Marketside logo, with the FRESH produce vertically stacked next to the text.

Where Tesco's Fresh & Easy (F&E) is more related to Trader Joe's in terms of its design, look and feel--both are fairly no frills, both use warehouse type shelves, F&E is modeling itself a bit on TJ's quirky look and feel--and to a certain extent merchandising--TJ's doesn't sell basic grocery items like Fresh & Easy does, nor are fresh, prepared foods a central part of its merchandising, but there are many similarities in the store brand and specialty focuses--we believe Marketside will be more kin to Safeway Stores, Inc.'s new "The Market" format, the first store of which opened on May 15 in Long Beach, in Southern California.

Safeway's "The Market" doesn't prepare most of its fresh, prepared foods in-store though. Rather, the fresh entrees and side dishes--which were developed at Safeway-owned Citron restaurant in Redwood City in the San Francisco Bay Area--are prepared at a central facility like Fresh & Easy's. The first (and currently only) store though, "the Market by Vons" in Long Beach, does have a wood burning hearth in it, which is used to bake fresh breads, pizzas and a few other prepared foods items in-store. We're told this will be a feature in all of the retailer's small-format "The Market" stores.

If anybody doubts there's a small-format grocery store revolution brewing in the U.S., they haven't talked to Tesco (world's third-largest retailer), Wal-Mart (world's and U.S.'s largest retailer) or Safeway (number three supermarket chain in the U.S.).

For that matter, they also haven't talked with SuperValu, the second-largest supermarket chain in the U.S. after Kroger Co. SuperValu has about 1,500 of its small-format (about 15,000 square feet) discount Sav-A-Lot grocery stores already in the U.S., and is opening more, including franchising more of them to independent operators.

There's also Germany's Aldi, which is one of the fastest-growing grocers in the U.S. Aldi USA currently has about 900 of its small-format (13,000 -to- 15,000 square feet) Aldi discount grocery stores in the U.S. and is building nearly 100 of the little price-impact grocery stores in America each year for the next five years. Members of the family who own Aldi International based in Germany also own Trader Joe's, which like Tesco's Fresh & Easy USA is based in Southern California.

Although Wal-Mart's Castro Wright wouldn't speak to it at the shareholders meeting or press conference after, we have it on pretty good authority "source-wise" that Marketside is a national strategy for the mega-retailer rather than merely a limited store test in one market--the Phoenix Metropolitan region.

This information is backed up by various commercial real estate agents we've talked with who have told us about Wal-Mart's looking for Marketside store sites in Southern California, Northern California, Nevada, Utah, the Pacific Northwest and elsewhere.

We are unable to confirm it yet, but we have two sources telling us the first of the four Phoenix Metro region Marketside stores could open as early as shortly before the July 4 Independence Day holiday. We continue to try to further confirm that information.

Wal-Mart isn't announcing any opening dates yet, as can be expected since the retailer has been very quiet, like Castro-Wright himself admitted at today's shareholders' meeting--about Marketside. Officially of course. However, that soon will be a moot point as summer is upon us.

Small-Format Food Retailing Memo: Wal-Mart's Small-Format Marketside 'Developer-in-Chief' Leaving for CEO Position at British Bicycle Retailer

David Wild, Wal-Mart, Inc.'s senior vice president of business development and the company executive who's been in charge of its new small-format Marketside grocery and fresh food format stores, is leaving the world's largest retailer to accept a position as CEO of Halfords Group PLC, the United Kingdom's largest retailer of car parts and bicycles, according to a statement just released by the Redditch, England-based company.

Wild was named to the position of senior vice president of business development at Wal-Mart in January, 2007. He held other executive positions with the company prior to that appointment.

Wild, who spent 18 years with UK-based Tesco PLC, will start his CEO duties at Halfords Group PLC on August 4, according to the statement.

In an interesting twist, he succeeds former CEO Ian McLeod, who left the car parts and bicycle retailer to run Australian supermarket chain Coles Group Ltd. as CEO. Halfords Group PLC apparently likes food and grocery retailing CEO's, as its replacing one, Ian McLeod, with another, David Wild. McLeod and Wild aren't strangers either. Both worked for Wal-Mart in Germany before the mega-retailer exited the German market in 2006.

During his 18 years with Tesco PLC, Wild was heavily involved with the retailer's European expansion, including having a hand in the development of its successful Tesco Express small format combination convenience and grocery stores in Europe.

"He (David Wild) brings over 20 years' retailing experience, gained at two world-leading businesses (Tesco and Wal-Mart), and clearly has the skills and ability to move the company forward,'' Halfords Group PLC Chairman Richard Pym said in the statement. "We are confident that David will add tremendous value to Halfords.''

Wal-Mart put David Wild in charge of spearheading its Marketside small-format combination grocery and fresh foods store development project in part because of his extensive experience at Tesco, which has been an innovator in small format food retailing with its Tesco Express stores in the UK and elsewhere in Europe, and now with its Fresh & Easy Neighborhood Market small-format, convenience-oriented grocery markets in the Western USA.

Wild led the Marketside development team, as we first reported in late 2007, in San Francisco where the group first conducted extensive format and consumer research and planned, developed and honed the concept and format. Wal-Mart has an office near San Francisco where it operates aspects of its Wal-Mart.com business.

Wild also has been the corporate cheerleader for Marketside inside Wal-Mart, Inc., and was the one who championed having the stores' prepare fresh foods in-store in kitchens rather than having the fresh, prepared foods made at a central kitchen and shipped to the stores like Tesco is doing with its Fresh & Easy Neighborhood market stores.

Wal-Mart's first four Marketside stores are set to open in the Phoenix, Arizona Metropolitan region this summer, as we've reported in Fresh & Easy Buzz.

Additionally, as Natural~Specialty Foods Memo has reported, Wal-Mart is looking for sites for the small-format Marketside stores in both Northern and Southern California. We also reported here that Wal-Mart is likely to be locating a Marketside store in this new development in Reno, Nevada.

Since the development phase for Marketside is complete, and the first four stores are set to open soon, its unclear if Wild's leaving Wal-Mart will be a setback for the retailer and Marketside. At this point, according to our Wal-Mart sources, operations is taking priority over development with Marketside, as the company has set up an office in Phoenix and is currently hiring managers and assistant managers for the four stores, along with getting the stores ready to open.

As the senior vice president of business development, Wild was preparing to move on to some new ventures in his position at Wal-Mart, therefore his timing in terms of leaving and accepting the CEO position at Halfords isn't likely to create a major shakeup with Marketside, although as the new format's head developer and cheerleader he will obviously leave somewhat of a void.

Wild isn't starting at Halfords Group PLC until August 4. And our Wal-Mart sources tell us in part that's because he wants to be around when the first of the Marketside stores opens in Arizona. In other words--and you read it here first--the first Arizona Wal-Mart Marketside grocery and fresh foods store will open before August 4, 2008.

Retail Memo: Wal Mart Has Created A New, More Upscale Supercenter Store Design Prototype; Submitting Plans For the Stores Selectively in U.S.

Wal-Mart, Inc. has created a new Supercenter design prototype (pictured above) which the retailer is currently submitting plans for to a select number of cities and counties in the U.S. where it hopes to build and open the first of these new design stores.

The prototype Supercenter, pictured at top in the artist's rendering of the design, has a completely different look and feel compared to the retailer's existing battleship blue and grey Supercenters.

The new Supercenter prototype is much sleeker in design than Wal-Mart's existing traditional big box Supercenter design and is rather upscale in its look and feel.

It still is a big box store in that it will feature all of Wal-Mart's traditional Supercenter departments, but it also has numerous new features and elements including: glass windows or large skylights on the roof to let in natural sunlight; numerous green building design elements which Wal-Mart has been using in its prototype "green" Supercenters for some time; and energy-efficient lighting systems that turn on when they detect a shopper and off when shoppers leave the particular area of the store.

The new design prototype Supercenter also features new department titles or names throughout the store, less clutter and in-store signage, curved lines rather than the square edges common in Wal-Mart's traditional Supercenters, and multiple earth-tone colors used throughout the store rather than the traditional blue and grey-only standard color scheme.

The new Supercenter prototype also features a new Wal-Mart logo to be placed on the stores. The new logo has two color schemes we've viewed. The first color scheme (pictured above) has blue lettering with a gold/orange starburst after "Wal-Mart." The second color scheme has "Walmart" in white letters on an orange background, with a white starburst after.

Wal-Mart, Inc. plans to officially unveil a new corporate logo next week, something that's being anxiously anticipated by company stakeholders, analysts and others. We believe Wal-Mart's new corporate logo might well be the one above, in one or the other color schemes. You read it (and viewed the logo) here first.

One of the handful of U.S. cities and counties Wal-Mart has submitted plans to for the new Supercenter prototype stores is Cordova, in Shelby County, Tennessee, according to a senior Wal-Mart official.

That plan initially called for the new design prototype Supercenter to be a whopping 267,000 square feet, which would have made it Wal-Mart's largest Supercenter built to date.

However, the Shelby County Land Use Control Board rejected the mega-retailer's plan for the mega-Supercenter earlier this year because of extensive objections by nearby residents over its size, along with having concerns about potential noise and traffic issues. The Supercenter's size also was objected to by the Shelby County Division of Planning and Development, along with it having some serious concerns about increased traffic on existing roads.

Wal-Mart went back to the drawing board, and on July 10 will present a revised plan to the Shelby County Land Use Control Board for a much smaller 151,908 new design prototype Supercenter for the same site in Cordova, in Shelby County, according to the senior Wal-Mart official. Cordova is near Memphis. The Supercenter site is at Macon and Houston Levee in Cordova. The county has jurisdiction over planning in Cordova.

The design elements of the revised, smaller 151,908 square foot Supercenter are identical to those of the initial 267,000 proposed monster-store, acccording to the Wal-Mart senior official. The only change is one of scale, he says.

One of the features of the new design prototype Supercenter is that it can be of variing sizes--as big as the 267,000 square foot model (and bigger if desired) described above, and as small as about 100,000 square feet. This feature allows Wal-Mart to moreeasily adapt the prototype to specific neighborhoods, as well as municipal and county political situations aand conditions.

The site for the Supercenter in Cordova, in Shelby County, Tennessee, is a 26-acre development which includes numerous other commercial buildings besides the proposed Supercenter. Wal-Mart has a contract to buy the land on which the proposed Supercenter would sit and will do so if its plans for the 151,908 square foot new design prototype Supercenter are approved by the county land use board, according to the senior Wal-Mart official.

If approved at or not to long after the Shelby County Land Use Control Board meeting on July 10, when Wal-Mart officials will present the revised Supercenter plan, we're told by the Wal-Mart senior official the Tennessee new design prototype likely will be the first of the new design Superstores to be built and opened in the U.S.

It's far from certain the revised Supercenter will gain approval however. There remains much opposition to it among various citizens and groups in the area, although thy've yet to see Wal-Mart's plans for the smaller Supercenter.

The Supercenter's opponents' primary concerns are traffic and noise. The county also has concernes because it says it will have to spend a considerable amount of money on road and intersection improvements because of the heavy volume of automobile traffic the new Supercenter will generate in the area.

What's significant though, at least for this piece, is that Wal-Mart has created this new age design Supercenter prototype. You can bet if this particular new Supercenter doesn't get built in this particular part of Tennessee, one of the new design Supercenters will be built soon elsewhere in the U.S.

As we wrote about here, Wal-Mart has become flexible with its Supercenter size recently, when historically it's been rigid over tweaking the size of the mega-stores. For example, the retailer is converting a 105,000 square foot former big box retail building in Modesto, California into a Supercenter which will be one of only two in that small size range it currently has. The other is near Fresno, California.

Additionally, as we reported here, Wal-Mart is converting a number of its Wal-Mart discount format stores in Southern California's Orange County into Supercenters, adding about 50,000 -to- 75,000 square feet to them, which will be used for food and grocery (including fresh foods) product merchandising.

These "hybrid" Supercenters will be much smaller than the average 180,000 square foot Wal-Mart Supercenter but will allow for a full selection of fresh foods and grocery products to be sold in them, which is a top priority for the mega-retailer, since food and grocery now comprise 41% of Wal-Mart's overall sales, according to the most recent categorysales numbers from the retailer.

Despite being the world's largest corporation and retailer, Wal-Mart isn't letting that prevent it from innovating. In fact, when it comes to retail format innovation, Wal-Mart is currently innovating more so than it's done at any time in its history.

In addition to the multi-format Supercenter concepts mentioned above, along with Wal-Mart's "green Wal-Mart Supercenter prototype, the mega-retailer is set to open its new Marketside small-format grocery stores, or what we call "Small-Mart's," in four cities in the Phoenix, Arizona Metropolitan region this fall.

The Marketside "Small-Marts" at about 15,000 square feet are about the size of the meat department in one of the retailer's 200,000 square foot Supercenters.

The stores are being positioned by Wal-Mart as small community grocery stores with a focus on service. The product merchandising focus in the Marketside stores will be in-store made fresh, prepared foods, fresh produce and meats, and basic and specialty grocery products, including some new store brands to be introduced by Wal-Mart just for the Marketside grocery stores.

Additionally, Natural~Specialty Foods Memo has learned Wal-Mart plans to convert more former big box stores in the 100,000 square foot range into smaller Supercenters like it's doing in Modesto, California, in other selected cities which like Modesto it's been difficult if not impossible for the retailer to get new Supercenters approved due to extensive city and community opposition. This is particularly true in California.

Further, as we wrote about in this May 6 piece, "Ethnic Retailing Memo: Wal-Mart to Open the First Store of its 'Hispanic Community' Store Ethnic Retailing Format Tomorrow Morning in Garland, Texas," Wal-Mart also recently created a brand new "Hispanic Community Sstore" format, opening the first one in a converted Supercenter in Garland, Texas in May.

Lastly on the format innovation front, we've learned Wal-Mart is working on some new design changes, tweaks and upgrades to its 45,000 square foot Neighborhood Market supermarkets. The retailer hasn't done much in terms of expanding its Neighborhood Market store count since it created the format and opened the first store in 1998. However, in the last couple years its opened a higher than historic annual average number of the supermarkets, and plans on continuing to do so for the next few years in select regions of the U.S.

For the last few years, Wal-Mart has been customizing the design of its Supercenters in a few regions of the U.S., where doing so has helped it to gain approval for the stores. For example, in Colorado, Wal-Mart has built two Supercenters that blend in with the respective communities' mountain setting, using earth-tone colors and brick on the store facades rather than the traditional blue and grey-colored materials it normally uses, as well as adding features like bicycle paths around the store, and even a bicycle shop inside one of the Colorado stores.

It appears to Natural~Specialty Foods Memo the new design prototye Supercenter is an evolution of that customization as well as a "mass customizatio"n of many elements of the handful of "green" Wal-Mart Supercenters the retailer has opened over the last few years in the U.S.

The flexibility of the new design prototype Supercenter--to go from say 267,000 square feet -to 152,000 sqaure feet for example--also has an element of "mass customization" in it which should serve Wal-Mart well.

The fact the new design prototype Supercenter is much more upscale and attractive than the basic format Supercenter (which wouldn't take much), seems to send a signal from the brawny big box retailer from Bentonville it believes its low and value price positioning won't be hurt by housing such merchandising--the key to the retailer's success--in a more sleek, upscale and considerably more attractive retail box (a box with lines even).

As far as we are aware, Wal-Mart doesn't intend at this point in time to completely do away with its standard Wal-Mart Supercenter battleship blue and grey big box. Although, based on conversations with our sources, we suspect eventually doing so will be the case for the mega-retailer from Arkansas, especially if the new logo Wal-Mart unveils next one is the one we have pictured in this story.

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.