Will the king of megaretailing strike gold again by going small?
A typical Wal-Mart Supercenter averages 187,000 square feet; its discount stores average 108,000 square feet. The Marketplace stores will average just 15,000 square feet, smaller than even its Neighborhood Markets concept, at 42,000 square feet. You can almost feel the claustrophobia.
The first pilot stores are set to open in Arizona in the next few weeks. While the initial run will include 10 such locations, the discount king let slip that it plans to grow them to a chain of some 1,500 units, with more than $10 billion in revenue. The Financial Times reported that Wal-Mart took down those grandiose plans from its website, stressing that the stores were just a pilot program, after the Times contacted the company. But you don't invest large sums of money in a pilot program without have grand schemes in mind, right?
Still, I'm not convinced Wal-Mart will find success here. The concept sounds intriguing, since both Safeway
Yet other big box-stores have reached for a cozy, neighborhood feel and fallen short. Shoe retailer DSW, OfficeMax
Wal-Mart has been able to offer low prices because it uses its massive size to muscle discounts out of suppliers. That might not work so well in the field of fresh produce, where high turnover might not be possible. The Marketplace move also reminds me of Wal-Mart's ill-fated decision to start offering high-fashion clothing. The company learned the hard way that its customers weren't interested in designer duds if they also came at higher prices. If Wal-Mart can't deliver on price when it comes to produce, it might find the Marketplace concept wilting just as quickly.
A tactic like this might work better for SUPERVALU, Safeway, or Kroger
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Fool contributor Rich Duprey owns shares of Wal-Mart and Kroger, but he does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.