Walmart, the quintessentially suburban "big box" retailer, is looking to conquer America's urban areas. The world's largest retailer has been "aggressively" scouting out smaller storefronts in New York, San Francisco, Detroit, and other big cities, and is expected to detail a planned push into the convenience-store market next month. Here's a look at what we know now:
How small is Walmart thinking?
The new urban stores will be about 20,000 square feet — less than one-seventh the size of a typical Supercenter. But that's still "about eight times the size of a 7-11," says Andrew Price in Good, and based on Walmart's previous forays into downsizing, it will probably look for "smaller strip malls rather than storefronts in mixed-used buildings."
Walmart's tried smaller stores before?
It has four test stores in Arizona, under the Marketside brand — focusing on fresh food — that are each around 15,000 square feet. Walmart also has about 200 supermarket-like Neighborhood Markets around the country, averaging 42,000 square feet.
How will the new stores be different?
They will probably fuse the Marketside and Neighborhood Market concepts, says Wall Street Strategies analyst Brian Sozzi. Bill Simon, the head of Walmart's U.S. operations, says the new urban format will "beg, borrow, steal, and learn" from the company's smaller Latin American stores.
Why is Walmart doing this?
It has hit a wall in the U.S., and believes it needs to expand beyond its 4,000+ U.S. locations to boost its profitability. And it isn't the only big retailer thinking small. Rival Target (average store: 125,000 square feet) has outlined plans to open stores in the 60,000-100,000-square-foot range, but is also looking at 20,000-square-foot locations, according to real estate brokers.
Will Walmart succeed?
Attacking cities with smaller stores is "a smart move, instead of coming into a market as a 900-pound gorilla," says real estate executive Faith Consolo. "This is a creative time. Everyone is thinking out of the box." After struggling in urban markets for at least a decade, "the world's largest retailer just might succeed" this time, agrees Matt Chaban in The New York Observer. It's already cracked Chicago, and promising "desperately needed jobs" during a downturn is probably a winning strategy against defenders of local "mom-and-pops."
Should it succeed?
Walmart is a mixed blessing, says Good's Andrew Price. If it brings fresh produce and other healthy fare into urban "food deserts," that "could have real public health benefits." But it's going to be a "bummer" watching Walmart "siphon money away from local economies, depress wages, and kill family businesses." Walmart's new plan will live or die on that tension, says Ben Popken in The Consumerist. "Will urbanites reject the micro-Walmarts? Or has the recession made snobbery unaffordable?"
Sources: AP, Financial Times, Barron's, New York Observer, WalletPop, Good, Consumerist