Wal-Mart Stores Inc. knows it needs a lesson or two in consumer convenience. It’s true the behemoth’s supercenter offers one type of convenience — one-stop shopping. But weaker customer traffic patterns and impatient consumer behaviors have prompted Wal-Mart to test its own version of the quick-trip convenience store at one of the busiest intersections in its hometown of Bentonville.
Wal-Mart spokeswoman Deisha Barnett told The City Wire that the small convenience store under construction near the intersections of Walton Boulevard and S.E. 14th St., will open sometime in the spring of 2014.
“The store will offer customers a quick and easy solution for gas, snacks and beverages, and other staples like milk, bread and eggs. We know this type of convenience store is popular with customers. We’re excited about the opportunity to test a new store and learn,” Barnett said.
A typical convenience store is roughly 2,500 square-feet, the same size as the retailer’s three college campus stores. The new convenience store model in Bentonville will sell fuel, unlike the campus stores at the University of Arkansas in Fayetteville, Arizona State University in Tempe and the Georgia Institute of Technology in Atlanta.
Wal-Mart continues to report weakening traffic and a decline in stock-up trips over the past several quarters and at the same time has recognized a meaningful jump in those consumers purchasing smaller baskets of fresh items.
Analysts applaud Wal-Mart for this latest test in the convenience format, as the retailer has the opportunity to leverage huge scale for the low prices, but also give the consumers the time savings they crave.
“Testing a Wal-Mart branded convenience store makes sense given the retailer’s push into smaller Express and Campus stores. They still have a lot to learn in this area and testing multiple small store formats allows them to zero in on what works and what doesn’t,” said Jason Long, CEO of Shift Marketing Group.
Carol Spieckerman, CEO of New Market Builders, said convenience is the key word for Wal-Mart and other retailers, because that’s want consumers are demanding.
“Although they have downsized from the mega supercenters to smaller Neighborhood Markets and Express formats (at 45,000 to 10,000 square feet, respectively,) it may be a stretch to call them convenience stores,” Spieckerman said.
WHAT’S TO GAIN
With nearly a half billion in annual sales, one might ask what can Wal-Mart can hope to gain with it’s own version of a 7-Eleven, Kum & Go or Casey’s General Store.
A former Wal-Mart buyer recently told The City Wire there is plenty the retailer can learn from a testing lab in its own backyard, including pricing strategies, traffic patterns, consumer behaviors in the quick trip format and experimenting with unique merchandise offerings that could turn the convenience store model on its head.
Spieckerman said if Wal-Mart initial tests prove successful, Wal-Mart will gain access to a new customer base.
“Given Wal-Mart’s highly-developed supply chain, particularly in fresh, it will go in with a huge advantage. This is particularly true as convenience stores evolve from selling beef jerky, cigarettes and hot dogs on metal rollers and into becoming destinations for healthy snacks and meal occasions,” she added.
In the highly competitive world of retail, Wall Street continues to watch Wal-Mart’s deteriorating comp sales while other big boxes like Costco remain their “darling choice”.
“Testing a convenience store is a big signal to Wall Street that the company is working diligently to turn around its recent sales woes. It could also be a competitive signal to current and would-be competitors that Wal-Mart isn’t going to blindly stand by and concede sales to smaller stores any longer,” Long said.
NPD Group recently reported some interesting finds about the convenience store format, noting that impulse buys were more prevalent by student shoppers who are one of the most loyal to this format, behind Hispanics. The firm also found that 65% of convenience store shoppers consume their purchase within one hour of purchase. This is 36% at traditional grocery and 47% at drug and dollar stores.
Robin Sherk, analyst with Kantar Retail, said the consumer quick trips are the fastest growing segment in brick and mortar retail today and it’s troublesome for big boxes that aren’t often thought of in that context. She said this latest experiment should give Wal-Mart ample opportunity to tweak their business toward convenience that perhaps could be transferred to other larger formats.
While the experts believe this local convenience store will serve as a lab that allows Wal-Mart to experiment with pricing trade-offs in exchange for the time-convenience, they warn there could be some risk to Wal-Mart’s core identity.
“We have to wonder if Wal-Mart’s C-store pricing be similar to existing supercenter stores. In general, C-stores charge more to offset lower sales velocity, and I would expect the same here. But charging C-store prices could dilute Wal-Mart’s position as the low price leader,” Long said.
The experts agree that Wal-Mart is playing it safe by putting its first convenience store in a market it already owns. Long said having just the one store in their backyard could possibly skew Wal-Mart’s results to the positive. He said the company will need to test in other markets to get a more accurate read. Barnett said there are no plans for any additional convenient stores at this time.
NPD Group found that Hispanics are the largest demographic to use convenient stores by nearly three times the category purchases of non Hispanics. This raises the question why Wal-Mart didn’t look at south Texas or some other largely Hispanic market to test this new format.
Spieckerman said Wal-Mart clearly is not afraid to test nearly every aspect of their gigantic business to improve insights on what shoppers want today, and this a nimble-like behavior becoming somewhat synonymous with this clunky retail giant.
BY THE NUMBERS
$4.5 million: The price Wal-Mart paid for the 2.01 acres for the building site.
9/11/2013: The date of property purchase by Wal-Mart Stores Inc.
2,500 square feet: The approximate size of the new convenience store, one-fifth the size of an Express Store.
8: The number of convenience stores that could fit inside one typical Wal-Mart Supercenter.