Can Wal-Mart Think Smaller?

The words "small" and "Wal-Mart" don't fit well together.

Yet the dominant retailer on the globe has been telling Wall Street analysts for several years running that small is beautiful.

Last year this time, at an analyst's meeting, Tom Shoewe, Wal-Mart's Executive Vice President, summarized his company's strategy on new store growth: "A moderation in new stores, migrating to a smaller footprint for the stores that we're adding, more efficient smaller stores."

This week, at their annual analyst's gathering, there was more talk of less. Small was still on the agenda. Wal-Mart reversed its decision from June of 2007 to slow down new store growth, and told Wall Street to expect an acceleration in the number of new stores being proposed. Wal-Mart has been aggressively remodeling hundreds of existing stores -- its so-called 'Impact Store' project -- but the retailer also sounded like the annual speaker at the E.F. Schumacher Society.

One Wall Street analyst reported that although Wal-Mart would open more stores in 2010, the stores themselves would be smaller. The Associated Press quoted this analyst as predicting that Wal-Mart will be "scaling back the size of its supercenters." In fact, the analyst said in recent sit-downs with management at Wal-Mart, the company "even expressed some confidence in developing supercenters as small at 70,000 square feet."

A store that size -- 1.6 acres just for the building -- is far larger than the typical grocery store in most small communities. Add in a parking lot that is usually at least twice the size of the building, and you're no longer talking about a 'small' project.

But this is small for Wal-Mart, and these pronouncements by the company are important to local communities -- where activists for more than a decade have packed town hall hearings, demanding smaller, less intrusive stores.

Last year, a Wal-Mart real estate planner told Women's Wear Daily that his company was concentrating heavily on smaller stores. He said that Wal-Mart was far more likely these days to consider a 90,000 s.f. store for a supercenter. "We can generate as much sales, as much profit from a smaller store," the Wal-Mart official admitted.

Talk of smaller footprints goes back at least to 2004, when Merrill Lynch Global Securities said that Wal-Mart could build 850 of its smaller supercenters over the next decade. The smaller stores could go into urban areas where land isn't available for a traditional supercenter.

The reality is: land is not available anywhere for the classic Wal-Mart supercenter, weighing in at over 200,000 square feet. These retail dinosaurs will -- in the not too distant future -- sit empty by our roadways. They are cheaply made, energy guzzling eyesores, and the sooner their Ice Age comes, the better for our communities.

Wal-Mart has learned that it can take an existing store around 120,000 s.f. and convert it into a supercenter -- without altering its size. This format is called an "in-box conversion," and its been done in Milwaukee and other U.S. cities. The advantage here is that the existing discount store doesn't get abandoned -- as the company has done to more than 1,000 of its stores since 1995 -- and the company doesn't have to go through extensive zoning hearings.

It is doubtful that Wal-Mart will ever learn to think small. But the company is clearly grasping that consumers don't want to shop in endless concrete caverns, and that shoppers are increasingly aware of the environment in which they are shopping as much as what they are shopping for. It also helps that competitors like Aldi and Tesco are focusing on smaller formats. Huge superstores are obviously land-consumptive and inefficient. They clash with Wal-Mart's claims to be a sustainable, green company.

The fact that Wal-Mart is stepping up its new store growth just means that more local citizen's groups will step-up their opposition. But smaller stores will be welcomed everywhere.

Small is not yet beautiful at Wal-Mart -- but it's still an improvement over the wasteful land use monstrosities they've built over the past 15 years.

Al Norman is the founder of Sprawl-Busters. Sixteen years ago this week he helped defeat a Wal-Mart in his hometown of Greenfield, Massachusetts. Wal-Mart is back trying for a second time to locate a 160,000 s.f. store in his community. Norman's most recent book is "The Case Against Wal-Mart."

 

Comments

[Cleo Creech]

Agree with ModernLeader absolutely a monopoly. When most every manufacturer in america has to tailor (dumbdown/cheapen) their goods and prices for one retailer that's not good. When one manufacture gets to name the price they want to pay, regardless of free market principles, somethins terribly wrong. WalMart has probably done more in this country to institutionalize outsourcing cheap manufacturing to China than all other companies put together. It's also lead to the decline and decimation of one small town downtown after another. It is definitely a dangerious monopoly. Even if they do smaller stores in downtown areas, they will still be depressing wages and benefits while siphoning profits from local mom and pops that support the local economy, instead to the Walton family. If WalMart were to ever get into trouble don't think for a minute they wouldn't play the "too big to fail" card. In regards to pay and benefits, labor practices, and employee loyalty it represents the worst of American capitlism. It should be broken up.

[worriedinvt]

Walmart can begin to reverse some of the enormous damage it has done to small town America by beginning right now to site those new, smaller Walmarts on previously developed land in traditional downtowns so that they become a partner rather than an enemy of the local economy. If they don't begin to do more than just talk about shrinking their footprints, Walmart is destined to collapse under the weight of its own excess. Unfortunately, that will probably happen too late to save a lot of irreplaceable farmland.

[themodernleader]

Walmart is an international monopoly. It is incompatible with democratic government. It must be broken into competing smaller units. Additionally, all the other conglomerates must be broken into smaller units except for natural monopolies that must be nationalized or strictly regulated to reflect the national and common interests. Oil companies have no inherent right controlling oil fom the oil well to the consumer. And oil and all other companies must be disallowed form buying up their competitors.
We must remain a democratic state, not a corporate state. And we must reinvigorate industry and enterprise form the bottom up.

[drymartini1]

Pop quiz for you....

what % of the retail market does Walmart has in the US......?

What % of a market is it reasonable to trigger a monopoly label....?

research those two and then speak

[mountainweb]

Never bet against someone with their track record! They do a LOT of research before they ever put the spade in the ground. Suspect they see a trend and want to be on the leading edge... they are looking to branch into small towns where the smaller footprint makes sense.

[steppenwolfsayshi]

I think they can make more money with this in the short run, but its just a way to cut corners to improve immediate bottom lines at the expense of long-term gains. They will regret it.

[Kassandra]

Escalators? Two levels? or stairs? NAH, the shoppers wouldn't want THAT much exercise.

[steppenwolfsayshi]

I had only been to a Supercenter Walmart before I moved recently to an economically depressed part of the country. The smaller Walmart's have much much fewer brands than an average grocery store despite its larger size. They can't compete on variety, can't compete on prices (here anyway), and obviously they're evil. The only thing I might buy there is ummmm, nothing. This is a bad strategy for them. Atleast if I was in a hurry, I might shop there occasionally before.

[Chauncey Zalkin - Huffpost Blogger]

So your brand does extend past the wrapper, they realized. Nevermind the advertising, here comes the essence of the product.

This is very encouraging news - but is it just deception? a wolf in sheep's clothing? If those big boxes get torn away and recycled into aesthetically triumphant wonders to house the homeless or give shelter to sustainability orgs, great. The eyesores need to be eliminated. Exurbia and its requisite Walmarts should be dismantled and re-appropriated to better causes.

I heard that Starbucks was unbranding itself and renaming some stores by mom and pop sounding names. Sounds like a desperate attempt. I'm teaching brand strategy and one student said in a brand association exercise that Starbucks makes him think of prostitutes. Not a good look for Starbucks and Walmart. As crud becomes unfashionable, how can these companies use their much bucks for good for innovation and not evil?

[ewoman]

That's the issue, in a nutshell, IMO. It's about McMansion-sized facilities that, when abandoned, leave an eyesore for a small town to deal with. Additionally, locations within some small towns (such as Montrose, CO), tend to leave town councils pondering how to change zoning laws - if they even consider using them for homeless housing (which some towns would not do, simply because of property valuations).

As far as small goes, WM does not follow the argument behind 'smart growth' planning, which is to build up, not out. Their facilities are a prime example of how water waste issues, green corridors and other smart growth plans are thwarted by corporate expansion.

[nexxtep54]

You can see the curvature of the earth down the main aisle.

[mcmutter]

LOL great one !

[bannorhill]

Don't count on it. WalMart is still strong despite the economy.

[RealityBaseCamp]

Hey, it's something . . . Now can they think about smaller amounts of stuff from China?