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Can Wal-Mart Think Smaller?

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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."

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