Walmart Loves Small Stores, Again

BENTONVILLE, ARK. – Walmart's on-and-off flirtation with small-box retailing appears to be heating up again. The world's largest retailer announced this week that it is accelerating plans to expand its fleet of smaller-sized stores, particularly its Neighborhood Markets, according to the Associated Press. However, the expansion appears aimed at competing better against dollar stores and drug chains more than convenience stores.

Walmart's U.S. division President Bill Simon told analysts that this strategy "gives us the opportunity to build more stores for less money."

The retailer plans to have 500 Neighborhood Market (small grocery stores ranging in size from 25,000 to 55,000 square feet) and 12 Express stores (even smaller stores of about 10,000 square feet). By comparison, the average convenience store measures 3,155 square feet, according to the 2012 Convenience Store News Industry Report,  although some of the industry's largest best-in-class c-stores run up to 6,000 square feet or more.

As of the end of July, Walmart had 10 Express stores and 217 Neighborhood Markets.

Observers view Walmart's focus on small stores as an effort to increase sales while becoming more efficient with its capital expenditures around the world. The U.S. division of the international retailer has seen its business grow since the depths of the recession by reemphasizing low prices, and company executives say they want to apply that same discipline to how it approaches store expansion, according to the AP report.

Simon went on to tell analysts, meeting near the retailer's headquarters in Bentonville, Ark., that Neighborhood Market stores have generated a 5-percent increase in sales at stores open at least a year for the first half of this year. That's more than double the growth rate of Walmart's average store. The retailer's core store format, the Walmart Supercenter, runs in size from 150,000 to more than 200,000 square feet.

Neighborhood Markets are more than twice the size of Express stores and sell perishable food, household supplies, beauty aids and pharmacy products. Express stores offer groceries, a limited assortment of general merchandise and also have pharmacies.

Walmart has a history of testing smaller store concepts over the years only to retreat and refocus on its larger stores.