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Reports that Wal-Mart is developing a convenience store format are causing a bigger stir outside the c-store industry than within it. Most retailers -- especially those located in the Western U.S., where British retailer Tesco is expected to open its own grocery/convenience store concept in November -- are not panicking about Wal-Mart's efforts on the c-store front.
Although they acknowledge that it's always hazardous to take the giant retailer lightly, c-store retailers tell us that Wal-Mart's plans to test an "urban" convenience concept would appear to be a greater competitive threat to grocery retailers.
Should c-store retailers be worried about a potential Wal-Mart convenience store concept? Let's look at what we know:
-- As the U.S. market nears saturation for big box stores, it makes sense that Wal-Mart is looking for other ways to grow. Citigroup retailing analyst Deborah Weinswig writes that Wal-Mart de Mexico has been very successful with its multi-format strategy. She believes the company will likely implement a similar strategy in the U.S. and that a new smaller-format store is possible.
-- Wal-Mart's track record with new concepts is mostly positive, but not entirely. The Sam's Club warehouse chain has been a success. The supercenter, of course, was wildly successful, replacing the traditional Wal-Mart discount store as its main retail vehicle. Wal-Mart's Neighborhood Market -- a grocery store meant to be a more convenient alternative to its huge supercenters -- has grown slowly, but not delivered the return on investment to warrant a full-scale rollout. Wal-Mart also tried and failed at developing home improvement stores, and craft and drug stores during its 45-year history. In the early '90s, it abandoned a nine-store convenience store test.
-- The concept is aimed at urban markets, making it more likely the new units will be freestanding stores, not supercenter parking lot kiosks. There's been no mention of whether fuel sales would be included -- a greater threat to existing c-stores.
Perhaps the strongest reason to believe that Wal-Mart is serious about testing and rolling out a new c-store concept is that the retailer needs a new growth vehicle. The company's profits have declined in recent years -- in part due to high gasoline prices that have eroded the spending power of its middle- to lower-income consumer base.
"I think this market is in constant evolution," Danny Roden, Chevron's vice president for North America marketing, told me recently. "Nobody can afford to stand still."
Roden is correct. C-store retailers need to be in perpetual motion, testing new ideas to serve its customers and meeting any new competitive threats in the market.
For comments, please contact Don Longo, Editor-in-Chief, at (646) 654-7489 or [email protected].