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BENTONVILLE, Ark. -- Wal-Mart Stores Inc., the world's largest retailer, has a team of executives in the San Francisco Bay area devising two new small-footprint stores, including a response to the November launch of Tesco plc's U.S. grocery stores, the Wall Street Journal reported, citing people familiar with the group.
One idea calls for urban convenience stores less than a tenth of the size of the company's supercenters and stocked with groceries geared to more affluent tastes. Another plan calls for stand-alone stores offering a variety of health services and products. The new outlets are being prepared for introduction early next year, the Journal said.
Leading the initiative is David Wild, Wal-Mart senior vice president of new business development, who declined to comment. A Wal-Mart spokesman wouldn't provide specifics but said in the report, "Our business is constantly evolving, and we're always looking for new and innovative ways to serve our customers."
Twelve years ago, Wal-Mart executives welcomed Tesco's Terry Leahy to the company's Bentonville, Ark., headquarters, and they spent an afternoon discussing operations with Wal-Mart executives. Today, Wal-Mart is doing everything it can to stop Leahy from crashing its last big-growth business -- groceries -- the report said.
The retailer hopes to begin rolling out the new convenience and health-care stores early next year, and is looking at California locations for the pilots. A Wal-Mart spokesman said the company "regularly tests new formats," but declined to describe the effort further.
According to the Journal, Tesco's impending U.S. arrival has accelerated Wal-Mart's plans. The British retailer is expected to open 30 Fresh & Easy Neighborhood Market stores by February and invest $2 billion in the U.S. rollout over the next five years, according to a spokesman for Tesco's U.S. operation, based in El Segundo, Calif. After the first stores are launched, the company has 70 more stores in its pipeline for early 2008.
"The impact on the competition depends on how fast Tesco rolls out. I think it'll be fast," David McCarthy, a deputy head of equity research for Citigroup, told the Journal. He estimates Tesco could have 500 U.S. stores and U.S. revenue of $5 billion by 2010.
Wal-Mart hasn't successfully incubated new-store concepts since the first supercenter was created in 1988. Its effort to build a conventional grocery business via Neighborhood Market stores has been a modest success at best, the Journal reported. The 40,000-square-foot outlets were designed to fill the gap between supercenters, but the company has opened just 124 of them since 1998, the report said.