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    Wal-Mart Pushes into Indiana

    Big-box retailer to roll out smaller-scale groceries in Indianapolis.

    INDIANAPOLIS -- In stark contrast to its usual supersized centers, Wal-Mart is downsizing in Indianapolis and attempting to fill what is possibly its only void in the market -- the neighborhood grocery store.

    The city has given preliminary approval for two Neighborhood Market stores to be built in Indianapolis by Bentonville, Ark.-based Wal-Mart Stores Inc. Two more locations are pending. The stand-alone grocery stores are just 45,000 square feet, not even a quarter of the size of a Wal-Mart Supercenter, according to the Associated Press.

    There is no motor oil for sale. No armchairs. No fishing gear. Just fresh produce, canned goods, a pharmacy and deli -- the true, traditional grocery store. Locally, Marsh and Kroger already have fought off an onslaught of supercenters -- Wal-Mart, Meijer and SuperTarget -- and remained market leaders in Indianapolis. But this latest concept is a threat that hits closer to home. Wal-Mart is coming to town to do exactly what they do -- within miles of their stores.

    "It's going to hurt badly. We're already grossly overstored," said Joe Lackey, president of the Indiana Grocery and Convenience Store Association. "The stores here are almost to the point of competing with themselves. Something else is going to fall."

    Or at least be shaken up.

    While boasting the same low prices as its monstrous Supercenters, Wal-Mart also touts the Neighborhood Market stores' convenience.

    It plans to open four in Indianapolis by spring. Two have been approved preliminarily by the city and two more are pending approval. A denial of one site isn't likely to deter a retailer as huge as Wal-Mart, which already is the number-one seller of groceries in the nation, said Lackey.

    "I look at them as basically coming in, skimming off the top and destroying the market," he said. "They're good. They're low-priced and the public goes."

    According to CSNews sister company Scarborough Research, 63.2 percent of the 1.1 million adults surveyed said they had shopped Kroger within the past seven days. Marsh ranked second at 53.2 percent, with Meijer at 40.8 percent and Wal-Mart Supercenter at 34.7 percent.

    The first Neighborhood Market was opened in 1998. Since then, the concept has grown to 56 locations in a handful of states, including Arkansas, Tennessee and Oklahoma. Stores feature produce, deli foods, fresh meat and dairy items, health and beauty aids, one-hour photo and traditional photo- developing services, as well as drive-through pharmacies.

    The impact of these Neighborhood Market stores is still unknown, said Bill Bishop, president of Willard Bishop Consulting Ltd., a food-industry consultant in Barrington, Ill.

    "I don't think anybody has named these Neighborhood Markets public enemy No. 1 yet," he said. "I'm sure they are going to hurt stores in immediate competition with them."

    Bishop has visited Neighborhood Market stores and said "they've got a lot to be proud of" -- low prices and a "surprisingly" strong produce department. "In terms of the appearance, your expectations are more likely to be higher than expected," he said.

    The smaller markets seem to be doing well nationwide, he said, and Wal-Mart has taken on a deliberate growth strategy with them, planning to open 25 to 30 in 2004.

    SIDEBAR
    Wal-Mart Stores Inc. at a Glance:
    * Headquarters: Bentonville, Ark.
    * U.S. employees: 1.1 million
    * Discount stores: 1,494
    * Supercenters: 1,386
    * Sam's Club stores: 532
    * Neighborhood Markets: 56

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