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Walmart is planning to open a smaller version of its large Supercenter store format in the Los Angeles area, one of the first of a new breed of smaller stores that it hopes can deliver a new phase of U.S. growth, according to an FT.com article.
The retailer leased a 75,000-square-foot location in Torrance formerly occupied by Mervyn’s, a regional department store chain that went bankrupt in 2008 as the U.S. economy worsened.
The site is less than half the size of most of Walmart’s Supercenters, which average about 185,000 square feet, and will sell groceries alongside general goods.
Walmart is also investigating a second, similar-sized former Mervyn’s site in San Diego. A real estate broker familiar with the former Mervyn's property declined to comment but said Walmart was currently “active” in the California commercial real estate market, according to FT.com.
FT.com reported that Eduardo Castro-Wright, the head of Walmart’s U.S. stores, said late last year that Walmart “will introduce new innovative formats here in the U.S.,” and saw “considerable opportunities to expand in the U.S. and especially in major metropolitan areas.”
The retailer is experimenting with a 20,000-square-foot small-store format in its hometown of Bentonville, Ark., combining groceries and a pharmacy in the space of a traditional U.S. drug store.
The test draws on its experience with four 10,000-square-foot Marketside convenience stores that it started testing in Arizona in 2008.
FT.com reported in a recent research paper, Neil Currie, retail analyst at UBS, said Walmart could open 390 to 400 of the 20,000-square-foot stores annually, with annual sales per store of $13 million and sales per square foot per week of $12.50. Most U.S. food retailers have sales in the $8 to $9 range.
Walmart has also said it will open more Hispanic-themed versions of its 40,000-square-foot Neighborhood Market stores, under the Supermercado de Walmart banner, after opening two last year.
Castro-Wright argues that, even with more than 3,000 stores in the U.S., the world’s largest retailer has still not run out of room for expansion in its home market.
Instead, he said Walmart’s opportunity for sales growth at home exceeds the combined potential of China, Russia and India.
However, in urban markets such as Chicago, New York and Los Angeles, Walmart’s efforts to expand in the past decade have been slowed by bitter political opposition, led by the UFCW grocery workers union, and by shortages of suitable large sites, according to FT.com.
Previous discussions about a full-size Supercenter in Torrance were abandoned in 2003 because of potential opposition.
But because the smaller store will open on an existing retail site, it doesn’t need to go through the public planning process, often used by Walmart’s opponents to delay store plans, FT.com reported.
SOURCE: Convenience Store News