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Walmart Finds Out How Small is too Small for its Stores’ Sizes

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It looks like Walmart’s New Year’s Resolution is to shed stores. On 15 January 2016, the company announced that it would close 269 stores globally, including a surprising 154 in the US, its home market. In both cases this is a relatively small portion of its stores. Notable however is the fact that Walmart has never closed this many stores at once in the US. This is smart for a retailer that is looking to stay proactive and cut costs.  More interesting was the news that these store closings include the shuttering of their smallest format experiment—Walmart Express. Even failed experiments are good when something can be learned and it appears as though Walmart’s main takeaway is that it needs a certain amount of space per store to offer people the suite of goods and services at low prices that their business model has come to stand for.

What was Walmart Express?

Average Store Sizes by Channel in the US v Average Walmart Express Size


Source: Euromonitor International

Proposed as a more convenient mini-Walmart that could hypothetically be used in the future to scale in denser areas and serve as cheaper brick and mortar anchors for ambitious omnichannel plans, it’s not quite clear where Walmart Express actually fell. Too small to be a supermarket, too big to be considered a convenience store and with too much fresh food to be likened to dollar stores, it’s not out of the question to consider Walmart Express a competitor to the small but thriving discounter space that is led by Aldi. However where Walmart differs is in the fact that it has built its brand off of large selections, a supply chain that supports this and the presence of helpful services, all of which Walmart Express had trouble incorporating.

Not enough room for what they wanted to do

At roughly 1,300 square meters each, Walmart Express stores were 2.5 times smaller than the supermarket format (Neighborhood Market) and over 12 times smaller than the massive hypermarkets (Supercenters). This is important to consider when you realize that they tried to do a lot of the same things at Walmart Express that they have done at these other formats. For instance, Walmart Express, for the sake of convenience, still had the pharmacy and financial services that its core customers had come to expect, but these options take up a lot of room. These small spaces with dedicated areas for service lend themselves to even smaller merchandising mix possibilities, which is trouble when you still are expected to carry a number of brands too. While the company was smart to make food the focus of Walmart Express’s merchandising strategy, there was an overreliance on the idea that for non-foods merchandize people would be able to easily order online and pick up in stores. Signs that read, “If you want it, we’ll get it. Just ask.” belied the simplicity of pulling off a successful omnichannel offering, one which Walmart still struggles with today.

Finally there remain questions surrounding just how well Walmart’s supply chain could incorporate these formats. A business model that has been built on the benefits of scale doesn’t work the same for a small amount of stores that are one tenth the size of the company’s primary format. Couple that with the their relative lack of influence and experience in setting up stores in more densely populated areas that were the occasional target for Walmart Express and you’ve got a potential for stores that may work on their own, but not within the larger Walmart strategy.

Neighborhood Markets may be just right

Walmart clearly knows that Walmart Express is not the key to its future and it looks like it knew as early as 2014, when it announced plans to rebrand the Express concept to Neighborhood Market. Many thought this was meant to simplify the small format strategy, as Neighborhood Markets are still notably smaller than their Supercenters, but it may have been a signal that Neighborhood Market was the real small format Walmart of the future. The size of a standard supermarket, these stores give Walmart more room to offer brands alongside private label, give people a wider selection of fresh and frozen foods, and commit space to value-added service areas at a lower opportunity cost. And with a 22% sales CAGR from 2010-2015 compared to just 2% for all supermarkets combined, there is clearly merit to these smaller Walmart stores.


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