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As the dynamics of the marketplace change at a disconcerting pace, Walmart, the quintessential big-box retailer, has recognized the virtues of going small.
As the dynamics of the marketplace change at a disconcerting pace, Walmart, the quintessential big-box retailer, has recognized the virtues of going small.
On the day last month when it announced disappointing results for fiscal 2014, the company revealed that it is significantly speeding up the deployment of small-format stores. The number of Neighborhood Markets and Walmart Express outlets planned for the current fiscal year was raised to between 270 and 300, double the projection made at the company’s analysts day just four months earlier.
"Customers’ shopping habits are changing more rapidly than ever before," Doug McMillon, just weeks into his new job as Walmart president and chief executive officer, noted when discussing the retailer’s performance. "We must be more nimble and flexible as we operate our business to adapt to these changes."
More small-format stores should sharpen Walmart’s competitive edge in several important respects. Less demanding real estate requirements will enable the company to operate in areas, particularly urban centers, where its massive Supercenters aren’t suitable. As a result, many consumers will have easier access to what Walmart has to offer, and the retailer will gain additional platforms to support such omnichannel programs as Site to Store.
For operators of chain pharmacies and dollar stores, the shift in strategy at Walmart is a vindication of their traditional emphasis on convenience. Smaller stores are simpler to navigate, making shopping more efficient and reducing the time required for each trip.
On the flip side, Walmart’s growing commitment to small-format stores will result in increased pressure on the likes of CVS/pharmacy, Walgreens, Dollar General and Family Dollar. Already the biggest retailer of food and beverages, health and beauty aids, and many other consumer products, Walmart should become an even more formidable presence in those categories by making its stores more convenient.
Conditioned by the Internet, consumers are raising the bar for all merchants, demanding to have the option to shop whenever, wherever and however they choose. To stay competitive, all retailers will have to enhance their business model to meet those higher expectations.
