brand experience brief: walmart neighborhood market
(This is a Brand Experience Brief — a video audit and analysis of a new or interesting restaurant or retail concept.)
Walmart Neighborhood Market, a smaller format store, competes against dollar stores and grocery stores — it looks to me like they just might win the fight. Check it out:
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Today’s brand experience brief is about Walmart’s Neighborhood Markets – this smaller format store is part of Walmart’s multi-faceted strategy to maintain its retail dominance. Right now, there are about 200 Neighborhood Markets open and the company plans to open more than 500 by fiscal year 2016. And with good reason: Neighborhood Market’s comparable sales in the first half of 2012 were up 5%, which is double the growth rate of the Wal-Mart U.S. average, net margins are around 3%, and the business unit generates more than $10 billion of sales as a whole. A Neighborhood Market recently opened up in La Mesa a suburb of San Diego and so I went to take a look:
As indicated by its name, this store is primarily a supermarket, with a selection of food products and fresh produce comparable to any grocery store, and it has a pharmacy and good-sized non-food sections for household and personal care products. It’s really nice, with high, exposed ceilings, long wide aisles, and lots of white paint. The visual identity for the store incorporates a bright green color in place of the blue used on regular Walmarts and the signage features bright colors and good photography.
Whenever I visit a supermarket, the test I apply to see if I would personally shop there is their soy milk selection – this store didn’t disappoint – it had an extensive, well-stocked selection at prices lower than what I normally pay at Ralphs, a Kroger owned chain of grocery stores in Southern California. Speaking of Ralphs, the Neighborhood Market is in the same strip mall as a Ralphs and is going head to head with it – check out this price comparison display at the front of store claiming you save over $36 by shopping at Walmart.
The other noteworthy point about the location of this store is that it is exactly 1 mile from a regular Walmart – although the distance between the two stores is so small, the differences between them are quite big. Of course, the Neighborhood Market is much smaller, around 50,000 square feet which is a quarter the size of typical Walmart Supercenter, and it doesn’t have all of the regular Walmart departments like clothing and toys.
But what was most notable to me was how it was much fresher, cleaner, and brighter – some of this is because the location I visited is newer, but it’s also because of the design and layout, visuals, and space at the Neighborhood Market. It feels big and airy and there is a lot more open space compared to those tight corners and crowded aisles you have to navigate at a regular Walmart. And there aren’t any of those mid-aisle pallet displays that offer great prices but look really ugly.
From a business perspective, all of this translates into lower sales-per-square-feet and indeed according to analysts reports, the Neighborhood Markets appear to be much less productive than Walmart’s other stores, but so far, the company doesn’t seem to be concerned. It knows that it will soon reach the saturation point for its big box supercenters and smaller store formats like the Neighborhood Market are key to continued growth. And the strategy is really about competing against dollar stores and grocery stores.
It looks to me like Walmart’s Neighborhood Markets just might win that fight.