Walmart observations

Predicting the demise of Sears & Kmart since 2017!
pseudo3d
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Re: Walmart observations

Post by pseudo3d »

Alpha8472 wrote: November 30th, 2020, 11:48 pm Perhaps the Neighborhood Market name will be eliminated and these stores will convert to small Walmart stores. They could add in more profitable departments such as Electronics and cell phones. There is much wasted space and the floor space could be converted to merchandise that people actually want to buy. They could become mini-supercenters.
Yeah, they tried that, it was called Walmart Express. It was a big failure, and before all of them got killed, they became Neighborhood Markets (though the Express name stayed on the stores if I recall).

The more likely future is converting some of them to dark stores/merchandise pickup stores and closing/selling the rest.
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Re: Walmart observations

Post by wnetmacman »

pseudo3d wrote: December 3rd, 2020, 9:20 am Yeah, they tried that, it was called Walmart Express. It was a big failure, and before all of them got killed, they became Neighborhood Markets (though the Express name stayed on the stores if I recall).
Prior to WM closing the Express stores, the name was changed but the focus and merchandise mix was not. They were the same little 14,000 square foot store stuffed full of merchandise. They were heavy on grocery, but with a nice mix of GM as well. I wouldn't call them a failure. They were a great idea. Walmart, however, wants a certain return on investment that the stores were not providing. Costs for a small building are almost as high as a larger one. Dollar General, Harps and Brookshire Grocery (the largest 3 benefactors of the closure) have been making the stores work.

WM has already begun converting dark stores to fulfillment centers. Why waste good real estate.
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Re: Walmart observations

Post by storewanderer »

pseudo3d wrote: December 3rd, 2020, 9:20 am
Yeah, they tried that, it was called Walmart Express. It was a big failure, and before all of them got killed, they became Neighborhood Markets (though the Express name stayed on the stores if I recall).

The more likely future is converting some of them to dark stores/merchandise pickup stores and closing/selling the rest.
Don't forget the other small 14k square foot "Marketside" format from Arizona 20 years ago which was basically a grocery and fresh food focused version of this...

I went into two of these Express Stores, one of the initial ones then later one of the ones that was part of the larger roll out they did.

First, structurally, they were basically a Fresh & Easy Store in terms of size and layout of most of the departments. However, they squeezed in a pharmacy. They also squeezed in an aisle or two of non food with a very abbreviated mix of basic items like towels, pillows, some very basic hardware, etc. They had a large SKU mix in the store, they seemed to try to pack as many SKUs as they could into a small space. I don't know how they got full cases of various grocery items onto the shelves as most items did not have enough shelf space allocated to stock a full case. One or both of them had gas pumps out front.

Both stores I went into, had at least 5-10 employees on duty when I was there. Employees almost outnumbered customers. Pricing was the same as a large format Wal Mart on everything.

Where I am going here is I don't think these stores were a failure in the sense that they were bad for the customer. The stores were actually very good for the customer. The problem, both with Express and with Marketside, was Wal Mart was trying to do too many things, with a format that required too much labor to work profitably without running significantly higher sales volume than they were running in the stores. Wal Mart, like Fresh & Easy, developed volume expectations that were flat out unrealistic for these small boxes. Yes small box Trader Joe's is very effective in sales per square feet but a lot of the other small boxes (like the drugstores) are quite low volume operations.

Dollar General has this format tuned in and how to do it profitably. Cheap pre-fab buildings. Rarely more than 2 employees on duty. Minimal to no maintenance. No fancy things like in-store music networks (maybe they pipe in a local radio station if you're lucky). Good SKU mix and aggressive pricing. Easy to use coupon app. Despite messy stores that seem poorly stocked, they were a store that had things like hand sanitizer and paper products available (at low prices) when others did not during the pandemic. They can survive on low volumes because they cut their expenses to the bone (past the bone, as I see it) but they are there to serve the customer with basic products at fair prices and they do that well.
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Re: Walmart observations

Post by buckguy »

The small format Walmarts were basically forced on them by Wall Street. They had little interest, even though they already had been experimenting with smaller stores (usually more like 50-60K sf) in urban areas. They need to figure out how to goose their profits which is difficult with a business model built on volume rather than emphasizing higher margin merchandise (Target's model) and food heavy little stores probably weren't doing it. At some point every large retailer saturates their market and has trouble generating growth and often they're evolution gives themselves few places to grow. Walmart has been stuck in this place for awhile like Sears and others before them.
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Re: Walmart observations

Post by veteran+ »

"Where I am going here is I don't think these stores were a failure in the sense that they were bad for the customer. The stores were actually very good for the customer. The problem, both with Express and with Marketside, was Wal Mart was trying to do too many things, with a format that required too much labor to work profitably without running significantly higher sales volume than they were running in the stores. Wal Mart, like Fresh & Easy, developed volume expectations that were flat out unrealistic for these small boxes. Yes small box Trader Joe's is very effective in sales per square feet but a lot of the other small boxes (like the drugstores) are quite low volume operations."

For the most part I agree.

Out of over 250 stores that F&E had there were only perhaps 5 to 10 that did over $250,000.00 per week. Those stores were profitable and most were absolute nightmares to operate. A couple were easier (like Palm Springs area downtown on Palm Canyon Drive) only because they were in former supermarket buildings that were larger than a regular F&E).

Everything about how Tesco designed these stores was problematic in handling HIGH volume in a very small footprint. Some stores were cartoonish in their attempts to simply stock the shelves with clerks falling over each other. Truck unloading was another nightmare. The list was endless.

Although TJ is one of the exceptions, I can tell you that their stockrooms are disasters and the waste numbers (don't even think of believing their reported numbers) are awful (you do not even have the room to properly rotate back stock) Lots of out of code merchandise thrown out. Walking through some of their backrooms was shocking. But very HIGH volume covers those backroom issues.

I believe that that very small footprint uber high volume en masse is not sustainable for most operators or not worth the trouble (Walmart, etc.).
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Re: Walmart observations

Post by pseudo3d »

veteran+ wrote: December 16th, 2020, 7:36 am
I believe that that very small footprint uber high volume en masse is not sustainable for most operators or not worth the trouble (Walmart, etc.).
Probably why even Target seems to have scaled back on small-scale stores (at least the very small ones, they did recently open one in Houston squeezed into a 63k square foot former Randalls, but that's not nearly on the scale that "TargetExpress" was).

Fresh & Easy, for what it's worth, did enough to spook a lot of major retailers into opening small stores or announcing such (Meijer, Safeway, Publix, and a few others come to mind) but those never really took off.

I think that Walmart does need to experiment more without Wall Street's influence. Their few experiments in the last 10-15 years were basically variations on their existing formats (Supermercado de Walmart, Sam's Club Business Center, Más Club, Walmart Express), all of which went nowhere. Maybe a new 30k square foot big-box format that focuses on individual departments could work (and not branded as Walmart in any way), I'm sure they could cut a deal on rent. But that also requires a bit of innovation, which is what Walmart seems to lack in its current incarnation.
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Re: Walmart observations

Post by veteran+ »

pseudo3d wrote: December 16th, 2020, 9:59 am
veteran+ wrote: December 16th, 2020, 7:36 am
I believe that that very small footprint uber high volume en masse is not sustainable for most operators or not worth the trouble (Walmart, etc.).
Probably why even Target seems to have scaled back on small-scale stores (at least the very small ones, they did recently open one in Houston squeezed into a 63k square foot former Randalls, but that's not nearly on the scale that "TargetExpress" was).

Fresh & Easy, for what it's worth, did enough to spook a lot of major retailers into opening small stores or announcing such (Meijer, Safeway, Publix, and a few others come to mind) but those never really took off.

I think that Walmart does need to experiment more without Wall Street's influence. Their few experiments in the last 10-15 years were basically variations on their existing formats (Supermercado de Walmart, Sam's Club Business Center, Más Club, Walmart Express), all of which went nowhere. Maybe a new 30k square foot big-box format that focuses on individual departments could work (and not branded as Walmart in any way), I'm sure they could cut a deal on rent. But that also requires a bit of innovation, which is what Walmart seems to lack in its current incarnation.
I agree 100% regarding Walmart.

Just to be clear, I WAS speaking about those very small formats under 20,000 square feet that generate very high volume as a prototype for expansion (like F&E was dreaming about). They wanted a national chain of these stores doing at least $150,000.00 per week. Their ground up stores that were designed for that were not effective or productive in real life. Very dysfunctional designs.
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Re: Walmart observations

Post by arizonaguy »

pseudo3d wrote: December 16th, 2020, 9:59 am
veteran+ wrote: December 16th, 2020, 7:36 am
I believe that that very small footprint uber high volume en masse is not sustainable for most operators or not worth the trouble (Walmart, etc.).
Probably why even Target seems to have scaled back on small-scale stores (at least the very small ones, they did recently open one in Houston squeezed into a 63k square foot former Randalls, but that's not nearly on the scale that "TargetExpress" was).

Fresh & Easy, for what it's worth, did enough to spook a lot of major retailers into opening small stores or announcing such (Meijer, Safeway, Publix, and a few others come to mind) but those never really took off.

I think that Walmart does need to experiment more without Wall Street's influence. Their few experiments in the last 10-15 years were basically variations on their existing formats (Supermercado de Walmart, Sam's Club Business Center, Más Club, Walmart Express), all of which went nowhere. Maybe a new 30k square foot big-box format that focuses on individual departments could work (and not branded as Walmart in any way), I'm sure they could cut a deal on rent. But that also requires a bit of innovation, which is what Walmart seems to lack in its current incarnation.
Pretty much everything Walmart does these days is to copy someone else's idea to placate Wall Street. Walmart really only has one successful business unit right now and that is the supercenter. Everything else be it online, the Neighborhood Markets, Sam's Club, etc. is far less profitable than its core supercenter business.

The issue that they have had is that they can't put supercenters everywhere. Supercenters generally cannot be located in towns as small as their original Division 1 stores. Supercenters generally cannot be located in dense urban areas (and many large cities have ordinances preventing supercenters from being developed in them anyways). Many of the urban supercenters that Walmart has been successful building are plagued with theft due to the sheer volume of traffic that runs through these stores along with the difficulty of effectively securing a massive store with multiple points of entry and exit.

The saving grace for most of Walmart's existing footprint (supercenters and Neighborhood Markets) is that they are moving to the Amazon model where the stores are not only a destination for shoppers but the stores are also a distribution center for online orders (both store pickup and delivery). Target implemented this first but Walmart is embracing the "ship from store" approach (as opposed to Kroger's "ship from warehouse" approach). Every time I go to my local Neighborhood Market there seems to be as many employees pulling orders off the shelf as customers browsing the store.

I actually am a major user of Walmart's online platform and find it very user friendly with reasonable pricing and a good selection. As both an Amazon Prime and Walmart+ member I find I use Walmart+ more as Amazon's grocery delivery option (at least in my area) is rather pathetic whereas Walmart+ orders tend to arrive quickly, correctly, and with a robust product selection.
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Re: Walmart observations

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veteran+ wrote: December 16th, 2020, 7:36 am

For the most part I agree.

Out of over 250 stores that F&E had there were only perhaps 5 to 10 that did over $250,000.00 per week. Those stores were profitable and most were absolute nightmares to operate. A couple were easier (like Palm Springs area downtown on Palm Canyon Drive) only because they were in former supermarket buildings that were larger than a regular F&E).

Everything about how Tesco designed these stores was problematic in handling HIGH volume in a very small footprint. Some stores were cartoonish in their attempts to simply stock the shelves with clerks falling over each other. Truck unloading was another nightmare. The list was endless.

Although TJ is one of the exceptions, I can tell you that their stockrooms are disasters and the waste numbers (don't even think of believing their reported numbers) are awful (you do not even have the room to properly rotate back stock) Lots of out of code merchandise thrown out. Walking through some of their backrooms was shocking. But very HIGH volume covers those backroom issues.

I believe that that very small footprint uber high volume en masse is not sustainable for most operators or not worth the trouble (Walmart, etc.).
It is interesting how many times Wal Mart has tried the small format and still hasn't gotten it to work... I wonder if they will try it again... as noted here Wal Mart's best format is the "supercenter." This seems to be the format they know how to operate the best and the one that attracts the most customers. Why Kroger who sat on Fred Meyer which was a far superior supercenter and failed to expand it is beyond me but that ship has definitely sailed. At this point our best hope is Meijer keeps expanding and slowly eventually becomes national so there is at least one other "supercenter" operator to compete.

I have noticed some short dates in very high volume Trader Joe's locations on dairy and refrigerated prepared food items and always thought it was interesting given the volume they do. Their produce is also not even close to the freshness it should be given their store volumes.
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Re: Walmart observations

Post by veteran+ »

Great observations about TJ!

If TJ's average store volume DROPPED significantly...................they would be in real trouble because of their operating procedures in inventory control.

High volume hides and disguises many systemic flaws.
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