Wal-Mart Stores, Inc. (WMT)’s New Small Store Strategy

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After five years of its experimental existence, Wal-Mart Stores, Inc. (NYSE:WMT) appears to have come to the view that it was enough to pursue the concept of Walmart Express. The biggest chain of retailer believes that it was time for a comprehensive change to have a far-reaching impact on its results. Wal-Mart Stores, Inc. is also ready to shift its focus on its neighborhood market format, which is set for an expansion. The move comes on the heels of the overall retail sales missing the expectations of National Retail Federation. Also, it demonstrated the kind of pressure that the online marketplace is applying on its store platform.

Biggest Single Shutdown Announcement

As a result, Wal-Mart Stores, Inc. (NYSE:WMT) was forced to announce the closing down of 269 stores, which was the single biggest announcement of shutting down. The move also signaled that it was ready to take steps to win back grocery-store customers. That was because the consumers have started finding newer destinations for food shipping. That included the rapidly growing dollar store category apart from the overflowing options from the online marketplace.

It would be a tough proposition even for the biggest retailer in the world to replicate the system that Dollar General Corp. (NYSE:DG) has created with its over 12,000 stores that has a small-store format. In an analysis, Morningstar pointed out that the closure of stores would enable the chain of the retailer to put additional resources into its online promotion efforts. The analysis pointed out specifically about SKUs since it did not sell in stores. The report suggested that Wal-Mart Stores, Inc. (NYSE:WMT) would continue to focus on 30,000 – 40,000 square foot Neighborhood market format since it provided a complete assortment of groceries. Also, the format has enough space for pharmacy products. The company could address the competition from the conventional grocers with the growth of this format.

Less Than 1% Of Total Square Footage

Wal-Mart Stores, Inc. has lined up closures across the United States locations. That includes all 102 Wal-Mart Express concepts, which were launched in 2011. Aside from that, the company has opted to shut down 23 Neighborhood Markets 115 money-losing stores outside the America and 12 Supercenters. According to the Morningstar, the closure of 269 stores accounted for less than a percentage of the total footage.

Apart from shutting down, Wal-Mart Stores, Inc. (NYSE:WMT) also has the ambitious plan of opening 50 – 60 Supercenters in the United States. That apart, it would also be launching 85 – 95 fresh Neighborhood Markets store concept. During the just concluded holiday season, revenue grew only at 3% to $626.1 billion while the NRF projected 3.7%. On the other hand, online sales advanced 9% to $105 billion. That meant e-commerce sales represented nearly 17% of the overall sales. It was not the only retailer to search for solutions since most of them failed to generate the kind of sales that they had expected before the start of the season. Now, the biggest retailer is pinning its hopes on new small store tactics.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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