Walmart’s prototype convenience store in Bentonville, Ark. reflects a shift in strategy for the retailer, but will it be a game changer for the industry?

By David Bennett, Senior Editor

As vehicles navigate under the shiny white fuel station canopy, the eye goes immediately to the yellow columns designed to mimic the burst of petals in the Walmart spark and the “W” in its iconic name.

On closer inspection, three noticeable sparks affixed on the underside of the fuel canopy double as branding and lighting.
A green walkway canopy, lower in height than the fuel canopy, extends from the brick building like a box lid. On the other side of the store’s entrance, barbecue sandwiches are being prepared at a deli counter.

Inside and out, the convenience store site, located just a short walk from the headquarters of Wal-Mart Stores Inc., is crisp and functional—almost understated for the import it carries, according to some industry experts. The pilot Walmart To Go not only reflects the industry titan’s evolving assessment of the superstore, but the changing tastes of the American shopper.

As consumer habits evolve, big box retailers are reinvesting in smaller stores, means of greater productivity and an online presence, helping them to compete more effectively against e-commerce entities like Amazon that threaten to swallow up brick-and-mortar stores one byte at a time.

Earning its reputation in the big-box domain, Walmart’s interest in the c-store industry is one of necessity. The retail giant launched the test c-store this past March with an eye on a different segment of the shopping public. Though it tried penetrating the convenience market years ago with limited success, Walmart is again targeting commuting patrons whose habits relate more to filling up the gas tank and grabbing a sandwich than those customers who load the station wagon with bags of groceries for the month.

Test Case
Not surprisingly, Walmart is taking a methodical approach to the venture in Bentonville, Ark. It’s closely looking at product mixes and examining customer patterns, and store merchandise changes in type and quantity in short order as company representatives analyze the numbers in detail.

“I go in there every week, and it seems to change from week to week,” said Walmart spokeswoman Betsy Harden, who added that the 5,000-square-foot c-store offers about 3,200 items, contracting and adding SKUs in response to sales. For example, wine sales weren’t doing wonderfully, so the retailer altered the space for other merchandise. However, real grapes do great, so more were added.

“We’re trying to be as selectable as possible and listen to what customers are saying, and then use that feedback. We will adapt and learn and get new things in there,” Harden told Convenience Store Decisions in a wide-ranging interview on the company’s desire to boost its convenience offering.

Fresh is the concept Walmart is pushing: the product mix as in fresh produce, fresh grab-and-go sandwiches, wraps and blended coffees.

However, don’t confuse the pilot c-store with another Walmart To Go program of the same name. Though this model with the same label is also small in scale, shoppers can order fresh, dry and frozen groceries on walmart.com, as well as thousands of general merchandise items, including electronics and toys.

The retailer began testing the pick-up version of Walmart To Go in 2011 in San Jose, Calif. and San Francisco, and expanded the program to Denver in October 2013.

The c-store in Arkansas is more homegrown, right down to the local foods cooked and served by Bentonville Butcher & Deli, a local favorite.

“They have a location across the street, so we’ve brought them in,” Harden said. “In addition, we have ready-to-eat meals, we have pizza and salads, so when people are getting gas, they can pick up dinner for the family.”
Krispy Kreme has a doughnut stand between the beverage stations on the right wall of the store. There are traditional cold dispensed beverages, an ICEE fountain, a milkshake bar and a coffee/cappuccino area where customers can make the beverage of their choice.

“We know the customers have been changing and they’re looking for new ways to shop. We are committed to providing that for them,” Harden said. “We know that if a customer is looking at a stock-up trip, that our supercenter is going to be the first place he goes. If it’s a grocery trip, he may stop at a Neighborhood Market. But, we think this (c-store model) fits a really nice need for our customers.”

Pushing Pricing
Neighborhood Market is Walmart’s version of a local neighborhood grocery store, carrying a limited assortment of general merchandise, but having a full-size grocery department.

The company recently announced all future Express stores would open under the Neighborhood Market name, while the 21 existing Express stores would be renamed under the brand.

With so many c-stores in the industry, Walmart is relying on its pricing prowess to click with customers.

“I think the other important part there too, is being able to offer everything in that convenience store at supercenter pricing,” Harden said. “Really, we’re the only folks able to provide that.”

In terms of lower prices, customers seem to be gravitating to the store for certain items. “Milk and (bottled) water is just flying out of there,” Harden said.

No matter how high sales climb, “at this point, there is no plan for any more stores,” Harden said.

Monkey Business
The recognized 800-pound gorilla of the retail domain, Walmart still sits perched atop the shopping spire, mainly because of its forward vision and formidable resources. However, Walmart’s second-quarter sales—down nine-tenths of 1% and ninth-straight quarterly drop—indicate a steady decline in customer visits even as it reported earnings and sales in the period were higher from a year earlier.

The retailer blamed the continued shortfall in store sales on fewer shoppers flocking to its stores.

But, not even King Kong was immune to adversaries. In this case, it’s Dollar General and Walgreens manning the biplanes, chipping away at Walmart’s top position, and threatening the retailer to the extent that it’s now scouting a new footprint and a new segment of shoppers to sell to.

Richard George, professor emeritus, food marketing at Saint Joseph’s University’s Haub School of Business visited the Bentonville c-store this year. He said while still in its testing phase, the program’s rollout is a foregone conclusion.

“They’ve announced they’re going to back off the Walmart Express, which is 12,000 square feet and go more towards the Neighborhood Markets, which leaves a void. This leaves Walmart To Go as the only small footprint,” George said. “I don’t see that this will be a threat to Wawa and those folks, who are going more toward foodservice. I think Walmart is more prone to go against the 7-Elevens of the world, and two classifications of trade: dollar stores and I think they’re going after CVS and Walgreens with these small footprints.”

While Walmart maybe be lining its sights on discount and drug retailers, the collateral damage might reach far and wide.
George said he wouldn’t be surprised if Walmart follows the same geographic dissemination that it used in its Neighborhood Market program. This year, the retailer has opened Neighborhood Market Stores in locations including Greenville, S.C., Joplin, Mo., Hidalgo County, Texas, San Diego, and Vancouver, Wash.

However, some regions will probably play better than others when it comes to the potential success of a Walmart To Go rollout. George predicts if Walmart proceeds, it will forgo New England and the Mid-Atlantic states, opting instead for the South and Southeast regions.

“I wouldn’t bet against them,” George said. “I think this is something they are going to roll out because they are getting tired of the ankle biters.”

Fresh First
The yellow columns designed to mimic the burst of petals in the Walmart spark and the “W” that marks the Arkansas location where Walmart To Go operates wasn’t drawn up down the road at Walmart headquarters, but at api(+), a Tampa, Fla.-based architectural firm that specializes in retail design.

The firm has been working with Walmart since 1997, when it helped the retailer reposition the Neighborhood Market when it was underperforming, said Juan Romero, api(+) president and CEO.

Over the years, the firm has been an important partner to Walmart as the retailer has tried other store footprints, said Tom Henken, director of design at api(+). So the two sides worked well together.

“Since then, we have played the role of the concept strategy group for their retail formats and understand what they’re about and construct them in a reasonable manner,” Henken said. “And reasonable with Walmart means: easy to duplicate, inexpensive to build in multiple locations and with multiple workforces.”

However, even if the Walmart To Go c-store is duplicated in various regions, the design is still singular, compared to other c-store chains, the principals feel.

Romero and Henken told CSD that inside the Bentonville store, the merchandising plan emphasizes the abundant fresh selection—designed to be immediately visible—is everywhere it seems.

“With this fresh component, not only do they have the freshly-prepared meal and meals to go, they also have produce and things that you wouldn’t expect in a typical convenience store,” Henken said. “On the left-hand side of the store, you have refrigerated and frozen doors that run around the perimeter with rows of merchandise that are convenient in the category. On the right-hand side is all fresh and ready to eat food, with different varieties of soda, coffees and teas, so the emphasis is on the fresh.”

“We really wanted to make an impact that there was a fresh component there; and opening that up and connecting it as much as we could to the pumps, which is the primary way someone is going to experience that store, is the goal that led to that design,” Henken concluded.

The Walmart Advantage
Walmart partnered with Bentonville Butcher & Deli, one of the more popular names around in terms of quality meat, to operate a quick-serve meat counter in the back of the store. Fresh deli sandwiches or hot barbecue brisket, ribs, smoked chicken and traditional sides are available by the plate or by the pound.

Jerry Weiner, vice president of foodservice for Rutter’s Farm Stores in York, Pa., also visited the c-store in Bentonville earlier this year. He said while nothing about the store seems incredibly “innovative,” Walmart’s partnership with a local foodservice provider offers a different spin on co-branded options like Subway or McDonald’s, which many c-stores pursue.

If, indeed, more Walmart To Go stores come online, competitors will be watching, if the retailer opts to partner with other local restaurants in other geographic areas.“It will be interesting if that’s the model they use,” Weiner said.

However, George sees the space occupied by Bentonville Butcher & Deli being better utilized to strike a direct blow at the drug store chains that have encroached on Walmart’s sales. He said pulling out the deli and substituting a pharmacy isn’t out of the realm of possibilities, adding a new service wrinkle unseen in the c-store marketplace.

“If that happens, that could really be a game-changer,” George said.

Collect & Serve
If Walmart is looking to change the game, one strategic option is online retail.

The emergence of curbside pickup, in which shoppers place orders online and head to a pickup location at a specified time, is becoming increasingly popular. This “click and collect” option offers all the benefits of shopping online and there are generally no shipping charges, though there may be a fee for expedited pickup.

One model is a gas station/grocery pickup center run by Giant Foods and Peapod, an online grocery service. Giant has 21 pickup locations in Virginia and Maryland, and its sister brand, Stop & Shop, has been testing this in the Northeast.

Walmart’s further foray into e-commerce could include leveraging online pickup to slow the momentum of such providers as Amazon Fresh and Amazon Spotlight. However, operating a collection location is a critical component, which is where Walmart To Go prospers, George suggested.

“Customers can collect at a Walmart To Go,” George said. “The supercenters are a little too big. I can see this (Walmart To Go) as a click and collect pickup point.”

It’s too early to speculate what Walmart might do until it decides. However, Jeff Lenard, vice president strategic industry initiatives at the National Association of Convenience Stores (NACS), said there are many things the c-store industry does well, including being able to provide thorough customer service in a timely manner—a concept at which Walmart will still have to become adept, he said.

Lower prices are great, but customers don’t frequent c-stores because they can obtain their favorite candy bar for three cents lower than the other guy, Lenard said. They frequent c-stores in part, because it’s convenient.

According to George, Walmart’s corporate mindset might not bode well for the retail giant as it ponders going small.
“Walmart is a logistical company, not a customer service company,” George said.

Walmart at a glance:
Total Retail Units: 4,921
Walmart Supercenters: 3,348
Neighborhood Markets: 381
Walmart Discount Stores: 489
Small Formats: 63 (Small formats include Amigo, Supermercado, Walmart Express, Walmart on Campus and Super Ahorros banners.)
Sam’s Club: 640