Wal-Mart's Small Format Stores Pose New Problems for Vendors

From The City Wire

As Wal-Mart Stores continues to focus on a smaller footprint for some of its stores, suppliers will see less shelf space and analysts say there is no time to waste in planning a survival strategy.

The Bentonville-based retail giant recently announced it would build 125 new supercenters this year at a cost of $2 billion. Total square footage on the new supercenter prototype is 140,000, shrinking from 169,000 in 2010. That’s 17% smaller than supercenters built four years ago.

There are still plenty of 180,000 and even 200,000 square feet supercenters which were popular about 10 years ago. And though Wal-Mart had been updating and remodeling hundreds of stores across the country with a fresher look, over the past couple of years those remodels have become less flashy.

Wal-Mart Chief Financial Officer Charles Holley said in February that Wal-Mart had lowered the average cost of a remodel by 50% over the past two years and shifted more capital to new stores.Dishwashing detergent repackaging from liquid to pods requires less shelf space and is a more sustainable option. Consumers are also paying more for less product with the new design.
“The new supercenters will also look more bare boned, opting for concrete floors instead of wood laminate with plainer finishing both inside and out,” said Leon Nicholas, director of retail insight for Kantar Retail.

Nicholas said Wal-Mart has been more cognizant of the store space in recent years and suppliers need to be ready for package redesigns and other creative display options in the coming year or so.

Dr. Jim Tompkins, CEO of Tompkins International, said shrinking shelf space is in direct conflict with an explosion of new and varied products – branded and private label. He urges suppliers to consider direct marketing to consumers through a virtual store to help compensate for shrinking shelf space among the major big box retailers.

Tompkins, a supply chain expert, said suppliers and manufacturers will miss an important crossroad if they don’t begin readying themselves for direct-to-consumer possibilities in the omni-channel world.
Nicholas said as Wal-Mart continues to put more supercenters in its already core markets, there will be increased cannibalization of sales – another concern for suppliers.
He said some suppliers may not get in as many stores with a renewed emphasis on the localized sourcing that harkens back to Wal-Mart’s “store of the community” initiative.

 

Lastly, he expects there will be more competition between brands and private label. This is based on a ramp up of private label hirings in the past six months at Wal-Mart. Last summer, Wal-Mart posted nine jobs for private brand, the largest hiring since the Great Value re-launch, according to Robin Sherk, senior analyst with Kantar Retail. She predicts ongoing private label refinements and expansions this year and next.

Nicholas said the shrinking store space, and other dynamics at work in essence means suppliers may need to revamp packaging and look for other ways to attract “favorite” status with Wal-Mart.

 

One idea tossed about by the Kantar analysts is looking for shared services or other partnership initiatives that fit into the five key pillars Wal-Mart has erected:

• Hiring veterans
• On-shore sourcing;
• Empowering women,
• Reducing overall carbon footprint, and,
• Providing healthier food options at affordable prices.

 

Nicholas said suppliers should anticipate increased complexity to serve Wal-Mart in the near term as the retailer seeks to cut its own costs, thereby shifting more of the burden toward product suppliers

18 Amazing Facts About Wal-Mart

by:  Sheldon Barry Cwinn (adapted from Business insider.com)

Sometimes we forget just how amazing Wal-Mart actually is. These crazy 18 facts will allow you to understand the enormity of Wal-Mart as a global corporation....


1- In fiscal year 2012, Wal-Mart registered approximately $444 billion in sales, which is $20 billion more than Austria's GDP. If Wal-Mart were a country, it would be the 26th largest economy in the world. 

2 - Wal-Mart has more employees worldwide — 2.2 million — than the population of Houston. The mega-retailer employs 1.4 million people in the U.S. alone.

3 - If Wal-Mart was an army, it would have the second largest military in the world, behind China

4 - Wal-Mart is bigger than Home Depot, Kroger, Target, Sears, Costco, and K-Mart combined.

5 -The average family of four spends over $4,000 a year at Wal-Mart.

6 - Each week, Wal-Mart serves more than 200 million customers at more than 10,400 stores in 27 countries.

7 - One of every four dollars Americans spend on groceries is spent at Wal-Mart.

8 - In 2010, CEO Michael Duke's annual salary of $35 million earned him more in an hour than a full-time employee makes in an entire year.

9 - In 2009, Walmart sold more bananas than any other item.

10 - China's exports to Walmart accounted for 11 percent of the growth of the total U.S. trade deficit with China between 2001 and 2006.

11 - If  Wal-Mart's more than 900 million square feet of retail space were spread out over one place it would take up roughly 34 miles, which is about 1.5 times the size of Manhattan.

12 - Wal-Mart parking lots alone take up roughly the size of Tampa, Florida.

13 - In the year 2000 Wal-Mart was sued 4,869 times, or about one lawsuit every 2 hours.

14 - 90% of all Americans live within 15 miles of a Wal-Mart store.

15 - The Walton family has given away about 2% of its net worth to charity. Bill Gates has given 48%. Warren Buffet has given away 78%.

16 - An additional Wal-Mart Supercenter per 100,000 residents increases average BMI by 0.25 units and the obesity rate by 2.4 percent.

17 - The most frequent destination typed into the GPS TeleNav is Wal-Mart

18 - Roughly 4,700 (about 90 percent) of international stores operate under a banner other than Wal-Mart, including Walmex in Mexico, Asda in the UK, Seiyu in Japan, and Best Price in India.