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Shopping Centers Today -> November 2002
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WAL-MART ROLLING OUT SMALLER URBAN FORMAT
By Ian Ritter
In its continuing, relentless growth around the globe, Wal-Mart Stores has arrived at a new frontier: the city. Plans are under way to build a store in downtown Dallas much different from the typical one-level, stand-alone Wal-Mart store in front of an ocean-size parking lot. This urban Wal-Mart is on two levels, with underground parking and a storefront facade.
“We do unique stores in areas where it’s necessary,” Wal-Mart spokesman Tom Williams told SCT. “Instead of large boxes, you go for the smaller boxes.”
The company has already built a handful of stores in urban locations, including Los Angeles, New Orleans and Philadelphia, though few of them deviate as drastically from the Wal-Mart norm as the Dallas project. But that will change as the retailer acquires more properties in cities. (Williams would not disclose how many city stores are planned, or where.) To fit into the tighter urban locations, Wal-Mart says it may, depending on the circumstances, build smaller units than its average size (about 150,000 to 250,000 square feet). The chain has not decided how much smaller, nor the exact size of the Dallas store.
These new-style Wal-Marts won’t just look different; they will also sell different products and cater to a population that may not have the luxury of a car to carry all their purchases home. The stores will stock more merchandise in easy-to-carry boxes, for instance. Their gardening centers will carry smaller plants, and the sporting goods departments will feature less outdoor sports equipment and more of the urban variety.
“In metropolitan areas, folks shop in a certain way,” Williams said. “They’re going to take those sacks on the bus with them and carry them home.”
There are definitely customers for Wal-Mart in urban locations, said Howard Davidowitz, chairman of New York City-based retail consulting firm Davidowitz & Associates, though he added that the number of these special stores won’t be large.
“No one is ripped off on price more than the urban shopper,” he said, explaining that there is a lack of discount stores in urban areas. “So there is an opportunity, but not on a big scale.”
Multilevel stores, Davidowitz said, are not as shopper-friendly as stores laid out on one level, making them less attractive development options.
Wal-Mart would not be the first large retailer to enter urban markets. Kmart Corp., which filed for bankruptcy earlier this year, has always built stores in urban markets alongside its suburban units. Those stores have traditionally been the best performers in the discounter’s chain, Davidowitz said. Indeed, the best performers in urban markets are usually what he refers to as “undermarket players” — the Family Dollar and Dollar General chains, for instance.
“The extreme-value players have done very well in urban markets,” Davidowitz said, noting that these stores do well because they require less square footage than the larger chains.
In the future, Wal-Mart will likely build more stores in semiurban markets — those between inner cities and the suburbs — where there is more land available, Davidowitz said.
The retailer has little choice but to go into the cities if it is to continue to grow, said Kurt Barnard, president of Upper Montclair, N.J.-based Barnard’s Retail Consulting Group.
“There are many, many urban markets in the U.S., and Wal-Mart is running out of nonurban markets,” Barnard said. “They are trying very hard now to look for those markets.”
The main challenges ahead for Wal-Mart are finding space and weathering opposition from community residents who fear that new stores will increase traffic and noise in their neighborhoods. Wal-Mart is certainly no stranger to such storms. In September the residents of Chalmette, La., protested a proposed Wal-Mart in their area, citing fears of traffic congestion. That same month opposition to a Wal-Mart store in Norman, Okla., nearly led to the creation of an ordinance requiring residents to approve any large development through referendum. And the position of political candidates for or against a proposed Wal-Mart in Inver Grove Heights, Minn., could determine their fate in that town’s local elections this month.
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