Filed under: Wal-Mart (WMT), Columns

Welcome to the 79th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes to a very hot topic these days: Wal-Mart.

This week, let's take a look at how Wal-Mart Stores Inc. (NYSE: WMT) may be trying to re-invent itself in some markets with a newer, smaller store format. Wal-Mart has dabbled in smaller stores before (like the Wal-Mart Neighborhood Market), but in general, they've been limited in product selection.

These newer launches, though, may be a competitive response more than Wal-Mart testing the small store format yet again. These new locations are marketed with the name "Marketside." They have no marketing connection to the Wal-Mart brand at all. This is indeed a difference, as Wal-Mart looks to be leveraging its immense retail power with a completely new brand. Can it work?

Going the microbrand route

Wal-Mart is not the only retailer to launch a sub-brand to compete in a niche market. In this case, having smaller, less cluttered grocery stores instead of massive, big-box, do-everything stores could be the ticket to testing a concept without most customers knowing it is. If you're reading this and live around the Phoenix, Arizona area, you are one of the few that actually do know.

In the Phoenix area, Wal-Mart will launch four of the new "Marketside" stores that max out at 15,000 square feet. Ever since European competitor Tesco announced its "Fresh & Easy" small grocery store concept, Wal-Mart has been trying to device a strategy to not let any grocery market share get away. This is what appears to be its first legitimate attempt.

In Mesa, Arizona last Thursday, the Marketside store opening drew a small number of interested customers plus some folks from local grocery chains wanting to see what format Wal-Mart had cooked up to better compete in the non-big-box grocery store format. One notable difference: the lack of store brands and private-label brands. Wal-Mart is positioning these Marketside stores to have value-priced brands on display without lower-priced, store brands. You'll supposedly find the best prices on national brands like Campbell's Soup and Tide Detergent.

Taking a different approach

Unlike Tesco's smaller approach (grocery stores in the 10,000 square foot range), Wal-Mart's Marketside stores will feature some own-brand prepared meals and side dishes. While Tesco's approach is to have about 70% of the foods featured in its stores be its own brand, Wal-Mart (for now) looks to have about 5%. There is a pretty large difference, as you can see.

Advice to Wal-Mart: have a double-digit percentage of all-in-one meals that cater to busy moms and families that would like to have a full family meal at least three times per week, but with no preparation required except for some oven or microwave warming. An hour prep time? Forget it -- busy families need turnkey, fast meal solutions.

Due to the smaller size of the Marketside stores, they will carry 5,000 to 7,000 products -- quite a small amount compared to the typical 20,000 items stocked by a standard-size grocery store. Marketside stores will also feature some unique features, such as pizza ovens for heating those store-brand pizzas in the store as well as a kitchen with baking facilities. Perhaps Wal-Mart wants more customers to actually make meals in the store, cart them home and feed waiting families?

Wal-Mart's next competitive advantage

The opening of these Marketside locations (it'll be a 10-store pilot to begin with) will complement Wal-Mart Supercenters and Wal-Mart Neighborhood Markets. Most likely, it's Wal-Mart's way to crack into markets that have been extremely hesitant to have large-scale retailers of any stripe bring huge footprints to smaller towns. In many cases, smaller communities fear the "Wal-Mart Effect," which is what happens when smaller retailers are driven out of business due to the huge selection, low pricing and one-stop-shop convenience Wal-Mart can offer.

It's hard to see 15,000 square-foot grocery locations being a huge threat, which is most likely why Wal-Mart came up with the concept. But, this is also a pilot -- Wal-Mart may indeed abandon the small grocery store concept entirely if it finds that it still can't compete with the new Marketside concept.

I still hold that any retailer who focuses on having completely-prepared meals that make it easy to families to eat together without spending an hour or more of prep time could see huge success. Offer the top 50 meals in several cuisines to cater to local tastes, package these meals together into easy-prep packages (complete with drink selections), and figure out a process to get those packages -- priced cheaper than the individual food packages would cost -- to the kitchen table fast and ready to eat. Do that, market it correctly and watch the soccer moms of the world show up again and again in droves, 365 days a year. Perhaps that yet another concept for Wal-Mart to think about.

Join me right here this time next week for another edition of The Wal-Mart Weekly. Until then, have a great week.

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