Walmart Challenged to Think Small in the Big City

Walmart launched its Walmart Express mini-store concept in Chicago in July of 2011. As the Chicago Tribune noted at the time, "The world's largest retailer, best known for its football field-size supercenters, plans to roll out 15 Walmart Express stores this year in three U.S. test markets: Chicago, Richfield, N.C., and the discount chain's home state of Arkansas."

A year later, the closure of its small-format store — "typically 10,000 to 15,000 square feet (or) one-tenth the size of a standard Walmart supercenter" which carried "fresh groceries, pharmacy and health and beauty aids" — on the South Side of Chicago indicates that the retailing behemoth still is trying to figure out its urban strategy.

The chain seems to have found its groove again in its traditionally sized bricks-and-mortar stores across the United States, with sales results moving positively again after a rocky couple of years, and is becoming a stronger presence online as well. But it's in America's city centers where Walmart is struggling to come up with the right approach.

That was indicated when its year-old Express store closed late last month, according to Crain's Chicago Business. Walmart told the publication the the closure of the 10,000-square-foot test store was based only on its promixity to a new, regular Walmart "supercenter" and didn't reflect any change in strategy.

Yet initially, Walmart executives said tht the Express format would be a vehicle for entry into the nation's 15 largest cities. It is still operating another couple of Express outlets elsewhere in Chicago and has 11 Express pilots nationwide that the company says are profitable.

"The supercenter was supposed to be the place for once-a-month big trips, and the Express would be for convenient fill-in trips during the week," Leon Nicholas, director of insights at London-based consultant Kantar Retail, told Crain's. "They weren't supposed to cannibalize each other, so the fact that it didn't work indicates the strategy was wrong." Nicholas maintained that, among other challenges, Walmart carried too many items in the Express store — such as large bags of pet food — that weren't appropriate for apartment-dwelling urbanites.

In the meantime Walmart has pivoted toward yet another format idea that may work better for its urban targets: Neighborhood Markets of 40,000 square feet (compared with a typical Walmart supercenter of 100,000 square feet or more). Walmart has said that it plans to open 80 more Neighborhood Markets across the country this year and an additional five in Chicago between 2013 and 2014.

One big reason its urban strategy has been such a challenge for Walmart, of course, is that until very recently it didn't have — or need — an approach to penetrating the hearts of U.S. cities. Sam Walton built the company on opening the biggest and cheapest stores for miles around in one rural market after another, then moved into the suburbs.

Another obstacle for Walmart in big cities is its perceived politics, founded by a conservative entrepreneur and still, to some extent, upholding a conservative ethos in some of its merchandise selections and political and not-for-profit ties. Its staunch opposition to internal unions and other issues also continually gets Walmart under the skin of the left.

All of which means that Walmart still hasn't made much progress on its ultimate goal for urban expansion: New York City. Whatever goes down in Chicago with Walmart's formats, at least the chain has a so-far welcome overall presence in the Second City. It may never get that far in the Big Apple.