Wal-Mart's 'Supermercado' Reflects New Focus

The decision by Wal-Mart Stores to test a Hispanic format at single Neighborhood Market locations in Phoenix and Houston could signal a new willingness by the giant retailer to focus on specific demographics as it expands. This is an indication Wal-Mart is getting more sophisticated in its thinking and moving away from operating cookie-cutter stores within each format in favor

BENTONVILLE, Ark. — The decision by Wal-Mart Stores here to test a Hispanic format at single Neighborhood Market locations in Phoenix and Houston could signal a new willingness by the giant retailer to focus on specific demographics as it expands.

“This is an indication Wal-Mart is getting more sophisticated in its thinking and moving away from operating cookie-cutter stores within each format in favor of a more customized offering, at least in terms of marketing,” Gary Giblen, executive vice president at Goldsmith & Harris, New York, told SN.

“Hispanics are already one of its largest constituencies, and it's been advertising in Spanish for years. And though it's harder to separate formats along similar lines for other demographic segments, this move shows Wal-Mart is thinking about doing more focused merchandising, which makes a lot of sense.”

Wal-Mart said earlier this month it plans to open the two Hispanic stores in the next few months “to better serve the diverse needs of the local community.”

The stores will operate under the name Supermercado de Walmart, with new layouts, signs and product assortments, as well as bilingual workers.

Wal-Mart previously announced plans for a Hispanic-oriented Sam's Club, called Mas Club, slated to open later this year in Houston.

In Phoenix, Supermercado de Walmart will be competing with the Food City chain operated by Bashas'; a Fry's Mercado operated by Kroger Co.; and Pro's Ranch Markets. In Houston, it will go up against Fiesta Markets and H.E. Butt's Mi Tienda.

According to Jim Hertel, managing partner at Willard Bishop, Barrington, Ill., “Wal-Mart apparently determined that a Hispanic format was the right answer to better meet local shoppers' needs. While that may sound obvious, it's amazing how many times supermarkets miss that point in their perishables offering, brand mix, pricing and so forth.

“If this move means Wal-Mart will tailor formats to meet a variety of trade-area demographic classifications, that would be very interesting to watch, especially as it tries to manage store-by-store needs alongside directions from headquarters.”

Jonathan Ziegler, principal at PUPS Investment Management, Santa Barbara, Calif., said he doesn't believe Wal-Mart was ever satisfied with the Neighborhood Market format, “because the returns were not as good as they are from supercenters, and perhaps they see the opportunity to market to the growing Hispanic segment as a better use for some of those units.”

The data gleaned from the test stores could also help Wal-Mart refine the Hispanic offerings at its supercenters, Ziegler added.

However, if Wal-Mart were to roll its Hispanic program out to a large number of its 146 Neighborhood Markets, “it could run into sourcing problems and the ability of vendors to fill its needs if demand were too high.”