You can't fault supermarket retailers who are distressed by the most recent news out of Bentonville.
eration by unveiling 170 to 180 of these giant units next year compared to 160 in the current year.
Moreover, traffic is increasing on the food side of these diversified stores and helping the supercenters attract more frequent customer visits overall, according to a story in last week's SN that quoted Tom Coughlin, executive vice president of Wal-Mart and president and CEO of its domestic stores division.
Wal-Mart continues to show signs of becoming a better student of the supermarket business and a more formidable competitor. The company is placing more emphasis on food freshness in order to drive double-digit sales increases, Coughlin said. By way of example he pointed to the coming rollout of Wal-Mart's case-ready meat program, which he sees as a big step forward.
The retailer is hoping to make further progress in improving labor and other store operations as a way of easing the challenge of having to staff up so quickly at so many new locations. Wal-Mart is even improving on its own record in its strong suits of technology and efficiency. It is now revising backroom procedures to reduce inventories and heighten efficiencies and is undergoing four tests of self-checkouts at 25 locations. None of this is good news for conventional supermarket retailers, particularly regional chains and independents. But past evidence shows that smart, clear-thinking operators Supporting this view is Steve Dillard, vice president of education and strategic planning for Associated Wholesale Grocers, Kansas City. In a speech to members of the Missouri Grocer's Association that is summarized in an SN article this week, Dillard sized up the hardest-to-execute part of Wal-Mart Supercenter's food offerings, the perishables department, and found plenty of opportunities for competitors.
Starting with produce, he conceded that Wal-Mart supercenters are "getting better," but assured that "they are not there yet." The supercenter's produce variety still doesn't come close to matching that of good supermarkets, he said.
Next, Dillard called Wal-Mart's meat business "a big weakness" and disputed Wal-Mart's view that its case-ready program is a major plus. "Since Wal-Mart switched to branded case-ready beef, if you want a specific cut you have to order three days in advance -- and see a meat 'stocker' instead of a butcher," he said.
Dillard stressed that many of AWG's member supermarkets have been able to find holes in Wal-Mart's program and use it to their advantage. These supermarkets have accomplished this through strategic remodels, aggressive promotions, targeted ethnic merchandising, improved customer service and employee communications, among other methods, he pointed out.
Dillard's outlook will no doubt be heartening to many operators facing a Wal-Mart onslaught. Another positive piece of news for Wal-Mart's competitors is that the world's largest retailer is still taking a go-slow approach to expansion of its small-box Neighborhood Market food format. Wal-Mart said it expects to open 15 to 20 units next year, which would add to the 19 that will be in place by year-end.
That rate of growth is low compared to what can be supported by Wal-Mart's growing network of distribution centers, points out Deborah Weinswig, an analyst with Bear Stearns, New York, in a report. This analyst approved of Wal-Mart's conservative store-opening approach, but added, "The benefit clearly belongs to traditional supermarket and drug chains who will see less direct competition over the near term."
Not that retailers should assume Wal-Mart isn't serious about aggressive expansion. One analyst recently predicted that Wal-Mart could have 2,600 Neighborhood Markets in place by 2005 on top of about 1,600 supercenters. But even a temporary respite from expansion of a Wal-Mart format gives supermarket competitors time to further hone their battle plans.
