Tags: Wal-mart | Revival | Strategy | Shrink

Wal-mart's Revival Strategy: Shrink To Grow

By    |   Tuesday, 08 Jul 2014 07:47 PM

As Wal-mart struggles with declining sales and dwindling traffic, CEO Doug McMillon has called for a new order, which includes shrinking to grow.

For years, Wal-mart successfully sold itself as the behemoth of low-price shopping. But in recent quarters, the company has steadily been losing market share to dollar stores and online retailers like Amazon.com.

McMillon assumed the role of CEO in February and he has doled out urgent instructions to accelerate new store concepts and online strategies in an attempt to get Wal-mart back on a growth track, MarketWatch reported.

And a key part of McMillion's vision involves rolling out smaller stores.

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Wal-mart supercenters vary from 180,000 square feet to 230,000 square feet, says Forbes. These units have been the backbone of Walmart's business model.

This year, for the first time in its history, Wal-Mart will open fewer supercenters and more Neighborhood Markets, a grocery store concept, and Wal-mart Express, a convenience-type store.

These new smaller units will range from 10,000 to 40,000 feet, says MarketWatch.

In March, Wal-mart quietly opened an experimental store in Bentonville, AK called Walmart to Go. This mini unit, measuring only about 5,200 square feet, offers gasoline, groceries and hot food, along with the usual staple items, World-Herald News Service reported.

Wal-mart has tried to play down intentions to open more Walmart to Go units, but the company's history doesn't support those claims, says the World-Herald.

After testing the Neighborhood, Wal-mart rolled it out aggressively and there are now some 300 nationwide.

“These smaller-format stores are the result of us listening to our customers. They are telling us they want new ways to shop,” Wal-mart spokeswoman Betsy Harden told the World-Herald.

And Wal-mart's ideas to answer those demands don't stop with just smaller units.

Employees claim that the retailer wants to double alcohol sales by 2016. To help achieve that goal, Wal-mart plans to roll out free-standing liquor stores in states that ban booze sales from grocery stores, MarketWatch reported.

Wal-mart also has plans to test an Internet grocery pickup center in Bentonville, where shoppers will order online and pick up their orders from a drive-thru.

Wal-mart has plenty of money to toss around in efforts to reinvent itself, but that doesn't mean that investors aren't concerned.

“You’re basically saying thousands of supercenters are going the way of the horse and buggy,” says Wolfe Research analyst Scott Mushkin. “It’s a scary thing.”

And while the new strategy may intensify the negative results in the short-term, Mushkin tells MarketWatch he doubts that is McMillon's concern.

“Doug isn’t there to make next quarter or next year’s earnings,” says Mushkin. “He’s there to try to bring Wal-Mart into the 21st century.”

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As Wal-mart struggles with declining sales and dwindling traffic, CEO Doug McMillon has called for a new order, which includes shrinking to grow.
Wal-mart, Revival, Strategy, Shrink
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2014-47-08
Tuesday, 08 Jul 2014 07:47 PM
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