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Arkansas consumers soon will test Wal-Mart's new supermarket concept.

Analysts To View Bentonville Store at Yearly Meeting in Early October

In less than three weeks, central and northwest Arkansas shoppers will have first-hand knowledge of Wal-Mart Stores Inc.'s new Neighborhood Market concept.

Wal-Mart officials took possession of the Sherwood Neighborhood Market last week from L.R. Mourning Co., the contractor who built the facility. Crews will work round-the-clock stocking the store and finalizing details before the store opens Oct. 14.

The Bentonville Neighborhood Market should open a little earlier. More than 100 retail analysts from all over the country will get a chance to view the Bentonville store at Wal-Mart's annual analyst meeting Oct. 6-7.

Neighborhood Market is a 40,000-SF concept that Wal-Mart will test in five Arkansas cities: Springdale, Bentonville, Fayetteville, Sherwood and Fort Smith. It's a combination pharmacy/grocery store with some general merchandise - particularly health and beauty aids, paper and pet products. A one-hour photo lab also will be included.

The potential for the scaled-down, more convenient Wal-Marts seems to be huge. Wal-Mart's plans are to place the stores in suburban or rural markets between existing Wal-Mart Supercenters.

One New York analyst, Richard Church of Salomon Smith Barney Inc., told Discount Store News that if the stores prove successful, Wal-Mart eventually could open 1,000-2,000. Estimating sales at $300-$400 per SF, that could mean $12 billion-$30 billion in increased annual sales eventually.

But Elda Jurado-Scott, a Wal-Mart spokeswoman, says, "There really aren't any plans outside what we are calling the initial tests of these Arkansas markets."

Jurado-Scott says Wal-Mart will determine if it will build more Neighborhood Markets "based on the customers' response and if we're meeting their needs sufficiently."

The stores' sites were chosen, Jurado-Scott says, "to meet the needs of consumers who live between Supercenter locations."

Another key for Wal-Mart is locating the new stores near food distribution centers. Wal-Mart's only food distribution center in Arkansas is in Clarksville and is nearly equidistant from Bentonville and Sherwood - about 120 miles. Clarksville is only about 60 miles from Fort Smith.

"If the test proves to be successful, I'm sure they will be as aggressive in rolling out this new store concept as they have been in rolling out their previous new concepts," says Asma Usmani, a retail analyst with Edward D. Jones & Co. in St. Louis.

John Lawrence, an analyst with Morgan Keegan & Co. in Memphis, says if Wal-Mart succeeds with the Neighborhood Market concept, a tremendous number of U.S. markets exist where they could be built.

"If you can get 80 percent of what you need in a third of the size [of a Supercenter], there are markets - if they can make the economics of the box work - where that makes sense," Lawrence says.

Not Always Successful.

Although it's hard to remember, every Wal-Mart test is not successful. Even before Wal-Mart opened its first Supercenters in the late 1980s, it tested an even larger grocery store/general merchandise concept, Hypermart USA stores. Wal-Mart had three Hypermarts, in Garland and Arlington, Texas, and in Topeka, Kan. Wal-Mart eventually chose to go with the smaller Supercenter stores and closed the Hypermarts in the early 1990s.

For a few years in the late 1980s, Wal-Mart also owned 14 dot Discount Stores, a chain of drug stores in Kansas, Missouri and Iowa. It sold those stores, which annually generated about $5 million each, in early 1990.

Wal-Mart obviously learned from that exposure to pharmacies. Almost every Wal-Mart and Supercenter now has a pharmacy in it.

But Wal-Mart may be no better than fifth nationally in prescription sales behind CVS Pharmacy, Walgreen Co., Rite Aid Corp. and Eckerd Corp. One trade publication, Drug Store News, estimates Wal-Mart did $3.8 billion in prescription drug sales last year.

"I think Wal-Mart is focusing more on providing convenience with this [Neighborhood Market] concept," Usmani says. "It's much smaller than the discount stores and the Supercenters. The drug store industry is a growing industry. As the population ages, prescription usage increases. They are trying to benefit from that trend by providing a store concept which actually houses the pharmaceutical business, and the size is small enough to be convenient for the shopper to go in and pick up their drugs and not have to traipse through a larger store."
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Author:Smith, David
Publication:Arkansas Business
Date:Sep 28, 1998
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