The biggest of the big-box retailers are looking to get a lot smaller as they try to bring in more customers in areas where mega-buildings are neither practical nor affordable.
Discounter Wal-Mart Stores Inc., the world’s largest retailer, and home improvement industry leader Home Depot Inc. are rolling out stores that are much smaller as their bigger warehouse stores near a saturation point in the United States.
This year, Wal-Mart said it was changing the layout of its Neighborhood Market stores, which are typically about 39,000 square feet, to add more frozen food and bakery items and make over the health and beauty departments.
“We are tailoring specific Neighborhood Markets to provide the type of product mix that will be customized,” Wal-Mart spokesman Dave Tovar said.
Wal-Mart, which opened its first Neighborhood Market in 1998, now has about 112 of these smaller stores and plans to open 15 to 20 of them over the next year. Wal-Mart supercenters average 187,000 square feet.
“The need to continue to grow the company and open up stores in places where they’re not is what’s driving this,” said George Whalin, president of Retail Management Consultants.
Last month, Home Depot opened stores that measure 28,600 to 50,000 square feet, smaller than its average 105,000-square- foot format, in California, spokesman Anthony Wilbert said.
The home improvement chain will also roll out small-market stores in Tennessee in July, and plans to open a 235,000- square-foot super store in New Jersey next year.
Whalin said smaller stores make sense for Home Depot but pose challenges for Wal-Mart.
Wal-Mart “is so used to having a bigger palate to paint on and a bigger space to do things in that I think (a smaller format) is difficult,” Whalin said.
He said stores in the 40,000-square-foot range require retailers to slim down their offerings. “I don’t know that (Wal-Mart) is convinced they can do it right,” Whalin said.
But he added that Bentonville, Arkansas-based Wal-Mart might put more emphasis on smaller stores now that Britain’s Tesco Plc plans to launch U.S. grocery stores.
Tesco, Britain’s biggest retailer, will open small grocery stores in the United States this year to focus on ready-to-eat meals and fresh and environmentally friendly products.
At Home Depot, Whalin said smaller stores can work in urban areas, particularly if they are served by independent hardware stores that can’t offer the Atlanta chain’s pricing and selection.
“There’s a part of America that needs the kind of a hardware store and home center that Home Depot operates,” Whalin said.
The New York Post on Monday reported that analysts say Wal-Mart is mulling stores as small as 20,000 square feet. When asked whether Wal-Mart was planning even smaller versions, Tovar said the chain was currently focused on its 40,000-square-foot format.
Whalin said he would be “real surprised” if Wal-Mart set up a 20,000 square-foot store.