All eyes on Phoenix, the small-format battle has begun

Articles
November 21, 2008

All eyes on Phoenix, the small-format battle has begun

The retail world will eagerly watch the showdown under the blazing Phoenix sun between Tesco’s Fresh & Easy and Walmart’s Marketside small-format grocers, which both stress fresh foods, convenience and value prices. The U.S. retail giant opened its first four 15,000-square-foot stores (10,000 selling space) to directly confront and battle-test 26 sites there run by the British innovator: some Marketsides are within a mile of a Fresh & Easy. Will either wither? Will they take better learnings into new locales as they roll out, as a result of their early standoff? Will local shoppers perceive enough differences between the two of them, and between them and conventional grocers, to give a strong ‘go’ signal for expansion? Where might Walmart take it? In a TNS Retail Forward webinar yesterday, senior vice president Sandy Skrovan and senior consultant Jennifer Halterman addressed these issues and more. “Five years from now, conventional supermarkets will be part of the landscape, but more niche formats delivering fresh, convenience and extreme value will crop up,” predicted Ms. Skrovan. She supported that view with the consultancy’s own shopper survey data: almost 6 in 10 consumers want to buy more fresh and healthy food, but feel it is too expensive.

The retail world will eagerly watch the showdown under the blazing Phoenix sun between Tesco’s Fresh & Easy and Walmart’s Marketside small-format grocers, which both stress fresh foods, convenience and value prices.  The U.S. retail giant opened its first four 15,000-square-foot stores (10,000 selling space) to directly confront and battle-test 26 sites there run by the British innovator: some Marketsides are within a mile of a Fresh & Easy. 

Will either wither? Will they take better learnings into new locales as they roll out, as a result of their early standoff?  Will local shoppers perceive enough differences between the two of them, and between them and conventional grocers, to give a strong ‘go’ signal for expansion? Where might Walmart take it?

In a TNS Retail Forward webinar yesterday, senior vice president Sandy Skrovan and senior consultant Jennifer Halterman addressed these issues and more. “Five years from now, conventional supermarkets will be part of the landscape, but more niche formats delivering fresh, convenience and extreme value will crop up,” predicted Ms. Skrovan. She supported that view with the consultancy’s own shopper survey data: almost 6 in 10 consumers want to buy more fresh and healthy food, but feel it is too expensive.

She sees Marketside as an appropriate vehicle to fill in gaps between supercenters and to establish Walmart in large urban centers such as New York City, Chicago, and parts of California. Yet she felt these small formats might cannibalize traffic from supercenters where they are too close.

SupermarketGuru.com believes, however, that Marketside will attract a very different consumer base, one that is largely incremental to Walmart now, and one that wouldn’t be able to easily tell by the store’s trade dress that the giant discounter owns and runs it. Even if they could know, Retail Forward’s own survey says 55% of consumers would be willing to give a small food store by Walmart a try.

Ms. Halterman, who visited the Marketside stores, described Quick Trip cues: small shopping carts, prepared foods and grab-and-go options which include endcap coolers of complete meal component containers.  She estimated 40% of floor space is devoted to fresh bakery, meats, sushi, pizzas, soups, produce (the latter open and touchable vs. the pre-wrapped presentation at Fresh & Easy) and other perishables. Fresh offers also include family-sized portions.  To ensure freshness, the stores receive two to three deliveries each day. To convey economical freshness, stores have on-site sushi chefs, pizza hearths and messaging such as Deliciously Affordable and Market Value.

National brand value is the primary message of center store, about 50% of space, with bottled water and chips on pallets. Also: Ethnic brands and flavors appeal to local Latinos. Gluten-free foods are on display. So are green household cleansers, and pet foods in smaller convenience sizes. About 20% of the store’s total assortment (including beauty care and household) is in organic and natural brands. 

Marketside stocks between 7,000 and 10,000 SKUs, far more than the 3,500 at Fresh & Easy, Ms. Halterman said, adding that less center-store variety might help make shopping decisions easier. Her other suggestions: more heating options for people who want to eat right away, indoor/outdoor seating, more daypart solutions (for breakfast, lunch and dinner), an online mechanism to order for pickup/delivery, and automated tellers, photo kiosks and video rental vending machines.

SupermarketGuru.com sees Walmart as just one of many food retailers unveiling their version of Fresh & Easy. Deeper analysis will surely follow their face-off, and differentiators will emerge. As Walmart, Supervalu, Safeway, and others refine their formats and line up fresh-food sourcing in every market, they’ll need to maintain high-quality to keep the heart of these stores intact and compete well against fast-feeders, each other and conventional supermarkets.