Imagine this: A neighborhood market that sells not only food, but pharmaceuticals and even fuel. It’s open 24-hours a day, and the prices are Wal-mart low.
Now snap back to reality because its true. Wal-mart has now designed smaller-format stores called Neighborhood Markets, and they are an alleged threat to some of our favorites, more traditional markets like Whole Foods, Kroger, and Trader Joe’s, because they are popping up all over the place, according to Moody’s analysts.
“The advantages of the Neighborhood Market concept will be difficult to beat back,” Moody’s Vice President Charles O’Shea said in a recent note to clients.
Analysts reveal that these traditional supermarkets have “upped their games over the past few years to somewhat blunt the onslaught of the Super-centers,” but the Neighborhood Market is considered a “different animal.”
They are like compacted Super-centers. They offer the same low prices as Wal-Mart’s giant warehouse stores, but in a much smaller and more easily accessible location, giving the Neighborhood Markets a “distinct competitive advantage over virtually anyone,” analysts write.
Sounds (and looks) kind of like the junior Smart & Final stores to me, but…
The focus of the smaller markets will be on groceries, pharmacies, and fuel; which have proven to be three of Wal-marts most solid categories. The stores are also more conveniently located to urban centers, which is a huge plus because Super-centers are typically located on city outskirts.
But according to Business Insider, traffic has been weakening at big-box stores because more and more consumers are shopping online for big-ticket items such as flat-screen TVs.
But that shouldn’t be much of a problem for the Neighborhood Markets, with their focus on fresh produce and fuel.
“Melding location convenience with an easier-to-shop store with a Supercenter-oriented pricing strategy presents a new set of competitive factors that we believe many supermarket operators will have difficulty addressing,” say the analysts.
Moody’s expects Neighborhood Markets to eventually outnumber Supercenters, with the smaller stores relying on the warehouses as supply hubs. Wal-Mart now has 645 Neighborhood Market locations and more than 3,400 Supercenters.
“We believe thousands of locations over time is a reasonable assumption,” the analysts write. “The only restraint will be how fast these can be built, staffed and stocked.