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American Food & Ag Exporter

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Will Wal-Mart’s Energy
Efficient/Hispanic Store
Make A Real Contribution?

Jim Prevor’s Perishable Pundit, May 14, 2008

Earlier this month, Wal-Mart opened a new HE.2 (High Efficiency — 2nd version) Supercenter in Garland, Texas. The company’s decision to introduce energy-efficient stores and its first “Hispanic Community” store opens the door to many possibilities.

Wal-Mart promotes the new store this way:

GARLAND SUPERCENTER FOCUSES ON LOCAL PREFERENCES
INNOVATIVE ENERGY-EFFICIENT STORE
ANCHORS NEIGHBORHOOD REVITALIZATION

Distinctive elements and special features abound throughout the new Wal-Mart Supercenter … in Garland. Customers at the newly relocated store will find a merchandise mix created with their preferences in mind, including family-oriented departments, bold colors and popular foods. The store is also built to minimize its impact on the environment as the latest of Wal-Mart’s High-Efficiency stores to open.

The Garland store is the latest High-Efficiency Wal-Mart Supercenter to open. The HE.2 store is designed to greatly reduce greenhouse gas emissions and use 25 percent less energy than a typical Wal-Mart Supercenter. By incorporating some of the most innovative products in building today, the HE.2 prototype uses many of the energy improvements from the first generation High-Efficiency (HE.1) stores, such as the one in nearby Highland Village. HE.2 stores feature industry-leading advancements such as integrated heating, cooling and refrigeration systems, and lighting innovations to conserve energy.

Store Designed for Local Tastes

Wal-Mart paid attention to the shopping patterns and preferences of its customers and designed the store to reflect the local community. As a result, the store will make fresh corn and flour tortillas and chips daily. The deli will also offer fresh-baked bolillo and pandulce, and the produce department will include an expanded selection of bananas, plantains, chilies and spices. Customers can pick up bulk packages of specially marinated meat, rice and beans. Near the entrance, shoppers will find a La Micha juice bar and a special shop with merchandise for the latest holiday or upcoming sporting event.

Customers will enjoy shopping with their families throughout the store, including its new youth-oriented department that displays children’s furniture, bedding and home décor together. Bold colors, popular brands and the latest fashions fill the store’s apparel and home décor sections. The store also has expanded its selection of children’s and infant apparel and accessories. In addition to the latest electronics, the store offers a wide variety of Spanish-language music, movies, games and other entertainment choices.

The new Supercenter will have a Wal-Mart MoneyCenter to assist customers who are outside of mainstream banking with convenient access to low-cost money services, including check cashing, money orders, bill payment and money transfers.

Ribbon-cutting Celebration 7:30 a.m., May 7

Community and business leaders will join Wal-Mart associates for a brief ribbon-cutting ceremony at 7:30 a.m., Wednesday, May 7, and doors to the new store will open at 8 a.m. Throughout the day, activities will include numerous product samples, character appearances and giveaways.

STORE FACT SHEET
Garland Wal-Mart Supercenter

Store facts

  • Location: 1801 Marketplace Dr., Garland, Texas
  • Originally opened in 1987 at 3159 Garland Ave.
  • 195,912-square-foot Wal-Mart Supercente
  • Store opens at 8 a.m., Wednesday, May 7, after a 7:30 a.m. ribbon-cutting ceremony
  • Store manager: Daryl Scoggins

Store features

  • Full line of groceries, bakery goods, deli foods, frozen foods, meat and dairy products, fresh produce, beer and wine section.
  • Merchandise departments include apparel and accessories, fine jewelry, lawn and garden center, health and beauty aids and a full line of electronics.
  • Convenience services include a money center, vision center, digital photo processing center, Wal-Mart Connect Center and a pharmacy with two drive-through lanes.
  • Leased areas and services include a La Micha juice bar, SmartStyle Family Hair Salon, DaVi Nail salon, a Subway restaurant and a branch of First Convenience Bank.
  • Open 24 hours a day, seven days a week
  • Twenty full-service and 10 express check-out lanes

Employment

  • The Supercenter plans to employ approximately 650 associates upon its opening. Due to its relocation, the store has added more than 175 associates.
  • Fifty-two of the store’s associates have worked for Wal-Mart for more than 10 years
  • Store Manager Daryl Scoggins was born and raised in Garland. He started his Wal-Mart career in 1994 as an hourly associate, working as a cart pusher at a store in Benton, Ark.
  • The average wage at Wal-Mart for full-time hourly associates in Texas is approximately $10.55 per hour.*
  • Wal-Mart benefits — available to eligible full- and part-time associates — include healthcare insurance with no lifetime maximum. Wal-Mart also offers a 401(k) plan and profit sharing contributions, whether an associate contributes or not, store discount cards, company performance-based bonuses, stock purchase program and life insurance.

* Average wage taken April 2008. See www.walmartstores.com for details.

HIGH-EFFICIENCY STORE INFORMATION

Garland Wal-Mart Supercenter

The Garland, Texas, store is the fourth Wal-Mart Supercenter classified as an HE.2 energy-efficient prototype. The stores are located in a variety of climate zones to evaluate how the systems perform and expected to use 20 percent less energy than a typical Supercenter. The stores feature industry-leading advancements such as integrated heating, cooling and refrigeration systems, and lighting innovations to conserve energy.

In July 2005, Wal-Mart opened the first of its experimental stores in nearby McKinney, Texas, followed by the opening of a similar store in Aurora, Colo., in November 2005, with the hope that successful experiments could someday be incorporated into new store prototypes. The Garland High-Efficiency store brings many of these experiments to life.

  • To achieve a 25 percent overall energy reduction, the Garland store uses a 100 percent integrated water-source format heating, cooling and refrigeration system, where water is harnessed to heat and cool the building.
  • The store also introduces a number of new and improved technologies, such as a state-of-the-art secondary loop refrigeration system, to gain a 5 percent improvement in energy efficiency over an HE.1 store. This improvement comes from a streamlined design of the water-source heating, cooling and refrigeration system, coupled with the new secondary refrigeration loop. This is the first time secondary loop technology has been paired with a water-source system.

Additional Energy-Efficient Store components include:

  • Motion-activated light-emitting diodes (LEDs) in refrigerated and freezer cases, plus additional glass doors on deli and dairy cases
  • Optimized pump package that is 50 percent smaller than the HE.1 store and uses even less copper piping
  • Industry-leading daylight harvesting technology
  • Reflective white membrane roof
  • Recycled construction materials such as fly-ash, slag, integrally colored concrete floors, and plastic baseboards and chair rails
  • A state-of-the-art Munters Dehumidification system is expected to increase overall store energy-efficiency by roughly two percent.
  • Restroom sinks use sensor-activated, low-flow faucets. The low-flow faucets reduce water flow by 84 percent, while the sensors save approximately 20 percent in water usage over similar, manually-operated systems.

In 2007, Wal-Mart opened a series of HE.1 stores in Kansas City, Mo.; Rockton, Ill.; and Highland Village, Texas. In January 2008, the first HE.2 prototype store opened in Romeoville, Ill. Others have since opened in Bernalillo, N.M., and Wichita, Kan.

Wal-Mart is now introducing its next generation of energy-efficient U.S. stores, the HE.5 prototype. The first HE.5 prototype opened in Las Vegas in March 2008.. These stores use up to 45 percent less energy than the baseline Supercenter. Building upon learnings from previous high efficiency stores Wal-Mart opened in 2007 and 2008, the HE.5 begins a new series of prototypes designed for specific climates..

The retailer’s high efficiency series of HE.1, HE.2 and HE.5 stores build upon many years of research, experiments, partnerships and pilots, and will ultimately help Wal-Mart reach its goal to design and open a viable store prototype that is 25-30 percent more energy efficient by 2009.

Wal-Mart customers are increasingly becoming familiar with the company’s energy-saving innovations as they are introduced in stores opening across the country. Many new stores now feature daylight-harvesting systems that minimize electricity usage during periods of bright sunlight, motion sensor-driven LED refrigerated and freezer case lighting and polished concrete floors that reduce the need for harsh chemical cleaning products.

The energy efficiency is part of Wal-Mart’s sustainability campaign, which is heavily focused on initiatives that can potentially pay off in the form of lower costs.

The Hispanic community store is a good idea but may not go far enough to make a real contribution to Wal-Mart’s growth.

In a sense, a Wal-Mart focus on Hispanics and, specifically, Mexican immigrants is a no-brainer. In fact, for at least ten years, executives at Wal-Mart have told us that it would be an easy win for Wal-Mart. After all, Wal-Mart has a dominant position in Mexico, with its Wal-Mex subsidiary. The lower incomes of recent Hispanic immigrants play to its demographic, and going back years, Hispanic Americans have been telling surveyors that Wal-Mart is their favorite store.

The problem is that merely tweaking a supercenter by adding a few Hispanic brands, buying a tortilla machine and opening up a money-wiring and check-cashing store is more in the vein of micro-marketing than a new concept store.

Presumably, Wal-Mart been exploring all these options for almost 20 years under its “store of the community” initiative — and if it didn’t put tortilliarias in every store in Hispanic neighborhoods, it is probably because the machine didn’t pay for itself and caused troubles in other ways.

For example, how many tortillas per hour will the in-store machine produce? And is that anywhere near what Wal-Mart can sell at peak hours? On the other hand, will Wal-Mart staff that tortilla machine 24 hours a day? Or will customers drawn by the prospect of warm, just-cooked tortillas be disappointed most of the time? And what is the back-up when the machine breaks?

We usually find that Wal-Mart does better focusing on things done in high volume and that these seemingly appealing things turn out not to work on Wal-Mart’s scale. This isn’t to say they shouldn’t be done, but not within the operating constraints of a Wal-Mart Supercenter.

If Wal-Mart wants a break-out concept for truly appealing to the Hispanic shoppers, it needs to start with a blank sheet of paper.

Wal-Mart is taking this blank-sheet-of-paper approach right now as it prepares to launch its new small footprint store. Very little information has been given out so far, but we are guardedly optimistic about Wal-Mart’s new concept.

Why? Well first, as we discussed here, it is a 20,000-square-foot concept — not 10,000 — and this strikes us as the size needed to offer sufficient assortment to appease American consumers. It also may allow for more service in the fresh departments — which is probably crucial if the stores are going to be perceived as fresh.

One of Tesco’s biggest problems has been a failure to deliver on its “fresh” promise. To American’s, sandwiches wrapped up in plastic and cardboard are what one gets from a vending machine. Why buy that if every Subway offers a fresher alternative?

We are also encouraged by what we are not hearing about Wal-Mart’s small format stores. By now, we would have heard the moans and groans of vendors if they were all being asked to do a lot of private labeling for the small format stores. That we haven’t leads us to surmise that the concept will be mostly branded — and that, if combined with aggressive pricing, is a dagger pointed at Tesco’s heart.

Tesco may spend the next 30 years building brand equity while Wal-Mart sells the best recognized and admired brands far cheaper than others and rides that branded equity into households across America.

Mostly, though, our guarded optimism is due to the fact that when Wal-Mart brought David Wild to the US as Senior Vice President of New Business Development, it allowed the team that is designing this new small store concept to locate in the Bay Area in California. Not only is this far from Bentonville but it is far from any Wal-Mart stores at all. (By the way, Wild is a former Tesco executive who had been working for Wal-Mart in Germany.)

This isolation from Wal-Mart’s headquarters and stores might give the small format team the freedom to explore niche marketing without the encumbrances of Wal-Mart’s real estate concerns or corporate dictates.

The Hispanic community supercenter may help Wal-Mart a little, but it can’t help much because it was fundamentally designed under the auspices of a team mostly concerned with not alienating any supercenter customers. Yet the very first strategic planning question is often not “who is your customer?” but, rather, “who is not your customer?”

If you complained to Whole Foods because you can’t get Ring Dings or Devil Dogs in their stores, that would not disturb them. You are not their customer.

If you wrote to Aldi and complained that the produce was out of place late in the day, that wouldn’t bother Aldi management either. If you have such rarified sensibilities as to be turned off by a misplaced bell pepper, you are not their customer.

It is easy for a company such as Wal-Mart to declare the addition of assortment or services to attract Hispanics. However, it is culturally almost impossible to get Wal-Mart to say that it is willing to alienate another group — say Anglos — to win those Hispanics to that store.

Even mighty Tesco has to some extent been laid low by its refusal to focus its stores. It refuses to choose between, for example, organic-lovers willing to pay for what they want and budget stressed bargin-hunters willing to trade down to feed the family. Fresh & Easy is not just a 10,000 square foot store, but a 10,000 square foot store that is somehow supposed to serve everyone.

The key to the success of the new Wal-Mart small footprint concept will be if management knows who is not a customer for the new banner. We will see soon enough if Bentonville has allowed the California team the autonomy to think this way.

The new supercenter in Garland, Texas, symbolizes an end of an era. The store this new supercenter replaces was the very first Hypermarket USA, which Wal-Mart opened in a joint venture with the Cullum Cos., operators of Tom Thumb supermarkets. It was a new era in retailing, worthy of coverage in Time.

In retrospect, and in contrast to the opening of the Wal-Mart Supercenter with Tesco’s Fresh & Easy rollout, Wal-Mart opened one Hypermarket, then a second, then the first supercenter. It opened slowly so it could change its concept as it received input, and it made many changes, including changing the box size and getting rid of roller-skate-wearing clerks.

Wal-Mart worked with a partner so it didn’t have to invest in distribution centers and related costs before it had the volume to support it. It took almost two years for the Hypermarket USA to evolve into the Wal-Mart Supercenter.

What confidence Sam Walton had! He didn’t worry that Kroger or Safeway would copy him. He felt he could out-execute them no matter what they did. One wonders if David Wild, who watched Wal-Mart fail in Germany, has Sam Walton’s confidence of old on the new small format Wal-Mart concept.

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