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Wal-Mart Re-Positions Marketside

Jim Prevor’s Perishable Pundit, June 12, 2009

We’ve studied many aspects of Wal-Mart for a long time. Yet the launch of Tesco’s Fresh & Easy concept made the prospect of examining Wal-Mart’s Marketside concept particularly intriguing. We‘ve run a number of pieces including these:

A Triumph In Phoenix — Wal-Mart’s Marketside Hits The Trifecta. One Open Question: Do Suburban Consumers Want Small Grocery Stores?

More Thoughts About Wal-Mart’s Marketside

With Wal-Mart’s Marketside Concept In Stasis, Let’s Pause And Examine Ready-Meals

Now comes word that Wal-Mart has decided to rebrand the stores to herald the Wal-Mart ownership:

Marketside grocery stores add Wal-Mart name

A subtle change is occurring at Wal-Mart’s four Marketside grocery stores, which the company is testing with Arizona shoppers.

In contrast to the great fanfare and international attention that accompanied the stores’ debut in Gilbert, Mesa, Chandler and Tempe last year, the Bentonville, Arkansas-based company quietly changed the name and logo on the newest addition to its family of stores..

The stores are now called Marketside by Wal-Mart. The logo, which once appeared to be stacked fruits or vegetables, was also bagged in favor of the new Wal-Mart logo, which looks like a yellow sun or star.

Previously known simply as Marketside, the retailer had obviously wanted to distance itself from the Wal-Mart image, said David J. Livingston, a supermarket industry consultant.

He said the company probably decided it was more advantageous to capitalize on its image as a low-cost leader in the retail and grocery store industry.

“Obviously, they’re just making a business decision,” he said. “If you’ve got a name like Wal-Mart, which is a household name, why not use it to its full extent?”

Company officials didn’t return phone calls.

Tom Rex, an economist with Arizona State University’s WP Carey School of Business, agrees with Livingston.

“There’s quite a market already for Wal-Mart,” he said, “So yeah, it would make sense to me that they’d keep pushing their name.”

Wal-Mart had hoped the prototypes would be a hit with consumers and wanted to expand beyond the Valley and across the nation. However, Reuters reported last week that the company is holding back on expansion plans given the current economic conditions.

Marketside by Wal-Mart places a heavy emphasis on convenience, freshness and low prices. If that sounds familiar, it’s probably because those are also key objectives for Fresh & Easy Neighborhood Market, a grocery chain that was opened in 2007 by Tesco, a United Kingdom-based grocer. Fresh & Easy was expected to be Marketside’s biggest competitor.

Although Wal-Mart’s ownership was not a secret, the store clerks we spoke to at the opening all vehemently objected when we said they worked for Wal-Mart.

David J. Livingston, the consultant quoted in the article, is a frequent Pundit contributor, including these pieces:

Kroger And Tesco Approach Store Acquisitions Differently

Aldi Challenges Wal-Mart As Low-Price Leader

Reading Tesco Between The Lines

Tesco’s ‘Selective’ Market Research

David points out that in this day and age, Wal-Mart executives must have decided that it was advantageous to tie in with the Wal-Mart name and its reputation for economy.

Many of the negatives associated with the name have dissipated due to some clever PR by Wal-Mart, including its focus on sustainability, and due to the fact that low prices are valued more heavily in times of economic stress.

In addition, as we mentioned here, Wal-Mart has now stopped requiring that Neighborhood Markets sell at the same price point as supercenters. If two banners can have different price points and remain under the Wal-Mart brand umbrella, why not three banners?

We suspect such a change also speaks to how Wal-Mart intends to use the banner in the future — most likely in markets where Supercenters and Neighborhood Markets are part of a broader retail mix. This differs from the idea of a self-sustaining brand, possibly opening thousands of stores all over the country — including in many markets where Wal-Mart has little, if any, presence. Indeed one wonders if this brand switch explains why the California Marketside locations — not located near any Supercenters — have not opened.

As to whether it is a smart move or not, we have some doubts.

● Marketside is more expensive than Wal-Mart, as the study done by Pundit sister publication, PRODUCE BUSINESS, demonstrates. So the tie in endangers the low-price leadership reputation.

● Wal-Mart is still a down-scale retailer. Today it is chic to be cheap and so Wal-Mart is a winner. In the short run, the branding will help the stores. Long run, however, we wonder if Wal-Mart isn’t limiting its options. Prosperity will rise again one day and we think Hallmark’s approach, where its ShoeBox Greetings division is identified in small type as “a tiny little division of Hallmark,” wouldn’t be a smarter positioning.

Some people just don’t want to be downscale. Some want to be a little quirky, and some just don’t like to shop at the place everyone else does.

For Wal-Mart, the question down the road is how to appeal to broader swathes of the consuming public. We suspect it won’t be with Marketside by Wal-Mart.

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