Walmart US: remodels the new engine of growth

Date : 11 October 2016

With new space having been a key driver of sales growth over the last ten years, we look at the remodel plans which Walmart will be relying on to be its new growth engine.

Planning on 59 new units in the US next year

Walmart's recently detailed capital expenditure plans for 2017 reveal that new space growth is coming to a very sharp stop in the US. This is not surprising given that new space growth has been moderating over the last couple of years, and broader industry trends which have seen many retailers in the US, particularly general merchandise retailers, close a significant number of stores. Next year Walmart is planning on opening only 59 new stores in the US; 35 Supercenters, 20 Neighborhood Markets and four Sam's Clubs.

Significant slowdown of the Neighborhood Market roll-out

The slowdown in terms of the number of new Neighborhood Markets is a key standout given that over recent years the retailer has been adding over 100 new units a year. This format has also been the retailer's best performing format in terms of comp store sales growth for a number of years, and the shift to a smaller format is in line with the sector overall.

Source: Walmart

500 remodels planned next year

The core factor behind the new space slowdown is that Walmart has identified a significant opportunity to drive sales through remodels, across both its larger and smaller format stores. Next year the retailer plans on undertaking 500 remodels, accounting for an increasing proportion of its $11bn capital spend.

Source: IGD Research

Fresh angle produce program at heart of Supercenter reinvention

A new vision for the Supercenter was unveiled earlier this year, with the new fresh angle produce program a key component. Highlighting the growing importance of fresh for Walmart, this program has already been rolled out to over 3,000 stores. Featuring new fixtures, layout and product mix, this program creates a very different impression for shoppers at the front of the store. The broader remodel program also features new perimeter and category signage to improve navigation and sight lines, new look baby, electronics and automotive departments and a more integrated approach for grocery ecommerce and store pickup. Given the strategic challenges that many large format operators are facing in developed markets, this is an important element of Walmart's plans to ensure that its core format remains relevant.

Stronger emphasis on fresh at Neighborhood Markets

The rationale for improving the Neighborhood Market is very different. Already a star performer for Walmart, the business has spotted an opportunity to make it even better, and like the Supercenter, many of the improvements are focused on the fresh food offer. Much of this is down to the leadership of President and CEO, Greg Foran. For the first time in several years the US business is being run by someone with an extensive background in food and grocery retailing.

Source: IGD Research

Although the current Neighborhood Market format is well liked by the leadership team, the evolving food retailing landscape in the US which places fresh, natural, organic and better-for-you products at the forefront, is driving change. Produce, bakery, deli, baby and pharmacy are at the centre of the remodels at the Neighborhood Market, along with a new fresh focused layout, lower fixtures and a new split aisle configuration to drive an improved shopping experience. Once many of the new elements are retrofitted into the existing store estate, which will hit 700 stores by the end of the year, the expectation is that the retailer will once again focus on network expansion to capture more of the more infill opportunities around its existing network of Supercenters.

Stewart Samuel, Program Director, IGD Canada
Based in Canada, Stewart heads up all of IGD's research and coverage on Walmart globally. He is also responsible for shaping IGD's research program across North America. Contact Stewart at [email protected] for further insight on the Walmart and the region.