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Wal-Mart Hopes Smaller Stores Will Mean Big Gains

The interior of one of Wal-Mart's new small stores in Arkansas. The company hopes its new strategy will help it compete with discount "dollar" stores.
The interior of one of Wal-Mart's new small stores in Arkansas. The company hopes its new strategy will help it compete with discount "dollar" stores.

Wal-Mart has announced plans to build as many as 40 mid-sized grocery stores and "express" marts this year.

The world's largest retailer hopes that the strategy will help it compete with burgeoning dollar-store chains and drugstores — and move into smaller shopping districts. And that has some smaller merchants worried.

What is possibly the world's tiniest Wal-Mart store is located on the University of Arkansas Campus in Fayetteville. The garage-sized prototype carries many of the things college kids crave: frozen pizza, soda and candy.

The store is "definitely cheaper than a lot of the other places on campus," says student Ian Plummer, who was buying macaroni and cheese. "It's nice to save a little bit, as well."

Some of the stores will also have pharmacies, including a new one in Prairie Grove.

Marilee Nelson operates the Antique Emporium, just a few doors down from her town pharmacist.

"So if the new pharmacy comes in, people will tend to go there," Nelson says, "because they're going to get their eggs and their bacon, and their lettuce, and their drugs."

And that's exactly what Wal-Mart is hoping shoppers will do. In a prepared statement, company spokesman David Tovar described the stores' likely inventory.

"The new format will feature an assortment of fresh food, dry grocery, consumables, health and beauty aids, over-the-counter medicines, and limited general merchandise," he said.

A woman makes her way out of a Wal-Mart store in Oakland, Calif. Wal-Mart Stores Inc. reported a 27 percent increase in fourth-quarter net income as the world's largest retailer benefited from cost-cutting and strong sales overseas.
Eric Risberg / AP
A woman makes her way out of a Wal-Mart store in Oakland, Calif. Wal-Mart Stores Inc. reported a 27 percent increase in fourth-quarter net income as the world's largest retailer benefited from cost-cutting and strong sales overseas.

Mel Collier owns a chain pharmacy in Prairie Grove. He says that the pharmacy's Wal-Mart survival plan is to do more for its customers.

"We offer the personal service, we have free delivery," he says. "We do the things that they're not going to do. We're going to have the personal patient interaction — and it's just not something Wal-Mart's known for."

But independent store owners have reason to worry, says Nelson Lichtenstein, author of The Retail Revolution: How Wal-Mart Created a Brave New World of Business.

"If the Wal-Mart initiative is successful," he says, "of course, it will have a competitive effect on small urban retailers of less than 20,000 square feet — of which there are lots of stores, like green grocers."

And Lichtenstein says the new Wal-Mart plan means that dollar-store chains have a reason to be concerned, as well.

"Those are the ones that are really cheap. They're dirty, they're understaffed, they're in strip malls," he says. "But they're now expanding. This is a function of the terrible economic conditions for many American consumers. And Wal-Mart wants to meet that challenge."

That's because studies show that nearly half of Wal-Mart's customers now browse dollar stores.

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