A customer pushes her shopping cart past a display at a Wal-Mart Supercenter in Rogers, Arkansas June 5, 2008.
Wal-Mart's supercenters are struggling as consumers increasingly choose convenience stores over one-stop shops.
The retail giant's mega stores
suffered a .3% same-store sales decline in the second quarter compared
with last year. During the same period, foot traffic for Wal-Mart's U.S.
stores fell by 1.1%.
By comparison, Wal-Mart's
smaller-format stores, or Neighborhood Markets, generated same-store
sales growth of 5.6% and traffic increased by 4.1%.
"I think convenience is where
the consumers have been looking, [especially] if you look at the Baby
Boomers," Wal-Mart CFO Charles Holley said on a call with reporters
Thursday.
The Neighborhood Markets are about one-fifth the size of Wal-Mart's
supercenters, and they are located in urban centers — where incomes tend
to be higher — while supercenters are typically located on city
outskirts.
The Markets are devoted to three of Wal-Mart's strongest categories: Groceries, pharmacy, and fuel.
Groceries account for 56% of
Wal-Mart's sales, and research shows that consumers no longer buy food
and beverages at one-stop shops.
"In the 1990s and the beginning
years of this century, the greatest threat to supermarkets and grocery
stores came from supersized 'one-stop shopping' venues like supercenters
and warehouse clubs," the market research firm Packaged Facts wrote in
its most recent annual report on emerging grocery trends. "Today the
threat is spread out among all retail channels, including drugstores,
dollar stores, limited assortment chains, and — the elephant in the room
— e-commerce."
On average, consumers shop at
five different types of stores to fulfill their grocery needs, according
to Deloitte's 2013 American Pantry report.
Consumers are carrying this shopping behavior over to other product categories, as well.
Instead of relying on a single
retailer to give them the best value and assortment, "consumers appear
more focused on some combination of value and convenience," Goldman
Sachs analysts wrote in a recent research note predicting the slow decline of big-box retailers like Wal-Mart and Target.
The rise of online retailers
like Amazon has made it possible for consumers to shop and compare
prices in a few clicks. Now that an increasing number of retailers are
offering free and fast shipping, there are even fewer reasons to step
foot inside a physical store.
In response to these trends,
Wal-Mart is rapidly expanding its Neighborhood Market locations. But its
fleet of 400 is still too small to offset the lackluster sales at its
3,300 supercenters.
That doesn't mean Wal-Mart is going to start shutting down its supercenters, however.
"Supercenters still have one of
the highest returns of any [store] format in the company," Holley
said. "It would be silly to close a lot of stores with good returns." LINK
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