With two boys to feed, stay-at-home mother Vanessa Kirby of Omaha already clips coupons and spends much of her grocery budget at a Walmart Supercenter, where she believes she often gets the lowest prices.
Kirby, 24, says she expects to shift even more of her shopping to Walmart next year when the giant retailer brings a new grocery concept, the Walmart Neighborhood Market, to the Omaha metro area, including one about two miles from her home.
“People aren't going to have to drive 10 minutes to get to Walmart,” Kirby said. “They're going to be able to run to their neighorhood market and get the milk they need for their cereal in the morning.”
The six neighborhood market stores planned for the area — four in Omaha, one each in La Vista and Bellevue — are part of an aggressive national rollout of a concept Walmart has been testing and honing for more than a decade. The stores' arrival in 2013, analysts say, will be a real threat to existing supermarkets, especially those that compete most aggressively on price rather than service.
The Omaha area grocery market already is in flux with wholesaler Nash Finch's purchase this year of local chains Bag 'N Save and No Frills.
“It'll be interesting to see who survives,” said Trenton Magid, principal at commercial real estate firm World Group. “I predict there will be a shake-up in the next few years where you'll see some empty grocery stores. It's not like there's going to be a lot more mouths to feed. There are going to be more stores to pick from.”
Proposed Walmart Neighborhood Markets
Six Walmart Neighborhood Market stores are coming to the Omaha area
1. 132nd Street and West Maple Road
Opening: Spring 2013
Baker's, 13250 West Maple Road
SuperTarget, 4001 N. 132nd St.
2. 90th and Lake Streets
Opening: Late 2013
Aldi, 3433 N. 90th St.
No Frills, 8005 Blondo St.
Bag 'N Save, 2650 N. 90th St.
3. 168th and Harrison Streets
Hy-Vee, 17810 Welch Plaza
Fareway, 17070 Audrey St.
Bag 'N Save, 15370 Weir St.
4. 96th Street and Giles Road in La Vista
Opening: Fall 2013
No Frills, 1230 N Washington St., Papillion
SuperTarget, 718 N. Washington St., Papillion
5. 50th and L Streets
Opening: Spring 2013
No Frills, 4240 S. 50th St.
6. 2109 Towne Centre Drive in Bellevue
Opening: Spring 2013
Baker's, 3614 Twin Creek Drive, Bellevue
U.S. Air Force Commissary, Offutt AFB
Walmart designed the neighborhood market in 1998 and has refined the concept in test markets mostly in the South.
“They had to get the returns right,” said senior analyst Robin Sherk of Kantar Retail.
That meant adjusting the size and services of different departments to hit on the most profitable model, she said. For example, the stores often have no service staff person at the deli counter. Meats, cheeses and deli salads are prepackaged. “That cuts down on labor costs,” Sherk said.
A Walmart spokeswoman said the retailer is opening 80 of the small grocery stores around the country in 2012 and will have a total of 230 by the end of the year, pushing its brand further into urban and suburban neighborhoods it views as underserved by supermarkets.
At an average of 38,000 square feet, according to Walmart, the stores are about half the size of typical supermarkets opening today. The stores, each staffed by 65 to 90 people, are typically open 24 hours a day, selling produce, meat, dairy products, baked goods and deli items. They also include a pharmacy and sell household supplies and health and beauty items.
As aggressively as Walmart is opening neighborhood markets, it is opening still more supercenters this year, Sherk said. She said those big boxes remain Walmart's preferred format, and a Walmart spokeswoman said supercenters are its customers' preferred format.
But the neighborhood markets serve a different type of “shopper mission,” Sherk said: Supercenters are for stocking up; neighborhood markets are for smaller-scale grocery shopping or midweek buys. With that strategy, Walmart doesn't lose supercenter customers but stands to gain customers from other chains.
A smaller format will be a welcome change for many customers, said food marketing expert Phil Lempert, the “Supermarket Guru.” Aging baby boomers, for example. “That's 76 million people who don't want to walk around a supermarket that's 60-, 70- or 80,000 square feet.”
Supermarkets also offer too many choices for some consumers, he said. “We got a little carried away,” Lempert said. “If you go to the olive oil section, there's 100 kinds of olive oil.”
The Bellevue location seems likely to be the first neighborhood market to open in the Omaha area, with construction well under way. Construction has also begun on the store at 132nd Street and West Maple Road. Both stores will open in the spring of 2013, Walmart spokeswoman Delia Garcia said.
Garcia said Walmart may open more Omaha-area stores, but just the six are planned now.
When Walmart studies where to put new stores, it looks for areas that are “underserved” or “inadequately served,” Garcia said, meaning there aren't enough stores or that the neighboring stores aren't competitive on price, she said.
The six stores will be spread throughout the metro area, in some cases directly across the street from another grocery store. In other cases, competing stores are nearly a mile away. The La Vista store will be the only store in that city, though there are stores nearby in Papillion.
Recent shifts in the grocery landscape here have created an opening for Walmart, said grocery market analyst David Livingston of DJL Research in Wisconsin.
“In Omaha, they sense a lot of weakness among the competition,” he said, citing Nash Finch's purchase this year of a total of 12 Bag 'N Save stores and 18 No Frills stores.
“If I'm Walmart, I'm thinking there are way too many Bag 'N Save and No Frills stores. I can put them away,” Livingston said.
Nash Finch did not return a call seeking comment, but Nash Finch President and CEO Alec Covington referred specifically to Walmart's Omaha expansion plans in a July conference call. He told investors and analysts that combining the forces of No Frills and Bag 'N Save in Omaha will create a stronger entity and help the company, predominantly a wholesaler, “get better prepared for the future competitive front that we will face there over the next several years. ...”
Covington said the purchase means Nash Finch now has the No. 2 grocery market share in Omaha. Several firms that study market share said they would not share such data publicly.
A 2012 World-Herald consumer preference survey indicated that 30 percent of households had in the previous month spent the most for groceries at Hy-Vee, followed by Walmart with 23 percent, Baker's with 12 percent, No Frills with 9 percent and Bag 'N Save with 6 percent.
Covington said the integration of the two chains is “well under way,” a process being led by Fred Witecy, chief executive officer for No Frills. Witecy said he couldn't discuss how the chains would be combined or whether there would be any store closures or changes to store names.
“We're in the middle of planning the next step,” he said. “It's a big transition for Nash Finch. It's a big transition for us.”
Livingston said the new Walmart stores will be especially competitive with supermarkets that compete on value. “Walmart probably sees that there is a huge opportunity with price shoppers,” he said.
Walmart agrees. “Our biggest competitive advantage is being able to offer the customer an everday low price,” Garcia said.
A Fareway store manager said he did not want to comment, and calls to Fareway's corporate office were not returned.
Baker's and Hy-Vee representatives said they are not concerned about the new neighborhood markets.
Hy-Vee spokeswoman Ruth Comer said Hy-Vee customers value its focus on friendly, personal service. “That was a point of difference for our stores in 1930, and it has remained a focus for 80 years.We have a great, loyal customer following.”
At the Baker's at 132nd Street and West Maple Road, across the intersection from where a Walmart Neighborhood Market is under construction, vendors and store staff have been asking assistant store manager Micaela Riddick what will happen when Walmart opens.
“I just don't think it's going to be too much competition for us when it opens,” Riddick said. “We're just going to do what we do every day and that's get ready for the customer.”
Baker's spokeswoman Sheila Lowrie said the chain offers values, including recently lowered produce prices, but its customers also expect a certain level of service. Its stores can include a full-service deli and meat counter, floral department, dry-cleaning service, a large liquor department, a gas station and a large selection of organic and natural food products.
“As with all competition,” Lowrie said, “we'll continue listening to our Baker's customers and making sure we're providing that type of shopping experience they're looking for.”
A spokesman for SuperSaver, whose southwest Omaha location is not far from a future neighborhood market site, said that store tries to provide both value and service in what is a low-profit-margin industry.
No matter where Walmart locates, “we just try to do the best we can every day,” said Marty Jarvis, director of marketing for parent company B&R Stores. “We definitely keep an eye on competition and try to keep our prices as sharp as we can.”
Experts said consumers shouldn't expect much downward pressure on prices with the new stores, because prices are already competitive and margins low. But they said Walmart's new format could spur other changes.
The stores' arrival will be “a big wake-up call” to other grocers, Lempert said.
“Those retailers who really understand what customers want, reinvent themselves,” he said. “When you see six stores coming into a market like Omaha, you're going to see all the other stores spruce up.”
Those that ignore competition do so at their own peril, he said.
“It makes the other retailers better, or they go out of business.”
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