M: Business 3rd Edition by O. C. Ferrell, Geoffrey Hirt, Linda Ferrell

Exercise 42

With thousands of Walmart stores across the United States, it is hard to imagine any region without the familiar big-box retailer. However, there is one market where Walmart is notably absent: urban areas. Cities like Chicago, New York City, and Detroit have been against the idea of Walmart Supercenters within their limits. This is becoming a problem for Walmart, as it has recently lost 2 percent of U.S. samestore sales while its competitor Target has gained. With suburbs and smaller towns becoming increasingly saturated, Walmart is looking toward urban areas. In order to do so, Walmart is planning to open up stores on a smaller scale.

Smaller formats are not new to Walmart. The company runs 152 Neighborhood Markets (at roughly 42,000 square feet) and four Marketside groceries in the United States, along with many smaller formats in Mexico. Yet in areas where space is a significant issue and sentiments for small businesses are high, Walmart is being forced to adapt its strategy and go smaller. These moves are starting to pay off. After six years of trying to break into Chicago, the city’s zoning committee recently approved plans for a Walmart on its south side. The desperate need for jobs and Walmart’s agreement to raise entry-level pay to 50 cents above minimum wage seem to have made this possible. To succeed in the city, Walmart will have to abandon the look and feel of the big box. Management says it will scale down these urban stores to 8,000 square feet.

The focus will be on groceries, although consumers will be able to order other items online and pick them up at the store. Whether Walmart is successful in Chicago will likely pave the way for the company’s future plans for stores in the big city.

From an operations management pointof- view, what challenges will Walmart face running significantly smaller stores, and how could this impact the consumer?

Step 1 of 2

With saturation of suburbs and smaller towns, world’s largest retail, WM planned on opening up stores on small format. The concept was not new to the company, but if faced resistance in some areas. Though, the new business strategy did well and contributed in the success of the company, but there are barriers that WM face in running significantly smaller stores.