Neighborhood Market fine-tunes for the future - Wal-Mart's Neighborhood Market new prototype store opened in Bentonville, Ark

DSN Retailing Today, Jan 21, 2002 by Mike Troy

ROGERS, ARK. -- The development of Wal-Mart's Neighborhood Market concept took another step in its evolution Jan. 9 when a new prototype was opened here just a few miles from the location where the original unit opened in Bentonville, Ark., a little more than three years ago.

Despite their proximity to one another, the stores are worlds apart in terms of merchandising, store design, operational characteristics and presumably profitability.

"There are a lot of innovative, very new and exciting things in this store," David Glass, chairman of the Wal-Mart board's executive committee and former president and ceo told those gathered inside the store for the ribbon cutting. The store's location near Wal-Mart headquarters generated a turnout of other top brass that included chairman Rob Walton, Wal-Mart president and ceo Lee Scott, Sam's Club president and ceo Tom Grimm, board member and former senior vice chairman Don Soderquist and WalMart Realty president Paul Carter.

What they saw was a store that although similar in size and product mix to the original unit has abandoned the supercenter design mindset that appeared to influence the concept early on. The first unit in Bentonville had a dual entrance, a photo department and deli department at the rear of the store, tall gondolas, white floor and ceiling, and a produce department in the store's front corner. All supercenter characteristics. That philosophy was abandoned at this latest prototype where some of the most dramatic changes revolve around the fresh departments.

For starters, the dual entrance design was eliminated as it was deemed an unnecessary expense that didn't contribute to overall convenience; the store is only 40,000 square feet. Now there is a single entrance on the food side of the store, and this entrance has a greater impact on the senses.

To the immediate left is an enlarged deli and prepared foods areas with rotisserie chickens, smoked ribs and a tortilla machine. To the immediate right of the entrance is an area called Grab It & Go where customers can pick up a newspaper, soft drink, cup of coffee or a variety of baked goods. Payment is handled on an honor system with customers expected to insert money in a box near the beverage machines.

"We are trying to make things as convenient as possible, and we think most people are honest," said Ed Kolodzieski, director of Neighborhood Market.

Straight-ahead from the entrance, produce displays spills out in front of customers from the entrance to the rear wall where meat and dairy items are merchandised.

Other significant merchandising and design changes unrelated to food include a repositioned photofinishing department, located just inside the front door, where Wal-Mart is promoting half-hour processing. Modern photofinishing machines can process film in less than a half an hour, but retailers typically don't promote the capability because unanticipated roll volume can lead to a backlog. WalMart wants customers to be able to drop off film, go shopping and pick up their pictures on the way out of the store.

Another key nonfood change involves a reconfigured pharmacy and health and beauty care department. HBC gondola heights were lowered to 5 feet in front of a pharmacy that has been shifted closer to the front of the store. Despite a single entrance on the opposite side of the store, these changes make the pharmacy and adjacent departments more visible than they were in the earlier versions that had dual entrances. That's because tall HBC gondolas made the pharmacy hard to see when entering on that side of the store and virtually impossible to see when entering on the food side of the store.

While the look of the store is more appealing than earlier versions, especially on the food side, the most attractive aspect from Wal-Mart's perspective is the likelihood of improved operating profits. Wal-Mart executives didn't offer any specifics in this regard. However, one of the challenges Wal-Mart has faced with Neighborhood Market is how to reduce construction and operating costs to offset the lower margins produced by a small store generating most of its sales from food.

According to Kolodzieski, the design philosophy was to "incorporate style with inexpensive, commercially available materials."

To this end, the store has bare concrete floors stained a reddish color and an unpainted galvanized steel ceiling. Outer cinder block walls were painted yellow, and inexpensive departmental signs hung from the ceiling along the outer walls are backlit to provide a sense of depth, making the store seem bigger than it is. Refrigerated cases, produce displays and bunkers are made of bare galvanized steel. Facades above the dairy and meat departments are made of painted particleboard with Styrofoam crown molding painted a contrasting color.

Despite the use of such mundane materials, the store looks better and has a warmer atmosphere than its predecessor that by comparison has a sterile feel thanks to white floors and a white ceiling.