WAG test drives electric fill-ups
HOUSTON — Walgreens will receive a jolt to its brand image in February as the chain begins playing host to NRG’s eVgo electric vehicle charging stations across 18 locations in the Houston market. The eye-catching stations will help position Walgreens, and such other participating retailers as H-E-B and Best Buy, as cutting-edge companies with an eye to the future — and as responsible neighbors intent to make good on the promise of sustainability.
“This is another way we are providing our customers with an environmentally sustainable shopping experience, and it sets us apart as a retailer who is moving clean and green energy alternatives forward,” stated Menno Enters, Walgreens director of energy and sustainability.
Driving that healthy brand image home to consumers makes sense for retailers today. But down the road, these charging stations — where potential shoppers are captive for as many as 30 minutes — also may represent an entirely new revenue stream for retailers, said Arun Banskota, president of NRG’s EV services. “There is going to be revenue-sharing possibilities in addition to driving more people into these stores,” he said. And that could happen in as little as two years, depending upon how fast any EV market develops, he added.
Similar to the way mobile phone companies quickly drove cell-phone penetration, NRG will be covering all up-front costs — the home charger, at-work charger and publicly accessible chargers — for a subscription fee ranging between $49 and $89 per month.
Under the best market conditions, electric vehicles may capture 10% of the auto market by 2020, projected Antonio Benecchi, a partner at Roland Berger Strategy Consultants. While aggressive, it’s a projection justified by such recent announcements as that of Renault-Nissan CEO Carlos Ghosn, who is targeting production of 500,000 EVs per year as soon as 2013. “The market has almost reached a point of no return with these vehicles in terms of investments that car makers have made [and] investments that the government, at different levels, [has] made,” Benecchi said.
Roland Berger, in partnership with the nonprofit Rocky Mountain Institute, in October released a report outlining how far along major metropolitan areas were in developing the EV infrastructure.
The top five most-prepared cities are along the West Coast: San Jose, Calif.; Los Angeles; San Francisco; Sacramento, Calif.; and Portland, Ore. Houston also was identified as one of the “first-wave” cities.
Small formats gain momentum, grab attention
BENTONVILLE, Ark. — Walmart’s Neighborhood Market concept finally is getting its due more than 12 years after the first unit opened in late 1998. Next year, the company expected to open between 30 and 40 small stores, the majority of which will be Neighborhood Market units, in addition to a handful of pilot stores measuring less than 30,000 sq. ft. that the company views as a potential growth vehicle for either urban or rural markets.
The uptick in interest in smaller-format development comes as the Walmart supercenter is close to saturation. At the end of the third quarter, there were 2,882 supercenters in operation, and with next year’s plan to add between 155 and 165 supercenters, the company easily should surpass the 3,000-unit market. By comparison, there were only 181 Neighborhood Markets, four Marketside stores and two Supermercado stores. Overall, the level of capital expenditures and square footage expansion next year will remain the same as this year, with plans calling for between $7.5 billion and $8 billion spent on adding roughly 11 million sq. ft. of space.
The upshot for the coming year and beyond is that urban markets, and to a much lesser extent rural areas, represent the single greatest domestic growth opportunity available to the company, which is why there is an increased, albeit modest, amount of capital being devoted to smaller stores. However, aside from indicating that the majority of next year’s small- and medium-format stores will be Neighborhood Markets, the company has not disclosed the size or location of its experimental stores, or indicated whether they would carry a different name.
What’s clear is that there is intense interest in Walmart’s small-format plans and that the product mix is likely to include food, consumables and health and wellness due to the high-velocity nature of those categories. Plenty of retailers have experimented with or indicated they plan to open smaller stores in the years ahead, but they don’t attract the interest of Walmart due to the company’s deep pockets and the ability to expand rapidly a retail concept that meets financial performance targets.
In addition to the means and motive to pursue small-format growth, several things have changed since the first Neighborhood Markets stores opened in the late ’90s and fueled speculation about growth. Today, Walmart has the distinct advantage to leverage its abundant international experience as it operates thousands of small-format stores in multiple formats across multiple markets. In addition, the company has improved its sullied reputation to the point where elected officials in urban markets now are more likely to green light growth plans as evidenced by recent wins in Chicago and Washington, D.C.
That said, Walmart’s small format will remain a work in progress throughout the coming year, with any type of meaningful expansion unlikely to occur until 2012 and beyond.
Sam’s opens its ‘Portfolio’ to a health-and-wellness focus
BENTONVILLE, Ark. — Sam’s Club promises to be an even more formidable competitor in the health-and-wellness space in the years ahead, judging from the strategic priorities now in place as part of a broad-based strategy known as Project Portfolio.
Not to be confused with Walmart’s Project Impact strategy, despite the abundant similarities, Sam’s Project Portfolio approach has as one of its key elements an increased focus on health and wellness. Space devoted to those categories, as well as to food, is being expanded as clubs are remodeled. Unchanged in the new Project Portfolio merchandise layout is the prominent position of the health-and-wellness area at the front of clubs.
The changes are occurring under the leadership of president and CEO Brian Cornell, who joined the retailer a little less than two years ago and quickly embarked on a strategy to expand space and improve the productivity of frequently shopped categories while reducing exposure to such less-attractive growth areas as large appliances and hardlines.
By the end of the current year, Sam’s expected to have 100 of its approximately 600 clubs in the Project Portfolio format, which Cornell contended improves sight lines and clarity, and results in sales improvement in focus categories. As evidence of the strategy’s success, Cornell highlighted the 2.4% increase in same-store sales Sam’s produced in the third quarter.
During the coming year, Sam’s expects about $700 million of its approximately $1 billion capital budget will be used to remodel 60 to 70 clubs, with an additional $300 million spent on the new construction or the relocation and expansion of seven to 12 clubs.
The emphasis on food and health and wellness in the Project Portfolio strategy is understandable given the growth characteristics, frequent replenishment cycle and a margin profile that enables Sam’s to demonstrate value. Also playing a factor is the background of the executives now leading the company. Cornell joined Sam’s in March 2009, after serving as president and CEO of Michael’s for two years. However, his more relevant experience was obtained in the supermarket and consumer packaged goods world. He arrived at Michael’s from Safeway, where he served as chief marketing officer, and prior to that he held senior management positions with PepsiCo and Tropicana.
A month after Cornell’s arrival, Sam’s named Linda Hefner as EVP merchandising. She joined Walmart in 2007 as a merchandising EVP to lead the home business. Hefner came to Walmart from Kraft Foods, where she served as EVP global strategy and business development, and prior to that was a senior executive with Hanes, which at the time was a division of Sara Lee.
In August, Sam’s appointed Todd Harbaugh EVP operations. He is a 20-year veteran of Walmart who spent the past seven years at Sam’s, where prior to his current position he served as SVP inventory management, supply chain, pricing, planning and execution.