The Westminster City Council’s approval of the city’s third Wal-Mart illustrates a new shift in the aggressive growth strategy of the world’s largest retailer.
In Colorado and around the country, Wal-Mart is building its stores closer together. That’s largely because the Bentonville, Ark.-based retailer is building more “supercenters,” which sell groceries alongside discount- store items.
“There is sufficient customer traffic on the grocery side to justify putting (stores) in rather close proximity to one another,” said Mike Ciletti, a consultant for Wal-Mart locally.
Local examples are:
A just-approved store in Westminster at West 72nd Avenue and Sheridan Boulevard, 3 miles south of an existing supercenter.
A recently approved store at East 136th Avenue and Interstate 25, 5 miles north of a supercenter in Thornton.
A planned supercenter at West Fourth Avenue and Wadsworth Boulevard, a mile south of a recently opened store at West Colfax Avenue and Wadsworth.
Grocery stores draw shoppers from smaller trade areas than discount stores, and customers shop them more frequently, said Larry Lund, principal with Real Estate Planning Group, a Chicago-based retail real estate consulting firm.
Building stores closer together allows Wal-Mart to target grocery customers and increase its market share. But the company must work to keep new stores from cannibalizing sales at existing ones, he said.
The shift is significant for Wal-Mart, which got its toehold in rural communities before pushing into suburban, and later urban, neighborhoods.
Wal-Mart will build stores in proximity when business at existing stores indicates the community can support another store, chief financial officer Tom Schoewe said in April.
While sales at existing stores initially drop when a new store opens, they eventually steady, he said. The result is an overall increase in market share because two stores sell more goods than one.
“When it comes to markets outside major metropolitan areas, we have very aggressive plans,” Schoewe said, pointing to Kissimmee, Fla.
The company has gone from having two supercenters there in the late 1990s to six centers. While sales at stores open at least a year dropped, overall sales in the market went up significantly, he said.
The company has executed a similar strategy in its home of Bentonville.
Some analysts have voiced concern that both Wal-Mart and competitor Target might be at risk of oversaturating some markets.
But shifting shopping patterns make oversaturation less of a risk than it used to be, said John C. Melaniphy III, executive vice president of Chicago retail consulting firm Melaniphy & Associates Inc.
“Consumers have increased their purchases at big-box discounters as opposed to conventional stores and malls,” Melaniphy said. “Convenience is the primary factor driving customer decision-making today.”
Staff writer Kristi Arellano can be reached at 303-820-1902 or karellano@denverpost.com.
