Wal-Mart Going Small in Small-Town Arkansas


Small towns in Arkansas love small Walmarts; vendors may be a little more ambivalent.

When Wal-Mart Stores Inc. of Bentonville announced a few years ago it planned to open a prototype 13,700-SF Express store in Gentry, Mayor Kevin Johnston said concerned citizens feared that the coming of the retail giant would crush competitive commerce in the city. Johnston said there were town meetings with small-business leaders to discuss the situation.

A Marvin’s IGA store in Gentry closed shortly after Wal-Mart’s arrival in 2011, but fears of a small-town takeover by the Bentonville retailer have proved overblown, Johnston said. Gentry’s sales tax revenue, on the other hand, has risen from $407,775 in 2011 to $544,637 in 2014, an increase of more than 25 percent.

“It’s the stigma of the big-box store coming to destroy mom-and-pop stores,” Johnston said. “There has been no negative impact. We want to keep people shopping locally.”

Johnston said that Gentry residents — 3,158 of them as of the 2010 census — previously traveled to shop in a neighboring city, but the Neighborhood Market has provided a closer alternative. Wal-Mart Stores has since brought its Express stores under the Neighborhood Market brand, stores that are approximately 41,000 SF.

And Wal-Mart plans to keep building Neighborhood Markets by the hundreds. In a company publication, Wal-Mart said 100 small stores were opened in a two-week stretch in January, and executives have said there are plans to open about 200 in fiscal year 2016.

In the fourth-quarter earnings report released in February, the company revealed that same-store sales for the smaller-size stores showed an increase of 7.7 percent, compared with 1.5 percent for all U.S. stores, which naturally include the iconic Supercenters.

“I would say we’re definitely pleased with what we’re seeing in terms of market reaction,” said company spokeswoman Erica Jones, senior manager of communications. “The customer is reacting really well.”

If it seems like a lot of the new, smaller stores are being built in northwest Arkansas, they are. Jones said small communities in Arkansas are perfect because they have customers who need service, and they’re close enough to company headquarters that reviewing operations is much easier.

Six Walmart Neighborhood Markets have opened in northwest Arkansas in the past year, and 16 have opened statewide — including six in January.

“They can go out and easily check on the execution of it and have a hand in what’s going on,” Jones said. “It’s a perfect place to test these things, and, at the same time, we also have these opportunities to serve these customers. It’s perfect right in our backyard.”

Suppliers Paying Notice

Wal-Mart’s increased focus on the small-store format — which has been around since 1998 — has caught the attention of its suppliers, many of whom aren’t exactly sure what to think.

Cameron Smith of Cameron Smith Associates of Rogers, a corporate recruiting firm that finds executives for Wal-Mart suppliers, said he has begun seeing new job descriptions specifically for small-store formats from many of his clients.

“It’s a topic that is discussed daily,” Smith said. “They are all paying attention to that. The small format is a hot thing right now. It’s a whole different animal.”

Scott Winchester of Blue Rhino, a propane gas supplier for 2,900 Walmarts, loves the small store. It’s a great fit for his product: Propane gas, much like a bag of ice, is something that most shoppers don’t want to fight a big crowd to buy.

“It’s an easier place for the customer to shop, especially a fill-in shop,” Winchester said. “No doubt it’s tougher on the big boys.”

Vendors accustomed to Wal-Mart’s big-box model know they need small-model experts to handle the hundreds — and eventually thousands — of new Neighborhood Markets in the Wal-Mart network. One general merchandise supplier said he hired someone just to handle e-commerce and small-format sales, even though the segment is not yet a major factor in overall sales.

“Small-box is an important source of growth, but still a very small percentage of total business today,” the supplier, who asked not to be identified, said in an email. Return on investment “is not great, but you need to be there on the front end, in my opinion, to be ready for the growth to come.”

Grady Mathews of Sage Partners, who handles office leasing for vendors in northwest Arkansas, said there has been an uptick in companies either bringing in or expanding their teams. He believes the small-store initiative has opened up the supplier market.

“I feel like a lot of people are speculating a little bit, as we are on the real estate side, because of Wal-Mart’s push to increase their small-format stores — they’re talking about 2,000 over the next how many years,” Mathews said. “They’re talking about 2,000 stores, and that could mean a full additional team for a vendor. We have not heard that officially from anyone. It is interesting that the addition of employees in offices that are expanding correlates pretty closely with Wal-Mart’s announcement. That can be a big driver of the office market.”

It’s clear in how Walmarts are saturating the marketplace that the company believes it can increase market share by increasing opportunities to shop. West Fayetteville, for example, is home to a Supercenter along with two Neighborhood Markets about 3 to 4 miles away and another one scheduled for construction.

“You’re going to pass one on the way home,” Winchester said. “A year ago, you wouldn’t have.” Jones said, “It strengthens the market share. It’s encouraging consumers to do more shopping.”

Prairie Grove Mayor Sonny Hudson was hopeful Wal-Mart would open a larger Neighborhood Market in his town before the company settled on a 14,000-SF Express that opened at the same time as the one in Gentry. Prairie Grove, with a population of more than 4,000, couldn’t support a Supercenter, the nearest of which is about 15 miles away in west Fayetteville, but it has no problems keeping a small store hopping.

Just recently, Hudson said, one of his administrators drove to the Walmart and had to circle the parking lot twice before finding a spot. “The only problem is it needs to be bigger,” Hudson said.

Hudson said sales tax revenue has risen since the Walmart opened. Revenue has increased from $893,720 in 2011 to a little more than $1 million in 2014, an increase of more than 10 percent, as Hudson said the city had predicted.

Not only that, Hudson said, but the area in west Prairie Grove where the Walmart is located has benefited. The Walmart was opened in front of a growing residential subdivision, and Hudson said other businesses are in discussions with the city to move into the area.

Dale Reed, the president of the Prairie Grove Chamber of Commerce and a city councilman, said Walmart’s presence is important because a recently completed highway bypass took much traffic away from the city. Walmart’s success has come even though it’s not on the bypass, and other local businesses aren’t complaining.

“They’re definitely a cornerstone,” Reed said. “Businesses tell us, ‘We love being next to a Walmart.’ They bring a lot of traffic. They’re a magnet.”

Farmington’s Neighborhood Market, 3 or so miles from a Supercenter, opened last August as part of a building phase that saw the town get a Domino’s Pizza, a Casey’s General Store and a Kum & Go. Studies have shown that as many as 26,000 cars a day drive through Farmington, and now those drivers have places to stop if they want to buy something.

“It was a matter of realizing these two formats could exist in the same communities,” Jones said. “It’s really about a cohesive strategy. It’s the best of both worlds. We’re not having to sacrifice anything of what we’re providing the customer. We’re just giving it to them in a different box.”

The smaller stores obviously offer less merchandise than Supercenters, and generally focus more on groceries and staple items. Through its e-commerce division, which Wal-Mart is also emphasizing, the company can ship, for free, any merchandise ordered off its website to any of its stores.

Don’t want to go all the way into a Supercenter to pick up a television or a bicycle? Order it online and then pick it up at the local neighborhood market when you go to get milk and eggs.

“Our customers want things in a convenient manner and they want to be able to get things quickly,” Jones said. “It’s really just about listening to what customers are saying.”