Wal-Mart's Small-Store Test Starts this Weekend

Will small grocery stores built by major chains prove to be a successful alternative to huge supermarkets?

Perhaps, over the long run. But will they prove to be successful during possibly severe recession? We may soon find out.

Wal-Mart tomorrow will open the first four of its Marketside stores in the Phoenix area. Wal-Mart is calling the four stores a “test” of the concept. It’s possible that the retail giant would rather wait for better economic times to conduct such a test, but it probably has little choice: the British grocer Tesco has already opened Fresh & Easy stores in California, Nevada, and Arizona, and the U.S. chains Safeway and Supervalu are conducting their own test of small stores.

“The industry is eager to see if Wal-Mart, which has specialized in running stores three times the size of a U.S. football field, can replicate that success on a small scale,” according to Reuters.

Much will depend on pricing. The stores are generally about the size of convenience stores, and are meant to make it easy for shoppers in a hurry to pick up fresh produce or ready-to-eat meals without having to park in a huge lot and traverse the aisles of a gigantic store, not to mention the checkout lines.

But that won’t work if the prices are anywhere near what convenience stores charge — especially during a recession. Whatever happens, margins will be slim.

It also won’t work if product quality is at convenience-store levels. Shoppers will expect products, particularly produce, to be at least as good as they are at regular grocery stores.