CONFIDENTIAL & ©RetailNet Group, www.retailnetgroup.com Page 1

New Walmart Urban 90 Supercenter Format

RetailNet Group recently visited a new Walmart Urban 90 store in Toronto, Canada, which

opened in late January, to see the adaptations in this smaller format supercenter prototype. As

indicated by its name, the Urban 90 store is 90,000 square feet, dramatically smaller than the

200,000 square foot box of a traditional North American Walmart Supercenter. The smaller

format supercenter takes only 34 weeks to build and launch, roughly 2/3 of a traditional

supercenter. This store is located on the second floor of the building, with Walmart renting

space to other businesses, such as fast food chains, on the first floor. For subscribers, click

here to access the full store tour on retailnetgroup.com.

Key Points to Consider

Full Assortment, Limited Space

Shelf-Ready Packaging

Dedication to Fresh

Seasonal Space

Commitment to EDLP

CONFIDENTIAL & ©RetailNet Group, www.retailnetgroup.com Page 2

Full Assortment, Limited Space

The Urban 90 format offers all

categories that a traditional

200,000 square foot

supercenter does, so

Walmart has addressed the

space restriction issue with

some reduced options in the

category and limited shelf

space dedicated to each

product. Throughout the

store, it is evident that

Walmart has significantly

reduced the shelf facings that

SKUs receive across

categories. For example, in

the refrigerated orange juice

section, some brands and

varieties receive only six

facings, and that small refrigeration unit holds a total of ten unique SKU’s.

At left, an end cap that might typically

highlight a single item instead features

six distinct products.

CONFIDENTIAL & ©RetailNet Group, www.retailnetgroup.com Page 3

Shelf-Ready Packaging

Limited facings equate to fewer

products on the shelves and in a

high-traffic environment, can also

increase the chances of empty

shelves and stock outs very quickly.

This increases the pressure on the

store personnel to ensure that

products are on shelves at all times.

Shelf-ready packaging is a major

help for this. Shelf-ready packaging

has frequently been used to allow

stores to stock shelves easily and

reduce labor costs, but in the Urban

90 format, speed to shelf can be

even more critical for employees to

restock the shelves.

Dedication to Fresh

Roughly 30% of store space is dedicated to fresh, indicating that Walmart’s urban format

supercenter will compete aggressively in this category. This is in line with Walmart pushing into

urban areas – a proximity

store is inherently more

convenient and can more

easily serve higher frequency

shopping trips. Walmart has

to compete in this space to

win the trips that fresh and

perishables generate.

CONFIDENTIAL & ©RetailNet Group, www.retailnetgroup.com Page 4

The commitment to fresh

provides an interesting

insight into some of

Walmart’s goals with this

new format. Evidenced by

their commitment to the

full assortment, they are

unwilling to sacrifice their

role as the one-stop shop.

However, they are

simultaneously making a

push toward capturing the

frequency and fill-in trip

with the focus on fresh and

the urban location.

Seasonal Space

To accommodate a full

assortment in a smaller

box, some departments

and spaces have been

reduced. For example,

action alleys are noticeably

smaller as there is not

sufficient space for the

typical amount of pallets.

However, the Urban 90

format still sets aside

significant space for a

seasonal department.

CONFIDENTIAL & ©RetailNet Group, www.retailnetgroup.com Page 5

Seasonal events are an important trip

occasion. It is a high impulse trip and

one that retailers can reliably count

on. Walmart’s focus on fresh while

also offering the full assortment

highlights the challenge they are

facing; finding the balance between

capturing more frequent trips and

being the one-stop shop and stock-

up retailer. Seasonal helps serve

both the frequency and stock-up trip.

Commitment to EDLP

One of the clear marketing initiatives highlighted by Walmart in the new format is the price

match guarantee as seen below. Signage promoting the ad match can be seen everywhere in

the store. The new format may confuse shoppers who are unsure how this smaller box

compares to the traditional supercenter with which they are familiar, so Walmart has clearly

made a focused effort to reinforce their low prices to consumers shopping the new store. The

retailer goes to great lengths to ensure that customers are aware that this store offers the same

Every Day Low Prices to which they are accustomed.

CONFIDENTIAL & ©RetailNet Group, www.retailnetgroup.com Page 6

Implications for Retailers and Suppliers

Walmart’s Urban 90 format aims to bring the one stop shop of the big box supercenter to a far

smaller footprint and more urbanized area, and RNG believes, that is ultimately an effort to

achieve greater space productivity. This concept is not unique, as other big box retailers are

testing similar small formats, including Target’s “City Target”, set to launch five stores this year.

(Click here to see RNG’s analysis of City Target) Walmart however, has made some interesting

adaptations from its traditional supercenter including limited facing in order to maintain a full

assortment and the high focus on fresh, as it appears to be trying to find a balance between a

stock-up big box retailer and capturing higher frequency trips as well. The limited product

facings present an inventory and labor challenge, and consistent and efficient execution of

these issues will be critical to making the smaller store economics work.

Retailers

Walmart’s trial of the Urban 90 format, if successful, may prove to be a blueprint for

other big box retailers launching small formats and entering urban areas. This

prototype’s success or failure will also have an impact on other retailers’ interest in the

small format concept.

Walmart’s entrance to more proximity-based, urban areas brings increased competition

to retailers competing in this space. With the success of this format, Canadian retailers

such as Sobeys, Metro, and Loblaws may find themselves with additional competition,

especially with this format’s commitment to fresh.

If Walmart can find the balance between being a traditional big box store and serving the

convenience and proximity trip, how will other retailers adjust to compete against one

that seemingly can compete on both ends of the trip spectrum?

Suppliers

Walmart’s decision to keep a full assortment with limited facings severely reduces the

shelf visibility of each SKU. For shoppers, this means brands on the shelf will be harder

to find and easier to overlook. How will brands stand out in the store and how will

suppliers balance product depth vs. product width with such limited shelf space?

For suppliers looking to get their products onto the shelf of this Urban 90 format or any of

the smaller formats being rolled out by big box retailers, thought should be given to

developing pack sizes to address the limited shelf facing issue and help alleviate the

inventory management concerns.

Because of the space restrictions, Walmart will have to manage inventory differently as it

simply will not have backroom space to hold the inventory of a traditional supercenter.

Inventory will turn more quickly, so suppliers will need to be more innovative and flexible

with inventory replenishment and optimization ideas.

As always, we appreciate your comments and feedback. Let us know what you think!

Doug Koontz

Research Analyst

RetailNet Group

doug.koontz@retailnetgroup.com