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Wal-Mart goes supersize
Grocers brace for `battle of the brands'
Nov. 8, 2006. 07:06 AM
DANA FLAVELLE
BUSINESS REPORTER
Wal-Mart Canada Corp. says it could have as many as 17 supercentres open by the end of next year, kick-starting a potential price war that could shake up Canada's $72.5 billion-a-year grocery industry.
The retailer, which officially opens its first three supercentres today, said it could add up to 14 more next year, depending on municipal approvals.
The massive stores are nearly a third larger than a typical Wal-Mart and are the first in Canada to carry fresh produce, meat and baked goods, along with an expanded assortment of household furnishings, clothing and consumer electronics, the retailer said.
"We hope Wal-Mart supercentres will become a real one-stop shop that Canadians have been waiting for," Mario Pilozzi, president and chief executive officer of Wal-Mart Canada Corp., told reporters during a media preview of the Stouffville supercentre yesterday.
Wal-Mart's long-expected entry into the grocery business has already taken the shine off some supermarket-industry stocks, particularly Loblaw Cos. Ltd., which is struggling to lower prices and add more general merchandise to compete with Wal-Mart.
"It's going to be a battle of the brands," retail consultant John Torella, of the J.C. Williams Group in Toronto, predicted after touring the Stouffville supercentre yesterday.
The store in Stouffville, 48 kilometres northeast of Toronto, is one of three that officially open today. The other two are in London, Ont., and the Hamilton suburb Ancaster.
Four more are scheduled to open early next year, the retailer has said previously: one each in Scarborough, Brampton, Sarnia and Vaughan. Pilozzi declined to say where the additional five to 10 supercentres announced yesterday might be located, though observers expect it will be southern Ontario.
Not every new store will be a supercentre, Pilozzi said, noting the retailer plans a total of 15 to 20 projects next year as usual, including a mix of additions, relocations and new stores. In fact, a regular Wal-Mart opened yesterday in Guelph, he noted.
Wal-Mart said its new supercentres have up to 200,000 square feet, and carry 120,000 items, 50 per cent more than normal and most in the new grocery section. Each store represents an investment of up to $15 million and employs 500 people, the retailer said.
The supercentres contain more of everything, and are housed in more spacious, upscale buildings, with hardwood floors, pastel paint colours, more high-end electronics and more department-store-like displays in the home-furnishings area.
But the biggest difference is in the grocery department. Where a typical Wal-Mart might carry up to 5,000 different canned, dry and frozen foods, the supercentres will sport full-fledged grocery stores, with fresh produce, baked goods and meats.
At up to 40,000 square feet, Wal-Mart's new grocery departments rival conventional supermarkets in size and quality, but aim to beat them on price.
Three other major supermarket chains have stores within a few kilometres of the new Wal-Mart, including A&P, Sobeys and No Frills (a Loblaw brand). None would comment on the supercentre.
Analysts, however, have predicted the supercentres will give the incumbents a run for their money. "It's a conventional grocery-store offering at discount prices," said a financial analyst on the Stouffville store tour, who asked his name not be used.
But others have said Wal-Mart will have a tough time cracking Canada's grocery market because it's already well served by discounters, such as No Frills, Price Chopper and Food Basics.
Pilozzi was careful to avoid the mistake he made when Wal-Mart launched its Sam's Club warehouse-style stores in Canada three years ago. At the time, he predicted 100 such stores could be built across the country. But only six have gone up so far, and no indication has surfaced on when more will open. The Stouffville supercentre, considered the prototype, contains many of the new features the retailer plans to add to all new stores, not just supercentres. For example, 100 of the company's 272 existing Wal-Marts got a makeover in consumer electronics and clothing, starting last July, and another 100 will be retrofitted next year.
The newer consumer-electronics departments contain more high-end and brand-name items, such as the one-gigabyte iPod released last Friday, and high-definition televisions by Panasonic and RCA. The newer clothing sections are organized by brand in miniature stores within a store.
In the home-furnishing section, the discounter has adopted a department-store concept, using floor models to show how a table might be set for the holidays or a bed made up with co-ordinating linens.
For Stouffville, the retailer's arrival signals a new phase in a transition from small town to fast-growing suburban centre. Major subdivisions are under construction and more in the approval stage, so the town of 25,000 is set to explode.
Eric Button, who chairs Stouffville's downtown business improvement area, said he is hoping the chain will bring back dollars Stouffville was losing to other high-growth communities.
