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Extra8/12/2009 12:01 AM ET

Wal-Mart tests big-box bodega

The retailer's new Más Club concept at its Sam's Club outlets is part of a broader effort to target the nation's fast-growing Latino population with dedicated stores.

[Related content: retail, Wal-Mart, discount, budgeting, shopping]
By The Wall Street Journal

Wal-Mart Stores (WMT, news, msgs) is experimenting with a new Latino-themed warehouse store as it hunts for U.S. growth, despite a mixed history at ethnic forays by other retailers.

The Más Club, which opened in Houston on Aug. 6, aims to satisfy the yearnings of recent immigrants for the familiar foods of home -- in American-style bulk sizes.

The Sam's Club spinoff is part of a broader effort by the retailer to target the nation's fast-growing Latino population with dedicated stores.

It also comes as Wal-Mart aims to reinvigorate revenue gains at its Sam's Club warehouse stores. Its share of Wal-Mart's $401 billion in sales has slipped since 2005 to 11.7% from 13.3% as international revenue has jumped to 24.6% from 18.7% over the same period.

The Bentonville, Ark., retailer is also testing a service-heavy Sam's Club that caters exclusively to small businesses while also targeting Latinos with a new food store called Supermercado de Walmart.

Some attempts by mainstream American food sellers to open Latino-themed stores ultimately fizzled, including a pioneering effort two decades ago by Safeway's (SWY, news, msgs) Vons supermarkets in Southern California called Tianguis, a Mexican name for a street market.

Grocery experts warned that Wal-Mart faces stiff competition from small bodegas and midsized grocery chains, such as Texas' Fiesta Mart, in what is already a crowded market.

"The question becomes, what can Wal-Mart offer that is not already being offered by a friendly face?" said Bob Reynolds, a former Safeway executive and food industry consultant.

Wal-Mart, the largest retailer by revenue in Mexico, says it is feeling out the Más concept (the name means ''more''), and may end up using it mainly as a laboratory on how to tailor existing Sam's Club stores to local tastes.

"There is an opportunity for Sam's Club to expand its membership base through Más Club," said Kenny Folk, Sam's Club senior vice president of new business development. "We expect Más Club to evolve as we get to know our members better. They will help us decide how fast and how far this format goes."

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For a $30 fee, less than the $40 for a basic Sam's Club membership, customers get a Mexican take on warehouse-style food shopping, with a tortilla bakery, 20 varieties of fresh Mexican pastries, a butcher shop slicing custom cuts of pork and ethnic delicacies such as cow tongues. That's far more fresh food than at Sam's Club, which mostly offers frozen and pre-packaged items.

The Más Club atmosphere is as much Mexican bodega as warehouse megastore. The store's bright orange, green and red signs are in Spanish, with English subtitles. The store includes health-clinic and money-transfer businesses that lease space from Wal-Mart.

Fewer appliances, more soccer jerseys

But it has fewer electronics and home appliances than Sam's Club. Aisles are filled with soccer jerseys of Club Deportivo Guadalajara of Mexico and FC Barcelona of Spain, as well as soda and candy from Femsa and Chupaletas.

"I'm not sure it is better than Fiesta yet, but I think Fiesta is going to have some competition," said 29-year-old Eris Contreras as she bought marinated chicken from the butcher shop.

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Others were more enthusiastic. "We really do find a lot of different stuff here that we've had family in Mexico ship us in the past," said Ariana Zamorra, 22. Her 54-year-old mother, Eva, chimed in that the bilingual signs made her comfortable.

While regional grocery chains such as Publix Super Markets (PUSH, news, msgs) and H.E. Butt Grocery have also launched formats aimed at Latino shoppers in recent years, others have tailored existing stores with ethnic merchandise and Spanish-language signs.

That is the strategy at Winn-Dixie Stores (WINN, news, msgs), which operates more than 500 grocery stores in the Southeast. It added bilingual signs and merchandise in heavily Latino neighborhoods to match the Cuban, Central American or Mexican immigrant identity of shoppers.

"We decided to go down the path of one-store format, Winn-Dixie, because it allows us to operate more effectively," said Dan Portnoy, chief merchandising officer for Winn-Dixie. "In the Miami area, we already have a strong brand."

Más Club also features an attached warehouse where small business owners can purchase about 500 of the store's 3,000 items by the pallet -- an attempt by Wal-Mart to lure mom-and-pop merchants away from the smaller wholesalers that now supply them.

Whether that takes root will depend on people like Jose Galvan, the owner of a Mexican bakery called Dos Naciones. As he chatted up the clerk at the J&A Regio Distributors, a seller of Mexican food items minutes from Más Club, Galvan said he already shops at Sam's Club, flashing his membership card.

But, he adds, "I don't think (Más Club) can match the relationships I can build with places like this."

This article was reported by Miguel Bustillo for The Wall Street Journal.

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