Food Desert – Analysis

The implementation of this strategy, specifically by pioneering small formats in the “food desert” neighborhoods of Chicago, shows the increased sales opportunities for this market. Walmart’s market segmentation studies have shown the potential strength of this type of strategy. The announcement of these stores, and a similar recent announcement in Dallas, demonstrate the importance of these markets in Walmart’s plans to gain increased market share of the grocery business.

Intelligent market segmentation studies by Walmart have proven the opportunities in these types of urban markets in the US as well as the potential in the Hispanic market, especially in California, Texas and Florida. While traditional grocers  struggle to gain market share by minor improvements in their existing formats and offerings, Walmart has identified significant new opportunities through these studies. Implementation of the Walmart strategy may well bring it an increased dominance in the grocery markets across the US.

Smaller, regional chains would do well to define more specific market segments to serve in order to hold their own in their markets. While Walmart cannot take over every special format or segment, they will be very tough competition in the markets where they implement the current strategies. Negotiations for Walmart to gain sites in Brooklyn and other boroughs of Manhattan represent another beach head for this strategy. While the resistance by labor unions and community activists in New York will make this a tough strategy to implement, Walmart has the staying power to outlast some of the opposition.

In addition, their ability to publicize the positive impact on the community through increased employment and merchandise offerings may further erode negative public impression. They have also embraced a number of environmental sustainability initiatives which might buy favorable press in areas like New York. The potential for incremental sales increases is dramatic here. This is an initiative to watch, and one which may be a game changer for grocery retail in the US.