Speaking at an investor conference last week, Walmart US chief executive Bill Simon outlined plans for a much larger foray into small-format retailing than many industry observers had anticipated.

Late last year, Simon announced he would open 30 to 40 small-format stores in 2011 as part of a plan to turn around sluggish performance in its home market. “We will have growth in geography, growth in formats and growth in multichannels,” he said.

Walmart has been eyeing impressive like-for-like sales growth of dollar and drugstore chains, as US consumers turn increasingly to convenience shopping, partly to counter rising fuel prices. It has also made no secret of the fact it wants to boost its presence in urban markets, such as Chicago and New York.

So, less than five months on and the talk is now of small-store plans on a much larger scale. Simon said: “We are going to be adding hundreds of these in the coming years, and maybe more, depending on how these [trials] work out.”

The main vehicle for this growth is likely to be a new concept, Walmart Express, which will have a 15,000 sq ft footprint, less than a 10th of the size of its main Supercenter format. Trials will begin in earnest in the second quarter, with the first site being in Gentry, Arkansas, about 20 miles from its Bentonville headquarters. More trial stores will follow, with Walmart experimenting with ranges and balances of food vs non-food. It will also trial stores with and without a pharmacy.

Once it gets the model right, Walmart has pledged to expand through new build and site purchases. Simon also would not rule out the acquisition of a rival retailer. The footprint of the trial store, the pharmacy offering, and the fact Walmart has also trialled a Walmart on Campus university store, which is traditionally the domain of the drugstore retailers, suggests the retailer is looking closely at the likes of Walgreens, CVS and Rite Aid.

As an acquisition target, however, the first two, with more than 7,000 stores each, may be too large for competition authorities to stomach. Rite Aid, on the other hand, at just over half that size and long suffering from investor pressure to sell stores, may yield attractive pickings.

Regional discount chain Fred’s, with just under 700 stores concentrated around Walmart’s home turf in the southeast and targeting a similar low-to-middle income shopper, might also be in its sights.

Matthew Stych, global research director, Planet Retail. For more information contact us on:

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