While Walmart Tinkers, SuperValu Is Ready to Capture the Urban Grocery Opportunity

Last Updated May 27, 2010 4:00 PM EDT

Walmart (WMT) has made a lot of noise recently about its aspirations for conquering urban markets with small discount grocery stores. But while the retail giant continues to experiment with various small-store designs, grocery powerhouse Supervalu (SVU) is ready to roll out its already successful Sav-A-Lot format to many of the same markets Walmart managers covet.

Walmart better get busy if it wants some of what the company has estimated as the $100 billion additional sales opportunity it sees mostly in the urban-grocery market. Supervalu has nearly 1,200 small Sav-A-Lot stores, and said earlier this year it plans to double the size of the chain over the next five years. That means more than a couple hundred new Sav-A-Lots will likely open their doors this year. Meanwhile, Walmart has less than 160 small Neighborhood Markets in several designs and no major initiatives planned to expand this concept.

Half of Sav-A-Lot's expansion, Supervalu says, is aimed at markets known in the grocery world as "urban food deserts" -- neighborhoods that lack a single full-line grocery store. These markets represent a wide-open opportunity to grab a whole new customer who is currently surviving on mini-mart food and long trips out of the area for fresh fruits and vegetables.

The first discount grocery to roll into that turf is going to have a huge advantage over a chain that arrives later on. The sheer gratitude consumers will have for whoever comes downtown and provides them with desperately needed fresh food will be a powerful loyalty builder. If Sav-A-Lot comes to town first, it won't be easy for Walmart to pry those customers away. More importantly, SuperValu has proven expertise in making small groceries work, while Walmart is still figuring out how to do a small store.

If Walmart wants to get into the small, neighborhood grocery game, now's the time. If they don't move soon, they may find Sav-A-Lot has already provided consumers with an oasis in many of the food deserts they were hoping to dominate.

Photo via Flickr user Natalie Maynor Related:

  • Carol Tice

    Carol Tice is a longtime business reporter whose work has appeared in Entrepreneur, The Seattle Times, and Nation's Restaurant News, among others. Online sites she's written for include Allbusiness.com and Yahoo!Hotjobs. She blogs about the business of writing at Make a Living Writing.