Is Walmart Afraid Of A 100-Store Regional Grocer?

Is this really "Walmart's worst nightmare"? The 100-store WinCo grocery chain is being touted that way by retail analyst Burt Flickinger III in Time.

Flickinger's argument: WinCo regularly undercuts Walmart's (NYSE:WMT) prices by buying directly from manufacturers instead of through traditional grocery distributors (and WinCo sends its own trucks, too). The stores are large, well laid out and open 24 hours a day, but don't have the everything-under-the-sun assortment of big grocery chains. The chain also doesn't take credit cards—just debit, checks and cash. And it's employee owned and offers pension contributions and health insurance for any associate working 24 hours a week.

The theory seems to be that WinCo is the antidote to Walmart's smaller "city stores"—at least in the places where WinCo and Walmart compete, which currently is only in a handful of western U.S. states. The problem with that idea: Where Walmart and WinCo are competing head to head, it's not Walmart (or WinCo) that's shaking in its corporate boots.

WinCo only has stores in Idaho, Oregon, Washington, Utah and California (its first Texas stores are slated to open in 2014). The stores are smaller than Walmarts but bigger, cleaner, and have a better assortment than and roughly the same prices as Aldi's limited-assortment and minimally staffed stores (both chains topped the "low prices" category in a 6,600-shopper customer satisfaction survey this spring).

At least some WinCo stores are located right across the street from larger competitors, and auto traffic makes it clear that more than a few customers are buying for price on one side of the street and for whatever's not at WinCo on the other side. (For all we know, shoppers may be treating doing a WinCo-Walmart shuffle in the same way when those stores are close by each other.)

Other things to make both Walmart and big grocers nervous are the level of associate engagement (they tend to stick around for years) and clever double-lane checkouts, so a second customer can be checked out while the first is still bagging.

Actually, that's not what matters so much to shoppers: It's that the line is rarely held up by a customer who requires a price check or manager approval. The double-headed point-of-sale system lets the cashier keep checking out other shoppers. Even if it's not actually faster, it feels to the customer like she isn't standing in line as long.

For more:

- See this Time story
- See this Idaho Statesman story

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