Wal-Mart Prepares Small U.S. Stores to Fend Off Tesco

Bentonville, Ark. Wal-Mart Stores Inc. is actively working to open its first small-scale grocery stores in Arizona, according to city planning officials, as the retailer looks to fend off competition from British supermarket rival Tesco.

Tesco entered the U.S marketplace last year, opening Fresh & Easy Neighborhood Markets stores in California, Arizona and Nevada. The company is seeking to woo U.S. shoppers with smaller convenience stores that emphasize ready-to-eat meals and fresh produce.

Wal-Mart has long been rumored to be planning a new, smaller store concept that would rival Tesco's stores in the States.

According to planning officials for four different cities in Arizona, Wal-Mart is now refining plans it submitted to launch convenience store-sized markets—some close to recently opened Tesco stores— in former drug stores in four cities southeast of Phoenix.

"What they want to do is make tenant improvements so they can put in this new, smaller version of their grocery stores," said Lisa Collins, Tempe's planning director.

The application plans call for the stores to occupy roughly 15,000 sq. ft. That is less than half the average size of Wal-Mart's Neighborhood Market grocery stores, and a fraction of the size of its Supercenters, which combine grocery stores with general merchandise and can be more than three times the size of a U.S. football field.

Officials said they have been told the new stores will offer similar merchandise to Fresh & Easy Neighborhood Markets.