By Amy Guthrie
LA GUADALUPANA, Mexico-- Wal-Mart Stores Inc. is taking on its
biggest competition of all in Mexico: the street vendors,
traditional markets and small stores that account for over half of
grocery sales in the country.
The attack comes as Wal-Mart's annual sales in Mexico have
stagnated after years of standout growth. The Bentonville, Ark.,
company says it needs to "rejuvenate" the Mexican business, which
accounts for 20% of Wal-Mart's international sales, making Mexico
one of the retailer's biggest global markets.
Yet finding new sources of growth isn't easy in a country where
Wal-Mart has already conquered more than a fifth of all grocery
sales, nearly double the market share of its next three big
chain-store competitors combined, according to HSBC data.
Space for supermarkets, not to mention big-box stores, is hard
to come by in Mexico's congested towns and cities, where consumers
tend to shop in family-owned shops or markets. Across Latin
America, these small grocers and markets feed around half the
population, the majority of whom are poor.
Wal-Mart's solution for Mexico is a mini-grocer format called
Bodega Aurrera Express, which the company launched in 2008. The
store looks like an oversize mom-and-pop shop, with products
stacked high against the walls. Bodega Aurrera's mascot is "Mama
Lucha," a chubby cartoon homemaker dressed like a masked wrestler
who fights for the best prices.
After some initial growing pains, sales at Bodega Aurrera
Express stores open more than 12 months have exploded this year,
expanding by 12% versus 2013 while Wal-Mart's broader same-store
sales haven't gained at all in Mexico.
Wal-Mart has nearly 900 of the mini-grocers open.
"We're concerned about how to reach the low-income segment,"
said Cristian Barrientos, head of the Bodega Aurrera formats at the
company's local unit, Wal-Mart de México. "Most of the mouths are
concentrated there."
Since 80% of consumers in Latin America fall somewhere between
middle class and poor, retailers who ignore that huge segment of
the population aren't really in the game, said Mr. Barrientos, who
previously worked for Wal-Mart in Chile. Small stores, he added,
are crucial for attending the lower-income brackets. Wal-Mart
operates in nine Latin American countries.
Simpler, more-convenient stores are also winning in other
markets. Wal-Mart's roughly 500 smaller-format Neighborhood Markets
grocery stores in the U.S. posted a 5.5% sales increase, excluding
newly opened or closed locations, in the three months through
October versus Wal-Mart's total 0.5% same-store sales rise in the
U.S. for the same period.
In Brazil, big supermarket chains such as Grupo Pão de Açucar
and Carrefour are gaining traction with stores about the same size
as Bodega Aurrera Express. Brazilians living in congested cities
and working long hours clearly favor the mini-grocers for their
practicality, said Erick Rodrigues, a São Paulo-based analyst with
Moody's Investors Service.
Throughout Latin America, "proximity is important," added Alonso
Sánchez, a Mexico City-based analyst with Moody's.
The Bodega Aurrera Express stores average 2,690 square feet of
selling space, roughly 3% of the area needed to open a Wal-Mart
Supercenter.
Still, street vendors have a tight grip on the market. The
tradition of shopping at an open-air market known as a tianguis
dates back to pre-Columbian times. And many Mexicans are reluctant
to take that custom indoors.
The markets are so beloved that in 2011, the Mexico City
government enacted a moratorium on openings of chain stores near
any of the capital's 300 traditional markets. Then-mayor Marcelo
Ebrard argued that the markets needed protection because they were
the social glue of neighborhoods.
The moratorium was overturned in mid-2013.
In the small town of La Guadalapana, an hour's drive from Mexico
City, a Bodega Aurrera Express opened four years ago on the main
avenue, where a street market springs into action three days a
week.
Employees at this Bodega Aurrera Express say their busiest days
are when the street market is open. They call it symbiosis.
As the street market bustled on a recent day, shoppers trickled
into the Bodega Aurrera Express to buy bags of potato chips and
boxes of juice. Laundry detergent and toilet paper are usually big
sellers, too, employees said.
The Bodega Aurrera Express feels spacious with its high-ceilings
and bright lights, while the tianguis is arranged in tight rows
under the orange glow of plastic tarps.
To the vendors outside, the small format Wal-Mart store is
competing for sales, but not very successfully.
"People are accustomed to the tianguis," said Rubén García, a
50-year-old who sells personal-care items like body lotion
alongside packets of Tang drink mix in the street market. "This is
how it has always been in Mexico."
Marisol Carrillo has shopped at the La Guadalupana street
market, in the shadow of a three-story-tall monument to the Virgin
Mary, for as long as she can remember.
The 30-year-old stay-at-home mother of three buys packaged items
like toothpaste and shampoo at Bodega Aurrera Express, where she
says the prices are better, but still gets her fruit, vegetables
and meat from the open-air stalls.
Shopping in the street market is "a custom," she said after
purchasing chopped vegetables, thin skirt steaks and tomato-tinged
rice for a late lunch. "And it seems more practical than grabbing a
car to go to the supermarket."
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