Wal-Mart explores urban marketplaces

Wal-Mart is setting its sights on opening urban stores, including in San Francisco, according to real estate executives.

The chain is the latest big-box retailer that’s considering a move into San Francisco. Target has announced that it wants to open two stores in The City — one at Geary Boulevard and Masonic Avenue and the other at the Metreon.

Real estate executives said that during summer, Wal-Mart, which is the world’s largest retailer, has been scouring for small locations, around 20,000 square feet, in urban areas such as San Francisco and New York. That size is larger than a typical drugstore, but smaller than a supermarket.

The expansion, expected to be spelled out next month at the retailer’s meeting with analysts at its headquarters in Bentonville, Ark., is aimed at pumping up sluggish U.S. sales.

“I see this as a smart move, instead of coming into a market as a 900-pound gorilla,” said Faith Consolo, chairman of real estate firm Prudential Douglas Elliman’s retail leasing division. She said Wal-Mart, which now has more than 4,000 stores in the U.S., has been talking to landlords and brokers.

“They’re on an aggressive roll,” Consolo said. “This is a creative time. Everyone is thinking out of the box.”

Since 2008, Wal-Mart has been testing smaller stores called Marketside. They now total four and average 15,000 square feet. The format focuses on fresh food. And the retailer now has almost 200 Neighborhood Market by Walmart stores, which offer a mix of fresh food, and pharmacy, beauty, stationary and pet supplies, and are about 42,000 square feet.

Wal-Mart has been shrinking its supercenters, which carry a wide assortment of food and general merchandise, to about 150,000 square feet from 195,000. But the company has maintained that it plans to use smaller formats in urban areas.

In a note to investors Monday, Brian Sozzi, analyst with Wall Street Strategies, said the new 20,000-square-foot stores would likely fuse the Marketside and Neighborhood Market formats.

On Monday, Wal-Mart spokesman Steven Restivo said that “while we have not shared an exact size of the small format … we continue to evaluate a wide range of stores sizes across the country and will consider any format that puts us closer to our customers.”

The retailer, however, could face hurdles in opening a store in The City. San Francisco requires special permitting for chain stores to open.

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