Where does Wal-Mart put new stores?

Wal-Mart has an incentive to keep its stores close to each other so it
can economize on shipping. For example, to make this simple, just think
about a delivery truck: If Wal-Mart stores are relatively close
together, one truck can make numerous shipments; however, if the stores
are spread out, you wouldn’t have that benefit. So, I think that the
main thing Wal-Mart is getting by having a dense network of stores is
to facilitate the logistics of deliveries.

There are other benefits, too. Opening new stores near existing stores
makes it easier to transfer experienced managers and other personnel to
the new stores. The company routinely emphasizes the importance of
instilling in its workers the “Wal-Mart culture.” It would be hard to
do this from scratch, opening up a new store 500 miles from any
existing stores.

…Wal-Mart waited to get to the plum locations until it could build out
its store network to reach them. It never gave up on density.                   

The placement of Wal-Mart stores has followed a spatial diffusion model.  K-Mart, in contrast, scattered its stores across the country.  Here is more.  Here is a video showing the spread of Wal-Mart, well worth watching and short.  It is the best single lesson in economic geography you will receive.  Thanks to http://kottke.org for the pointer.

Comments

The explosion throughout the Southeast in 1980-1982 is fascinating. Given interest rates in that era, I assume that was self-financed?

Tyler, I love reading you (from inside China), however, your comments here about Wal-Mart are just plain wrong. As a former member of Wal-Mart store management, I can attest that Wal-Mart stores receive full semi-trailers every night - and often times two full semi-trailers. If they don't have a full truck load, they'll simply wait a day and deliver the goods tomorrow.

If you want another great contrast of economic geography and better planning, lay a map of Honda dealerships over a map of GM dealerships. It's stunning how much GM competes with itself.

This is very interesting. WalMart is trying to put a super store in my small town. And there are 2 already, about 20 minutes away in 2 different directions.

Note too that a major complaint about Walmarts is that they can be too crowded. Do you know a better solution for long lines/crowds that opening more stores nearby?

In general, chain retailing is about depots and truck routes: the logistics of keeping stores supplied with the stuff that's selling RIGHT NOW before it stops selling. Different chains do it differently. Specialty stores run a single truck route past several stores (the model posited in the original post); big boxes run a truck a store. But the principle is the same: merchandise from the depot. And the growth pattern is one of establishing depots and building stores out around them.

Wal-mart management often refers to this as "back-filling" to investors. If you look at return on investment of these fill in stores they are much higher since investment in logistics/distribution centers have already been made. This is rather simple... focus on returns in an industry run by marketing and fashion gurus. Oh yes... "green is the new pink"... right?

It looks like mold growing on bread, which is apt.

Interesting too how closely the Wal Mart map in 2000 corresponds to the population density map:

http://www.census.gov/geo/www/mapGallery/images/2k_night.jpg

I know you'd generally expect this correlation, but they're pretty much identical.

It obviously doesn't apply today, but at least the early spread pattern could be efficient marketing. If you open a store 'near' another store, then you 'seed' it with people who go to the other store, would have gone more often if only it were closer. You also get customers who have friends/coworkers/relatives who go to the nearby branch, who would go also. Your current marketing for the old store has at least some overlap to the new. If you open a store in a new market clear across the country, you have to start from scratch. (Think if Braum's Dairy opened a new store in New York state. No one knows who they are up there. A new store in Waco, or western Arkansas, however, would draw people who know who they are.) (Substitute a Trader Joe's in Dallas, Texas vs. Salem, Oregon, or a Kerr Drugs in southern Virginia vs. Denver.) 25 years ago, a new Wal-Mart in New York state would have been greeted with a 'who?' not a protest. A new Wal Mart in Frankfurt, Ky, on the other hand, would draw a crowd.

Interesting event in 1981 - Wal-Mart colonized South Carolina with what looks like a dozen or more stores more or less simultaneously. Was this a buyout? Or did they save on marketing costs by blitzing a relatively small set of interrelated media markets all at once?

The 1981 event in South Carolina was a buyout. Wal-Mart bought a company called Kuhn's Big K.

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There's rumor's of a Wal-Mart store going in, Junction City, Oregon. ???

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