What it's like inside Wal-Mart's new marketplace that's a threat to Whole Foods and Trader Joe's

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wal-mart neighborhood market concept

Photo credit: Wal-Mart

Wal-Mart is expanding its fleet of smaller-format stores, called Neighborhood Markets.

The Markets, which are one fifth of the size of Wal-Mart Supercenters, pose a major threat to traditional supermarkets like Whole Foods, Kroger, and Trader Joe's, according to Moody's analysts.

"The advantages of the Neighborhood Market concept will be difficult to beat back," Moody's Vice President Charles O'Shea said in a recent note to clients.

The Markets are like mini Supercenters. The interior of some of the stores is very similar to Wal-Mart's big warehouses, with exposed ceiling beams, wide aisles and fluorescent lighting.

Neighborhood Market
Photo credit: Wal-Mart

The stores offer the same low prices as Wal-Mart's giant warehouse stores, but in a much smaller and more easily accessible location, giving the Neighborhood Markets a "distinct competitive advantage over virtually anyone," according to analysts.

Neighborhood Market
Photo credit: Wal-Mart

The Markets put a strong focus on three of Wal-Mart's strongest categories — groceries, pharmacies, and fuel.

And they have a wide selection of fresh produce.

Neighborhood Market
Photo credit: Wal-Mart

Here's another look at the produce section.

wal-mart neighborhood market concept
Photo credit: Wal-Mart

There are also several aisles devoted to wine.

Neighborhood Market

Photo credit: Wal-Mart

You can apparently get a pound of flat iron steak for $6.27.

And several nut butters, such as almond butter and sunflower seed butter — are 40% cheaper at Wal-Mart's Neighborhood Market than at other chains.

There's also a sizeable selection of gluten free foods in the freezer aisle.

The store offers a pharmacy and deli counter, as well.

Neighborhood Market

Photo credit: Wal-Mart

And some of the produce is locally grown.

Unlike Supercenters, which are typically located on city outskirts, Wal-Mart's Neighborhood Markets are more conveniently located to urban centers.

Moody's expects Neighborhood Markets to eventually outnumber Supercenters, with the smaller stores relying on the warehouses as supply hubs. Wal-Mart now has 645 Neighborhood Market locations and more than 3,400 Supercenters.

"We believe thousands of locations over time is a reasonable assumption," the analysts write. "The only restraint will be how fast these can be built, staffed and stocked."

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