New Ventures

By: Kyle Webster, Tyler Nevins, Rachel Metcalf

Situation

Complication

Walmart to Maximize ROI in Utah County through Physical Assets

Maximize their 30-year ROI

Market expanding at over 6%

Brick and mortar locations are succeeding but customers are moving toward online market

Competitors looking to build in growing regions

Walmart has limited access to localized population and high growth markets

Walmart not found within 5 miles of fastestgrowing communities

Resolution

ROI Maximized by Building Stores in Eagle Mountain and South Provo

Neighborhood Market in Eagle Mountain offers a 355% ROI over 30 years

Walmart Supercenter in South Provo gives a 266% ROI over a 30 year period

Walmart becomes first mover and main supplier for fastest growing cities in the state

Increase market penetration for online sales by 27% in one month

Walmart’s Successes in Utah County

Distribution Centers like this one in Grantsville can supply 80+ supercenters within 150 miles. It has the ability to supply more stores in Utah County.

There are 11 current Walmart locations, from

Draper to Springville.

Utah County is experiencing rapid growth from their current 550,000+

population.

Supercenter location

Neighborhood Market

Increase ROI Through Physical Assets in Utah County

Walmart Only Partnerships

Traditional

BillboardWalmart Supercenter

Business Inside

Neighborhood Market

Novel Inside a Business

Malls, Joint Stores, etc. Sodalicious

Problem Structure

Characteristics for the Ideal Market

Actionable Solutions

Issue Prioritization

Innovation & Creativity

Risk Mitigation

Market

Population Growth

Demographics

Competition

Demand

Location

Accessibility

Availability

Competitors and Growth

Cities growing over 6% annually

Populations Over 75,000

We recommend that Walmart target the areas in Utah County that are experiencing rapid growth and have room to maintain that growth. We also recommend that Walmart capitalize on the largest markets in Utah County.

Provo has the Requisite Demand for a Supercenter

Population by Age in Provo, UT, 2010 Census (Hispanic/Latino in purple, else blue)

Provo has a very large student population, has two 4A High Schools, and an increasing number of young families. These customers also have a higher tendency to shop online.

In our survey of 600 South Provo residents, we found that 54% shop at Smith’s regularly, and 63% who shop at Smith’s only do so because of close proximity to BYU Campus.

Provo has the Target Market of Walmart

High Student Population (18-26)

Provo’s large Hispanic population matches a large target market of Utah County Walmart Shoppers (22%), based on a survey taken during this case of Springville Walmart Customers.

Build a Supercenter in South Provo

• Lowest land cost (~$6-7/sq ft)• 1 Mile away from Frontrunner station (SLC rapid transit)• Less than 3 miles away from majority of BYU Housing• 20 acres of land space• Population 47,000 within 2 mile radius

We recommend 600 S, 1600 W for the proposed Supercenter.

New Ventures through Partnerships

Issue Prioritization

Actionable Solutions

Innovation & Creativity

Risk Mitigation

Partnering with Sodalicious as an in-store tenant

● Local company founded 2013● 7 Corporate Utah locations in 3 years● 16,000 Social Media followers for Utah● Market leader in a rapidly-growing

competitive market● Proven success attracting the college

demographic in Utah County

An in-store Sodalicious would accelerate the switchover rate from Smith’s to Walmart in the Provo area with the college-age demographic

West Utah County is the Fastest Growing Region in the State

LandScan Population Projection Data, 5 miles from Commercial Hub

“Eagle Mountain’s building rate and average household size helps us project a 522% growth rate in the next 24 years”-Ikani Taumoepeau, Director of Economic Development, Eagle Mountain

Saratoga Springs and Eagle Mountain is projected by the Governor’s Office to surpass 200,000 residents by 2050

City Line, Eagle Mountain/Saratoga Springs

Building a Neighborhood Market in Eagle Mountain

● Main Commuting Street for Eagle Mountain residents

● Closest, most accessible grocery store for Saratoga Springs residents

● 11,000 residents within 2 miles● Walmart becomes the first mover and

main supplier on the West side of Utah Lake.

● Corner location with room for growth (66 acres of land space)

Ridley’s is the sole grocer in Eagle Mountain city limits, and regularly surpasses sales projections

We recommend a Walmart Neighborhood Market on Pony Express Pkwy and Porter’s Crossing Pkwy

“Our key strategy… was simply to put good-size discount stores into little one-horse towns that everybody else was ignoring” -Sam Walton, Sam Walton, Made in America: My Story

Consumer Trends in Utah County

In 30 years, just 40% will prefer brick-and-mortar shopping over online

85% prefer brick-and-mortar vs online

Billboards have increased consumer awareness locally by over 25% in one month

Help consumers adjust to purchasing online while

capitalizing on their current preference of brick-and-mortar

stores.

Emphasize Online Purchases through Pickup and Billboard Space

Issue Prioritization

Actionable Solutions

Innovation & Creativity

Risk Mitigation

By offering and promoting Walmart Pickup, Online sales will double in the Provo Area, and awareness of Walmart’s online presence will increase by 35,000.

Completion and 30-Year ROI

2016 2017 2018 2019 2020 2021

Spring 2018: Begin Construction on Eagle Mountain Neighborhood Market Store

Summer 2018: Begin Construction on Provo Supercenter

Spring 2019: Eagle Mountain Walmart completed and opened

Summer 2019: Provo Walmart completed and opened

Early 2017: Land Purchases and City approval

South Provo Supercenter:

266% ROI based upon DCF for 27 ½ year period. Growth rates of population and demand are taken into account.*

Eagle Mountain Neighborhood Market:

355% ROI based upon DCF for 27 ½ year period. Growth rates of population and demand are taken into account.*

*Assumptions made for ROI found in appendix

Risk Mitigation and Recommendations

Issue Prioritization

Actionable Solutions

Innovation & Creativity

Risk Mitigation

Build as soon as possible to maximize ROI

Build a Neighborhood Market on Pony Express Pkwy and Porter’s Crossing in Eagle Mountain

Continue to cement online presence by using In-Store Pickup for online orders

Build a Supercenter on 600 S 1600 W Provo

Go Glocal by renting in-store retail to Sodalicious

Provo● In-store pick-up option will promote online market use● Consumers are using online methods of research, but

prefer to make purchases in brick-and-mortar locations● Sodalicious will draw customers despite competitors in

the Provo area, since Walmart is a one-stop shopEagle Mountain

● Current commercial zoning areas make the Pony Express location the best property for a retail store

● Building near Ridley’s will draw consumers to the location. Prices will draw customers to the Neighborhood Market

Appendix

Change in Population from 2000-10, Age and Hispanic/Latino Origin in Purple, Provo, UT

We used this data to help pinpoint Walmart’s target market. Provo’s population saw the most growth from ‘00-’10 in the 25-34 age group, adding 3,000 residents in the category.

“100% of Walmart's growth in sales is going to come from multicultural customers” -Tony Rogers, Chief Marketing Officer

Appendix: Online Sales and Billboard Survey Data

1%

27.3%

Billboard Advertising Works in Utah CountyBillboards have recently been proven to be very effective. As part of a study conducted in 2016, billboards saying “William Henry Harrison 9th President” were put up around Utah. Surveys from before and a month into the advertising campaign showed that the number of people who knew that Harrison was the ninth President increased from 1% to 27.3%. This shows that this medium would be an effective and successful way for Walmart to increase awareness of its two day shipping for online purchases.

By advertising Walmart Pickup locally in Provo, Walmart will see awareness of their online presence and number of local unique visitors double in the Provo market within 6 months of the store opening. We also recommend, because the market is trending towards Pickup

Analysis behind Online Statistics:

Brick-and-mortar consumers will decrease by 3% for the next 30 years.

Of the current population, 60% is over the age of 18. The population spread will remain constant.

Millennials will hold similar preferences for the coming 30 years.

3 Evaluated Provo Locations

• Lowest land cost (~$6-7/sq ft)• 1 Mile away from Frontrunner station (SLC Connection train)• Less than 3 miles away from majority of BYU Housing• Ample space for Supercenter

• Smith’s currently is exploring a Grocery Store here • On Center Street, main road in Downtown Provo• Between airport and highway• Land cost ~$10-13/sq ft

• Highest traffic street in Provo• Closer to most BYU Students than Smith’s• Enough land to create Supercenter/adjacent parking• Land cost ~$15+/ sq ft

Appendix

We have seen Walmart Supercenters use local companies as their in-store tenant before across the country, from Texas and Arkansas to Orlando with Rally’s. Stores in Rogers, AR recently went glocal and have selected local eats as retail locations. We examined Sodalicious, Swig, JCW’s, Waffle Love, and JDawgs and ultimately came to the consensus that a Sodalicious..

● Would not deter Walmart customers from buying products in the Supercenter

● Attract higher traffic than any of the competitors● Stay within the limited square footage that would be

available to any in-house retail tenant● Build local brand loyalty with the Provo student market.

Of the estimated 16,000 BYU Students that shop regularly at local competing grocers, we project that 8,000 will choose Walmart as their primary grocer, and Walmart will see a quantifiable uptick in regular (5+ times/month) due to impulse trips to the increasingly-popular Sodalicious.

South Provo Supercenter:● 2.5% growth the first year as store begins operation● 5% growth for following 2 years- geographic growth and student population

switching to new site at a rapid pace● 2.5% growth for the next 2 years- geographic growth continues as slower rate● Demand decreases in final 5 years by 2% due to innovations in technology● Discount rate of 8%

Eagle Mountain Neighborhood Market:● 5% growth for 10 years to account for fast growing market● Demand stabilizes at that amount for following years● Discount rate of 8%

To see the sample financial statements that were created to make these assumptions, follow the link listed below.

ROI Assumptions

https://docs.google.com/spreadsheets/d/1WCYy6t7gu7RVL3DDDpqmbS1GqhjUFZHFtceMWBpgx_g/edit?usp=sharing

SourcesInternet-BasedSodalicious Numberswww.Tagyoursoda.comhttps://www.instagram.com/sodalicious/https://www.facebook.com/SodaliciousUtah/First-hand research of soda industry, including cost projections of comparable company models, helped determine the sizing requirements and optimal traffic count.Utah County Zoning Numbers and Graphshttp://maps2.utahcountyonline.org/zoning/zoningmap.htmlThis was used for both Provo and Eagle Mountain to determine possible locations based on lot size and land price.LoopNet was also used to verify numbers.Census FiguresVarious figures from http://censusviewer.com/Custom Maps Datagoogle.com/maps using web searches to pin map locationshttps://drive.google.com/open?id=1jmkvNoJK0gBgGeNGZ73XRTNVCSE&usp=sharinghttps://populationexplorer.com/ Race Data, South Provohttp://demographics.coopercenter.org/DotMap/Walmart Advertising Report figures and datahttp://www.slideshare.net/colinparajon/walmart-advertising-reportWalmart Data used for calculations and assumptionshttp://www.marketwatch.com/investing/stock/wmt/financialsWalmart 2014 Annual Report http://www.corporatereport.com/walmart/2014/ar/_pdf/WMT2014AnnualReportFinancials.pdfBillboard studyhttps://www.ksl.com/?sid=38228359&nid=148Depreciation Cost Estimatewww.yourbusiness.azcentral.com/irs-depreciation-schedule-commercial-real-estate-15798.html

In-Store Retail Spaces to Local Companies in Walmarthttp://www.wusa9.com/news/its-always-the-state-fair-at-restaurant-to-open-in-plano-walmart/322036277http://www.bizjournals.com/orlando/blog/2015/09/5-c-fla-walmart-stores-to-get-new-fast-food.html

Preference to Brick and Mortar Storeshttp://www.timetrade.com/news/press-releases/study-85-consumers-prefer-shop-physical-stores-vs-online

Ancillary Sources Matthew Boyle, “Wal-Mart Struggles to Shift From Bricks to Clicks,” Bloomberg Businessweek (July 25, 2011).Miguel Bustillo, “Wal-Mart Plans Small, “Urban Stores,” The Wall Street Journal (October 14, 2010)Utah Snapshot of 2050, http://www.utahfoundation.org/uploads/rr720.pdfNon-Internet Sources600 Person Survey of Provo Residents between 18-30

100+ Person Survey of Springville Walmart ShoppersTo better depict the overall market, each tally represented a purchaser. If there were 5 children and 1 adult that walked in together and could be determined that they were a group, only one tally was made.

Eagle Mountain Economic Data, Primary SourceIkani Taumoepeau, Economic Development Director

Walmart Cold CallsWalmart Realty for land requirementsCold Call Quote Verification placed to Tony Rogers

Commercial Real Estate Contacts for Land costsRoger Woolstenhulme, Commercial Real Estate, Utah CountyTyler Dow, Real Estate Lawyer, Heber, UT