Wal-Mart Stores Inc. will sell used cars at five U.S. stores, a pilot project some observers say could lead to the world's largest retailer dominating yet another category of business.
The move toward being the quintessential one-stop shopping centre will see used-car lots operating next to five existing Wal-Mart stores in Houston under the Price 1 Auto Store banner, selling the vehicles at no-haggle, below-the-going-rate prices.
Wal-Mart confirmed yesterday it has struck a partnership with Asbury Automotive Group Inc., one of the biggest U.S. dealership networks, aimed at launching the six-month test in May.
If successful, observers say used-car lots could be rolled out at Wal-Marts across the United States and, eventually, in Canada.
"It gives a bit of credibility to the business of used cars," said retail consultant John Winter in Toronto. "It's a very large business and there's probably a lot of money to be made if it's done well."
The entry of Wal-Mart into the used-car sector could shake up the estimated $30-billion Canadian market as the savvy new player grabs business from rivals, he said.
But Wal-Mart could also help bolster the business, which is generally thought of as unsophisticated, he said.
It's yet another instance of Wal-Mart stepping into a new category and, with its considerable logistics and marketing savvy, trying to corner the market in that sector, observers say.
Wal-Mart is already, by some measures, the No. 1 grocery seller in the United States; its outlets offer everything from in-store banking machines to McDonald's restaurants.
Later this year, it will start setting up low-price gas stations at selected Wal-Marts in Canada in an agreement with Murphy Canada Ltd. Wal-Mart runs about 300 stations at its U.S. stores and plans to add about 100 a year over the next five years south of the border.
Nevertheless, Wal-Mart was quick to caution that the used-car project is simply a test, one of many the discount giant embarks on.
"Many things go forward, and some things don't," said Thomas Williams, a spokesman for Wal-Mart in Bentonville, Ark.
A spokesman for Wal-Mart Canada, which has 196 stores, said the pilot has no immediate implications for this country.
But industry observers are already trying to figure out the implications if the pilot becomes permanent.
Some used-car representatives welcomed the entry of Wal-Mart into the sector.
"I think it can do more to help than to hinder," said Robert Beattie, executive director of the Used Car Dealers Association of Ontario.
Mr. Beattie said he isn't worried about Wal-Mart's high-profile name and track record stealing away customers from established auto dealers.
"Wal-Mart may be very surprised to find out that this is not like selling Heinz 57 off the shelves at 4 cents lower than everybody else," he said.
Mr. Beattie said it will not have the selection or size of lots to take on auto dealers.
And U.S. retailers' attempts to expand into used cars have not been a big success, he said.
Allen Levenson, chief marketing officer at Asbury in Stamford, Conn., said the vehicles will be sold at a one-price, no-haggle rate "well below" the industry's standard rates.