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In response to the British invasion of the streamlined and popular Tesco stores, Wal-Mart (WMT) will begin the launch of a new concept grocery store this year, starting Phoenix, Arizona area.

The new stores will operate under the name "Marketside," and will be created to compete directly with Tesco.

This had to be done because of the potential ability of Tesco to expand operations quickly with their small Fresh & Easy Stores.

"Marketside" stores will come in at about 20,000 sq.ft., and looks to be a major driver of domestic growth for the retail giant, which decided recently to cut back on the expansion of its Supercenters, which had been the key engine of growth over the last 20 years.

Although this is a new concept store for them, they have been running well over 100 Neighborhood Market stores since 1998, which the new stores will  be similar to. The major difference is the Neighborhood Market stores are about 35,000 sq.ft. in size, as they are used to fill in between Supercenter markets.

Financial Times reports there have been a number of trade names registered by Wal-Mart recently, like City Thyme and Field & Vine, which some believe is the precursor to their own private label fresh produce.

Other than the obvious competitive reasons, another thing that downsizing means is Wal-Mart will now be able to quickly enter markets with their new stores, and not go through the public consulting process where politics gets involved. This will allow them to become much nimbler and quick, as they must be to compete against the Tesco threat, and also grow out the business.

This could be one of the reasons they recently hired Jack Sinclair to run the grocery business, as he's worked in the smaller grocery environments like these in England. Former Tesco Executive David Wild should also be a part of this new concept, as he heads Wal-Mart's new business development.