Walmart (NYSE: WMT) is tired of neighborhood discount stores like Dollar General (NYSE: DG), Family Dollar (NYSE: FDO) and Dollar Tree (NASDAQ: DLTR) eating its lunch.  So the world’s largest retailer is fighting back with a new crop of stores it will brand Walmart Express.

The stores are expected to be a fraction of the size as a Walmart supercenter, but they will carry most of the basic items its cousin does  to satisfy regular shoppers or those dropping in for milk, socks or cold medicine. All stores will take food stamps and offer check cashing. Some stores will even feature a gasoline station.

Company executives say Walmart Express’ strategy is two-fold.  The stores will locate in small towns that aren’t big enough to support a full-size Walmart, and in big cities where building a supercenter isn’t practical. Walmart will start off by opening 15-20 Walmart Express prototypes in Chicago, Arkansas and North Carolina by the end of January. If the stores do well in both urban and rural areas, Walmart hopes to begin its expansion assault on rival dollar stores by adding about 350 Express stores a year.

The Walmart Express stores’ size and location could very well help Walmart’s sales rebound from its flat performance last year, especially if the Express stores adopt the 24-hour model of the supercenters. But size and location shouldn’t be the retailer’s only consideration.

Walmart didn’t lose business to dollar stores because those retailers are small and conveniently located. Consumers shop there because, in this age of falling incomes, the stores’ prices are predictable, $5 or less in many cases, effectively allowing shoppers to tally their basket of goodies before they get to the cashier.

Consumers still will be looking to get the most bang for their buck.  If they can’t do that at Walmart, the retailer may find that many of those customers visiting the store will be checking out through the Express Lane.

As of this writing, Cynthia Wilson did not own a position in any of the stocks named here.