BENTONVILLE, Ark. - As Wal-Mart Stores attempts to expand into urban locations around the country, it's being stymied by local initiatives designed to keep big-box stores out of an area, or at least to keep them closely regulated.
The latest instance came two weeks ago in Chicago, when the City Council passed an ordinance requiring big-box operators to pay "a living wage" - a move that could prompt Wal-Mart to cancel plans to open its first supercenter inside Chicago this fall.
The ordinance will require stores with 90,000 square feet whose parent companies generate annual sales of $1 billion or more to pay a minimum wage of $9.25 an hour plus $1.50 in hourly benefits, effective July 1, 2007, increasing to a wage of $10 and hourly benefits of $3 in 2010.
"An increasing number of cities are pressing Wal-Mart to provide decent wages," Paul Weitzel, vice president, Willard Bishop, Barrington, Ill., told SN. "The proposal here in Chicago addressed the city's concern that a Wal-Mart supercenter will shift the population base from higher-paying to lower-paying jobs."
In the wake of the law's passage, Wal-Mart may not open a supercenter planned for September at a former shampoo factory - which would have been its first supercenter in the city of Chicago and only its second urban supercenter in the U.S. - opting instead to open more locations outside but close to Chicago.
"Just as every business weighs the costs and complications associated with each potential location, we will try to provide Chicago residents with the savings, choices and jobs they clearly want, without subjecting ourselves to a discriminatory marketplace and a competitive disadvantage," said Michael Lewis, senior vice president, store operations. "Dozens of communities around the city of Chicago already welcome the savings, job opportunities and tax revenue we bring with each store opening."
Wal-Mart tipped its hand during the debate over the living wage ordinance when John Bisio, the Wal-Mart executive overseeing the Chicago area, told a local newspaper that, if the ordinance were to pass, "we'd direct our focus on our suburban strategy and see how we could better serve Chicago residents from suburban [locations]."
Mayor Richard Daley, quoted in the Chicago Sun-Times, said during the debate on the ordinance that he was not taking sides on Wal-Mart's urban expansion. "[But] if the suburban areas can have 'em, why can't the city have 'em? That's the thing I don't understand."
Many Battlegrounds
Chicago is the latest battleground for Wal-Mart, but it is just one of many.
Los Angeles and Oakland, Calif., have passed ordinances requiring economic impact studies on proposed big-box sites.
In Inglewood, Calif., the City Council approved similar legislation earlier this year - two years after voters there rejected a ballot measure sponsored by Wal-Mart that would have allowed the retailer to build a supercenter without public input or environmental review. Some observers believe it was the fight against that measure that helped galvanize the movement to hold Wal-Mart and other large retailers accountable for the needs of the communities they serve. In New York, Wal-Mart has already been turned down for sites in Queens, Manhattan, the Bronx and Staten Island.
A group called The Wal-Mart Free NYC Coalition charges on its website that big-box stores lower the standard of living in the communities where they operate, calling Wal-Mart "the worst offender" for paying employees "poverty-level wages" and offering a health insurance plan that is so bad, "many of its employees end up on taxpayer-subsidized state health insurance."
Other cities that have passed laws restricting big-box operators include:
San Francisco, which approved a proposal in 2004 prohibiting stores larger than 120,000 square feet from locating in any downtown area; and stores selling "a significant amount" of nontaxable items banned from anywhere in the city.
Turlock, Calif., which OK'd a zoning ordinance barring development of stores of 100,000 square feet that devote at least 5% of total floor space to the sale of nontaxable merchandise in full-service grocery departments - a law upheld earlier this year by the California Court of Appeal.
Hercules, Calif., which approved a plan in May for the city's redevelopment agency to use eminent domain, if necessary, to take 17.3 acres of land away from Wal-Mart because the site had been previously set aside for a neighborhood shopping center with relatively small stores. Wal-Mart has threatened a legal challenge.
Several Maryland counties, which imposed restrictions on the location of any stores larger than 120,000 square feet that include a full-service grocery and pharmacy.
Washington, D.C., where a pending "large retailer accountability bill," similar to the Chicago law, would require nonunion operators to pay wages of at least $11 an hour and benefits of at least $3 an hour.
Jefferson County, Wis., which has asked the city council to conduct a review of the environmental, economic and social impacts before annexing land for big-box stores.
Dallas, which imposed a short-term moratorium a couple of years ago on construction of stores larger than 100,000 square feet.
Franklin, Tenn., and Mission, Kan., which have proposed laws requiring retailers larger than 50,000 square feet to build on two floors and those whose stores exceed 100,000 square feet to build on three levels.
In addition, at least 30 states have proposed what one state association executive called "a Wal-Mart bill" - "fair share" efforts that would require big-box employers to pay specified minimums for health care. Maryland is the only state so far to pass such a law - which would require companies with more than 10,000 employees to spend 8% of their payrolls on health care; though that law was ruled invalid last month by a federal judge, proponents have indicated they will appeal the verdict.
Some Victories
Wal-Mart has been able to overcome some of the legislative challenges tossed in its face over the last few years as it has sought to move into urban sites, including:
In Washington, D.C., legislation that would have banned stores of more than 75,000 square feet that devote more than 15% of space to nontaxable products such as food, which died in committee.
In Contra Costa County, in Northern California, a measure that would have prevented the operation of nonmembership stores of more than 90,000 square feet that devote more than 5% of floor space to sales of tax-exempt goods, which was rejected by voters in 2004.
In Eugene, Ore., a recommendation that the City Council elicit input from the community to review local planning and zoning codes, and develop a comprehensive plan "that clearly articulates a policy to promote existing responsible retail and discourage corporate chains," which was rejected by the council.
In Vermont, a bill that would have required any store over 75,000 square feet to undergo an economic and community impact analysis to determine its impact on employment, property values, public services costs, the character of the area and the vitality of nearby downtowns and village centers - a proposal that failed to get out of committee before the legislative session ended but which is expected to be reintroduced in the next session.
In New Jersey, failure of an amendment to the state's Municipal Land Use Law that would have required a regional economic impact study when a company applied to build a store larger than 130,000 square feet.
In Maine, failure of a bill that would have prevented taxpayers from subsidizing medical care costs of large employers, pending a study to determine the economic impact on such employers and pending developments in Maryland; and another failed proposal that would have imposed a special sales tax on big-box retailers to reimburse the state for the health care subsidies it provides its workers.
The reasons why municipalities say they want to control the spread of big-box stores usually involve efforts to protect against urban decay, increased traffic, reduced air quality or loss of jobs.
Such fears were reflected in the first sentences of a report prepared in 2004 for Eugene, Ore.: "[When] a big-box store opens its doors, two low-wage, no-benefit jobs are added to the community and three better-paying, often unionized jobs are eliminated. In addition, when a supercenter opens, two local grocery stores will be forced out of business."
Observers acknowledge that many efforts to keep Wal-Mart out of urban locations are more politically than economically motivated, with the United Food and Commercial Workers Union playing a behind-the-scenes role in most of the activism aimed at Wal-Mart.
"The union is behind the initiatives that are frustrating Wal-Mart," Jonathan Ziegler, a Santa Barbara, Calif-based analyst with J.M. Dutton Associates, El Dorado, Calif., told SN. "As Wal-Mart moves from its Southern roots to cities north of the Mason-Dixon line, it's running into more union issues."
Wal-Mart Outlook
Despite the challenges Wal-Mart faces in its efforts to move into urban locations, industry observers told SN they believe the retailer will ultimately be successful in its efforts.
"The fight by special interests against Wal-Mart is like the buggy whip companies fighting the automobile industry," said Gary Giblen, senior vice president and director of research for Brean Murray, Carret & Co., New York. "They may be able to slow things down a bit, but they can't stop the wheels of progress from turning.
"The initiatives and other legislative proposals really won't change anything because at some point Wal-Mart will get into most of the locations it wants, whether by winning legal battles or convincing the public it doesn't exploit people."
Lately Wal-Mart has been fighting back - despite founder Sam Walton's notion that as long as you treat shoppers well, you don't have to worry about public relations.
Lee Scott, Wal-Mart chairman and chief executive officer, echoed Walton's philosophy earlier this year when discussing efforts to keep big-box stores out of some cities. "If we built stores of 39,000 square feet, they would still propose box laws to keep us out," he said. "But ultimately, if we treat customers and associates right, we will be allowed to grow."
