Will Wal-Mart superstores really devastate the City of Angels?
"Ugly." "Devastating." "Race to the bottom." Barbs about the latest Hollywood film or reality TV show? No. Just a few choice words from opponents of Wal-Mart Stores' expansion efforts into Los Angeles' retailing market.
Like the flicks and sitcoms churned out by the major studios in the City of Angels, the retail giant's plan to build 40 so-called supercenters—jumbo versions of the stores where it peddles produce and other grocery items along with cheap Levis-Strauss "Signature" jeans and Crosman BB and Pellet Guns—has attracted its own share of powerful critics.
Nothing stirs the ire of anti-big box activists like the thought of an expansion effort by the world's largest retailer. Wal-Mart has been bashed for a variety of ills, from allegedly ruining the historic character of neighborhoods to driving out small retailers and turning downtowns into "ghost towns." That many of these trends are either a natural evolution or a result of the popularity of cars rarely comes into the reasoning of the opponents.
Leading the critics in L.A. are labor unions such as the United Food and Commercial Workers. They represent cashiers, baggers and stockers working supermarket chains such as Vons, which would have to go head-to-head with Wal-Mart's superstores. Wal-Mart employs a non-union workforce. Last month, the UCFW rsettled a five-month strike with the major local chains over wages and benefits, a contest which both sides insist was prompted by Wal-Mart's expansion plans.
The UCFW and other unions complain that Wal-Mart stores will create "poverty-wage jobs" and drive out higher-paying ones by forcing supermarkets and other retailers to lower prices or go out of business. That in turn, will hurt taxpayers and blight communities because Wal-Mart employees allegedly won't be able to afford health insurance and other benefits on their incomes. "Wal-Mart represents a giant step backwards," declares Danny Feingold, the communications director for the Los Angeles Alliance for a New Economy, a union-backed anti-Wal-Mart nonprofit.
The UCFW and its allies have in turn gained backing from L.A.'s politicians, many of whom count on unions for campaign donations. The UCFW alone gave $9,500 over the last three years to city officials including Mayor James Hahn. Copying a method used by other cities, L.A. is drafting an ordinance that would essentially cordon off the stores to a small swath along a commuter rail path in the San Fernando Valley and parts of the city's ritzy West Side. It couldn't build in other parts of the city because they are receiving economic development subsidies from the city government.
"I think Wal-Mart is one of the real ugly chapters of American capitalism," Martin Ludlow, a former union leader and one of seven city councilmen who have already lined up against Wal-Mart, told the Los Angeles Business Journal earlier this month.
Wal-Mart isn't exactly backing away. It has already hired a local lobbyist and launched a TV campaign touting the benefits of having its stores in the community. Wal-Mart's mouthpiece in its L.A. effort, Peter Kanelos, also says it could try to beat back the rules with a referendum, a tactic it recently used to beat back similar anti-Big Box ordinances in nearby Inglewood. Another possibility: Roll out smaller supercenters, which would evade the legal limits. One such store opened in Tampa, Fla. last month.
As it is, Wal-Mart is already here, with four stores in L.A. and fifteen more in surrounding cities. While these aren't the 200,000 square-foot stores with delis and bakeries that L.A. officials want to banish, you can already get cereal and other groceries there. At one store on Crenshaw Boulevard in the Baldwin Hills section of town, you can walk up to the second floor and buy milk and cheese.
These stores aren't in the nicer or easier-to-reach parts of town. The Baldwin Hills store for example, is located within South Central L.A., which is better-known for poverty and gang violence than for its array of shopping amenities. The store in Panorama City section of the Valley is 13 miles away from tony Westside enclaves, the next closest is in the gritty suburb of Paramount. With such slight penetration, Wal-Mart is hardly a threat to rival retailers.
Wal-Mart's presence, admittedly, does disrupt local retailing markets. Some 30 rival supermarkets in Oklahoma City were shuttered after Wal-Mart launched seven superstores in its market, according to trade publication Retail Forward, while other chains have been forced to deal with the competition. But much of this is simply the continuation of dynamics that come into play whenever new innovations appear in the market. The rise of department stores a century ago killed off one generation of so-called mom-and-pop stores while the emergence of supermarkets after the Great Depression did the same in the grocery segment.
With so few mom-and-pops around these days, Wal-Mart's presence only threatens the businesses of other retailing giants. In L.A., it competes or will compete against an array of rival retailing giants including Kroger Co.'s Ralph's in the grocery arena, Rite-Aid and Walgreens in the drug-store arena, rival big-box retailers such as Costco, and the 7-Eleven convenience stores that dot the landscape.
And in some cases, Wal-Mart would actually be filling a need for new shopping and employment options that haven't been met by its rivals or anyone else. Take South Central, where the Baldwin Hills store is located. A 1999 Pepperdine University study determined that South Central had 65 percent fewer grocery stores and 20 percent fewer clothes shops than the rest of the L.A. county area; Federated Department Stores' Macy's division abandoned the Baldwin Hills-Crenshaw Shopping Center six years ago while the only major supermarket chain within a mile of that site is an Albertsons down the street that opened seven years ago.
This isn't exactly a problem for Wal-Mart opponents, many of whom live in parts of L.A. where the shopping choices are myriad. While driving around the Palms area of West L.A. (home to Reason's headquarters), one can run into four different supermarkets, a Smart & Final warehouse store, the Macy's and Robinsons-May department stores (located at the Westside Pavilion shopping mall with a Gap and other shops) and a Sav-on drug store.
For anti-big box types, a Wal-Mart is something they could live without. Much of the opposition likely comes from the image of Wal-Mart shoppers as hicks without enough style or taste to shop at a hipper spot such as Target. But for the poor with limited shopping options and even more limited incomes, Wal-Mart represents something else altogether.
When Wal-Mart opened its store last year, it didn't exactly devastate the neighborhood. Instead it filled the very space Macy's abandoned and brought cheaper-priced items to the area. It also brought 450 jobs; the average pay is more than $9.50 according to Kanelos, just above the $8.71 average wages earned by unionized workers in a typical Vons or Safeway. For an area with unemployment rates in the double-digits, Wal-Mart seems to many a godsend.
"For years the complaint has been that many small mom-and-pop stores often provide poor quality at high prices and in many instances with service that is not acceptable. But you go into Wal-Mart and you find the prices are good, the service is great, and the store is spotlessly clean," said former L.A. Police Chief-turned-city councilman Bernard Parks, an opponent of the anti-Wal-Mart ordinance, to the Business Journal last year.
Future poor neighborhoods could benefit from Wal-Mart's expansion as well, in part because of the land-intense nature of its superstores. Each one, which will take up 200,000 square feet in space, requires 25 acres of land. The best source of available land? Some of the abandoned buildings that dot much of South Central and East L.A.
Will any of this come into play when L.A. officials gets around to considering the anti-big box ordinance? Likely not.