Paying Wal Mart's Price

by Dan Richardson


Ol' Sam Walton must be smiling. The legacy of Wal-Mart's founder thrives as his retail empire grows in a sort of economic Manifest Destiny.


A century ago, pioneers built the Northwest on timber and ore. Today, Sam's Arkansas imperialists are launching a campaign to sweep through the Inland Northwest, remaking the region on an economy of cheap snack foods, toys and housewares.


The beachheads are numerous:


-- In 2000, the company ordered a huge expansion of the Ponderay, Idaho, Wal-Mart to a "supercenter," which offers both groceries and variety items.


-- Last month, another Wal-Mart supercenter opened in Post Falls, Idaho.


-- Workers are stocking the shelves of a second Spokane Wal-Mart, on north Colton on the far North Side, just five miles from an existing Wal-Mart. The company plans a March 18 opening.


-- In Colville, the company continues its effort to triple the size of an existing store.


One of Wal-Mart's perennial promises is jobs. With 150 to 300 employees or more per location and 10 stores from Moses Lake to Ponderay, the company is one of the largest employers in the Inland Northwest.


It's also ones of the scariest for competitors. If K-Mart can't keep up, how's a small business down the street supposed to?


In Colville, the town's Excell grocery store has announced that it's closing its doors in the coming weeks, even as the Wal-Mart there is planning to expand into groceries. The Excell owner wouldn't comment much, saying he didn't want to sound like sour grapes: "If you're in a competitive business, you'd better be ready for it."


Consumers clearly love Wal-Mart. Supporters point to its cheap prices and convenient, one-stop glories.


But the closing of home-grown businesses, the urban sprawl and the high number of part-time, no-benefit jobs associated with each Wal-Mart store troubles some people, whether they are longtime social activists or just the guy down the street.


Their bottom line question is this: What are Wal-Mart's cheap prices really costing us?





To go shopping at the new Post Falls Wal-Mart is to drive past rows of ranch-style houses and wind-swept grassy lots.


Then, mirage-like, there looms the store, a red-white-and-blue concrete fortress. At 193,990 square feet, the building's as large as 60 large houses. It's just two stories, but its sprawling vastness lends the building a sense that it's towering over the parking lot, where asphalt spreads like a black lake.


The Wal-Mart lot is 19.5 acres, according to city planning records. At 60 mph, it takes seven seconds just to drive past.


A gas station is perched in front, on Mullan Ave., and there's a tire shop out back. You could lose an elephant in the garden center. Inside is an arcade of professional shops: A shopper could get a new pair of glasses, a haircut and a family portrait all before setting a purse inside a shopping cart. With the store's groceries, housewares, clothing and toys, a shopper would never have to go anywhere else. And that, of course, is the point.


The 950-space parking lot is mostly full even on weekdays. All of Post Falls is represented here: Mom and kids nosing around the medicine aisle; an elderly couple slowly buying the week's groceries; a youth chattering on his cellular phone while rummaging through boxes of shoes. Judging from the parking lot license plates, Wal-Mart draws people from the Spokane Valley, around the Panhandle, even Montana, says Post Falls Mayor Clay Larkin, with a hint of accomplishment in his voice.


Down along East Seltice Way, Post Fall's historic main shopping street, it's easy to find owners and employees of the thrift stores, auto parts shops and small professional offices who aren't so thrilled about the big new guy on the block attracting away traffic.


"I'm sick of people from Spokane stopping in asking directions to Wal-Mart," says Mary Walt, whose family runs Post Falls Hardware.


The mayor concedes that Wal-Mart, like its big-box store brethren, troubles some people. But this is the first big-box retailer in town, says Larkin, and there's enough business to go around.


"If we were a community that had level growth, there would be great concern. But this community is growing rapidly," says Larkin. The town has about 18,000 residents, according to the 2000 U.S. Census, and developers watching its growth plan to build 4,000 single-family residences in the coming decade.


Still, along East Seltice, people express some reservations -- most of them not for their own places, mind you, but for the shops down the street. Given that they can't always compete with Wal-Mart's prices (talk about your buying in bulk; Wal-Mart has 3,200 stores ordering the same toothpaste), shopkeepers like Walt say finding a niche will be the key to survival when its customers are on the line. But even that may not be enough, as some have accused Wal-Mart of "predatory" pricing. Since Wal-Mart can afford to lose money on one store for a while, it may set its prices below a break-even point -- often far below what local retailers can afford to charge. later, when competition has dried up, Wal-Mart is then free to raise its prices again. In Post Falls, the Wal-Mart gas station offers gas at 92 & cent; a gallon -- 10 & cent; lower than most stations.


Still, Walt says her personal assistance and advice will distinguish her business from Wal-Mart's hardware aisles. "That is the only thing we can offer different: customer service," she says.


"Anytime there's a new competitor that comes into any market, obviously everyone tries to build on their strengths and minimize their weaknesses," says Mike Davis, executive vice president of Tidyman's, which operates a grocery store about a mile from the new Wal-Mart. There are now four major grocery stores in town. Each Tidyman's is on schedule for remodeling, but the company made sure the Post Falls $2 million remodel was completed a couple of months sooner than originally planned, before Wal-Mart came in, says Davis.


At Hoffman's Shoe Box, the niche is high-end shoes and boots, the kind not found at Wal-Mart -- in essence, survival by avoiding competition.


Most longtime local residents aren't happy with the new massive new Wal-Mart, says Hoffman's Zane Denison. "I won't shop there. I'll support the smaller stores and pay a little more."





When a Wal-Mart comes to town, it promises jobs for the community. Officials at the Post Falls Wal-Mart said it would employ about 350 people. (The store manager did not return telephone messages asking for comments.) People often liken the average Wal-Mart job to hamburger-flipping, but they are precious commodities with unemployment in Idaho's Panhandle hovering around 9 percent, according to the state Department of Labor. In Colville, the existing Wal-Mart (a regular, non-grocery store) employs about 175 people, about 150 of them full-time, says Store Manager Fred Woods. If the planned Colville expansion goes forward "we're going to have to layer on at least that many more," he predicts.


There are skeptics, though, who say that the jobs Wal-Mart provides are taken from the smaller stores it drives under.


"A lot of jobs are simply the same jobs in new aprons," says Al Norman, head of Sprawl Busters, a one-man, Massachusetts-based Wal-Mart watchdog. "So when you net it out, particularly in the micro level... what you can predict is a significant number of jobs and sales base will be transferred to the Wal-Mart."


That's why shopkeepers in Post Falls are worried and why Colville resident Judy Linetty (a former salsa merchant, ACLU member and letter-writer) is starting to gather petition signatures directing the Colville City Council to turn down the Wal-Mart rezoning request there. The company has annexed 6.3 acres and wants the town to rezone it from residential to commercial; a zoning meeting on the matter is tentatively scheduled for March 13.


Linetty says she watched "store after store" go under when Wal-Mart opened in Omak, Wash., some years ago. She saw the same thing happen again in Colville over the past few years. She hopes to collect 1,000 or more signatures to pressure the council, which has the ultimate say in rezoning.


"We cannot buy underwear in this town," says Linetty. " You have to go to Spokane. Except for Wal-Mart. We have all the Wal-Mart we need in town."


It's not just small towns that split over the big-box way of life. Communities in one part of a state might support them, while others fight them tooth and nail. Sprawl Busters lists Port Townsend and Gig Harbor in Washington and Hailey in Idaho as three Northwest communities that have rejected Wal-Mart developments.


"They do run small businesses out of business. That is true," says Doug Orr, associate economics professor at Eastern Washington University. "There are literally communities in the United States that say Wal-Mart can't come here."


Gauging impact on a region can be tricky, says Orr. Wal-Mart clearly has a regional strategy, he says: To intercept Canadians heading to Spokane for weekend shopping by locating supercenters on the major highways south of the border, including Ponderay and Colville.


"Colville's gain is Spokane's loss," he says. The real problem for the region, like any other place big-box retailers get a solid grip, is that the company drains money from the region. Unlike a factory or a natural resource industry, big retailers don't produce anything, says Orr. They are "just moving the money around. [And] if you buy something from a mom-and-pop in Colville, the money's going to stay in Colville or Spokane. But you buy something from Wal-Mart, the money's going back to Arkansas."


All the basic criticisms about small businesses getting cut down by low prices and jobs being displaced miss the point, according to another economist, Rich Schatz, chairman of Whitworth College's department of economics and business.


"We either buy into something like free market capitalism where entrepreneurs go and open businesses and compete with others who are already there, or we don't believe in that system," says Schatz. "I'm sympathetic to small businesses. But the whole history of America and the expansion of our economy is based on people who figure out how to do something better and then go and do it. If I can retail better, if I can sell blue jeans and motor oil of equal quality and lower price, why shouldn't I?"


No one, says Schatz, is immune from competition, not even Wal-Mart. If that company starts mistreating consumers, they'll go to Target or Costco or wherever, he says.


As for jobs, big-boxes like Wal-Mart do tend to reduce the number of employees in a given market, both professors agree. That, says Schatz, is simply being efficient. And, again, that criticism misses the point: Wal-Mart's coming to town isn't about jobs, it's about consumers, he says. "Americans are voting with their feet and wallets. They like going into the stores and getting greeted by those corny Wal-Mart greeters."





Wal-Mart projects an almost a cosmic force, drawing shoppers, automobiles, roads, utilities, lighting, noise, dollars -- so many dollars -- and jobs by its mass alone.


Next door to the new Post Falls supercenter, tractors are leveling ground for a retail strip mall for merchants hoping to suckle from Wal-Mart's flow of shoppers. Mayor Larkin says he knows of one Seltice Way pizza shop that has planned for months to relocate next to Wal-Mart. It's as if this Wal-Mart carries the potential to shift the community's center of gravity.


That, say critics, is how Wal-Mart and mega-retailers like it contribute to sprawl. Placing a popular big-box store at the edge of a town redirects traffic and attention. Other smaller stores follow suit, as do new businesses coming in, the theory goes, leaving the downtown a hollowed-out core.


Economist Edward Shils, director emeritus of the Wharton School at the University of Pennsylvania, makes this argument in a lengthy 1997 report on the impact of large retailers. Old-time, smaller retail chains like Sears and Woolworth's were designed to fit along America's Main Streets, Shils wrote. Large retailers like Wal-Mart, Kmart and the others, combined with growing urban congestion, emphasized suburban locations, often in areas formerly zoned industrial. Soon, the "Main Streets of these towns were decimated by repeated small-store closings, unable to compete with the new American retail giants," wrote Shils.


Even the winners, the Wal-Marts, leave behind massive empty structures as the company either saturates a given area and later consolidates its stores, or leaves structures behind as it seeks bigger, expanded ones. The company expanded 121 stores into supercenters in 2001, company documents say. Wal-Mart's realty Web site lists more than 380 vacant stores, mostly in the southern states where it's been longest established.


That's the doom-and-gloom side, say Wal-Mart free-marketeers. The other view is that Wal-Mart's officials display keen insights into market forces with their aggressively expansionist policies. Wal-Mart opened 211 U.S. stores in 2001 alone, including those 121 supercenter upgrades, according to the company's year-end statement released Tuesday. When they decide on an area to launch or expand a store in, company officials have back-up sites, and often, Wal-Mart watchers say, pressure local governments by letting them know that. The company preferred to expand at its Colville site, but it was exploring backup locations, says Store Manager Woods. And while city officials like Mayor Robert Anderson say Wal-Mart didn't openly pressure them, these alternate locations, like those in Chewelah, were an open secret and published in the local newspaper, the Statesman-Examiner.


That's a powerful incentive for a small community, but Wal-Mart has other methods, too. Sometimes the company operates quietly, attempting to fly in under the radar of potential opposition, often getting deals done before people even find out Wal-Mart is looking for land. When in the late 1990s, Spokane County officials denied the retailer a permit to develop a North Spokane store just outside city limits, Wal-Mart simply went a stone's throw away -- inside city limits, dealing with another government. The company persuaded the city's Park Board members to conduct secret negotiations to sell park land close by without opening it to competitive bidding. The arrangement became public and was reported in The Inlander, but only after the parties shook hands in late 1999 on a $3.6-million agreement for the 30-acre parcel. That store opens next month.


Given that stick-and-carrot, most Colville residents support Wal-Mart expanding from about 77,000 square feet to about 193,000, says Marty Wold, director of the Tri-County Economic Development District. "If we're not going to do it here in Colville, they're going to do it in Kettle Falls or Chewelah or some other place."





Wal-Mart brings much good to the world. It lowers prices for consumers, and creates hundreds of thousands jobs for people from teenagers to senior citizens. The company distributed $190 million last year in goodwill gestures, funding things like academic scholarships and the Children's Miracle Network. (The Post Falls store donated some $30,000 to community groups at its opening, according to Mayor Larkin. And employees at the Colville store raised $43,000 for local charities last year, Wal-Mart officials say.) Shareholders who invest in the mega-retailer win reliably strong returns.


But there are powerful arguments that these positive attributes of Wal-Mart's success have hidden costs: That the chain, along with the other big-box retailers it has inspired, contributes to the worst aspects of American culture. Entire communities become homogenized coast-to-coast, destroying downtowns and leaving behind hollowed urban cores of empty buildings. These side effects have sparked opposition in scores of communities around the country, as in the several Northwest localities that have fought off Wal-Mart developments.


Wal-Mart is a topic that raises strong emotions, because it's often close to people's hearts, whether they see in Wal-Mart a job or the loss of a family business. Sam Walton's creation can be seen simultaneously as both the triumph of American capitalism and its destructive dark side.


That, says Whitworth economics professor Schatz, is simply the nature of our free market in high gear.


"Growing economies change, and the structure of these economies change. There are few buggy makers working anymore. They were screwed by the automobile makers," says Schatz. "Will the Mom-and-Pops survive? No, not unless they find a niche... This is the way the market works."





What do you think about the growing presence of Wal-Mart and other national, big-box retail chains? Let us know at [email protected].