STOUGHTON, Wis. -- Main Street in this town of 12,500 near Madison, Wisconsin, looks like thousands of others, except perhaps for the Norwegian flags lining the road, a tribute to the immigrants who settled the area.

There's an antiques shop, a little drug store, a movie theater, and down the road, there's a Wal-Mart.

Wal-Mart plans to open more than 200 supercenters in the United States this year. For the first time in Wal-Mart's history, U.S. supercenters in 2003 will outnumber the smaller discount stores that do not carry a full line of groceries. The Wal-Mart Super Center in Lebanon, Tennessee is seen in this 1999 file photo. (Jeff Mitchell/Reuters)

People around here like the small-town feel, but they also like their Wal-Mart -- they just don't want to see it getting any bigger. So they're putting up a fierce fight against Wal-Mart Stores Inc.'s proposal to build a new supercenter on local farmland.

"There's a Wal-Mart in town now and it's very well liked, but it's a little one," said Larry Peterson, who helped organize local opposition to the proposed supercenter.

"The proposal that Wal-Mart is making is one of these megastores. It would change us from a local, self-sufficient town to a regional shopping hub," he said.

Wal-Mart, the world's biggest company, is banking on supercenters to drive domestic revenue and profit growth over the next few years. The stores, some of them as large as four football fields, carry a full line of groceries along with clothing and other goods usually found in its aisles.

The retailer dominates rural and suburban markets, but as it bumps up against more urban areas -- with plans for increasingly large stores -- resistance is mounting.

Wal-Mart plans to open more than 200 supercenters in the United States this year. For the first time in Wal-Mart's history, U.S. supercenters in 2003 will outnumber the smaller discount stores that do not carry a full line of groceries.

The retailer opened its first supercenter in 1988, and is now the biggest grocery seller in the world. The idea is, customers may only visit a discount store to stock up on diapers or detergent a couple of times a month, but they'll need bread or milk twice a week.

"UFF-DA WAL-MART"

Peterson's anti-supercenter group calls itself "Uff-da Wal-Mart," using a Norwegian expression of displeasure to reflect the community's roots. A city council hearing earlier this week on an ordinance that would block large retail development for six months drew a standing-room-only crowd, nearly all of them opposed to large-scale new development.

"People live in the town because of its tone and its culture and its history," Peterson said. "They don't live here because they want rapid access to lots of shopping malls."

Wal-Mart's Stoughton proposal calls for a 180,000-square- foot store on farmland on the outskirts of town, dwarfing the 40,000-square-foot existing store. Residents would rather see Wal-Mart expand at its current location, or perhaps open a small grocery store on the other side of town.

Stoughton isn't alone in its Wal-Mart opposition.

Dallas, Texas, recently denied Wal-Mart's request to build a massive supercenter with retail floors on top of a parking structure. New Orleans also turned down a proposal for a supercenter, and dozens of other communities are trying to muster enough supporters to block new Wal-Mart developments.

For its part, Wal-Mart says it wants to work with communities, and has enough expansion opportunities that it should not have to force its way into an unwilling area.

It regularly modifies its stores to meet local tastes, whether it means adding stables in Pennsylvania's Amish country, where shoppers often arrive by horse and cart, or extra-spicy salsa in communities with large Hispanic populations.

In some places, Wal-Mart has found residents much more amenable than the local politicians.

In California, for example, where Wal-Mart plans to open dozens of supercenters in the next few years, some local governments have passed ordinances blocking megastores that derive more than 25 percent of their revenues from food sales.

But in at least two cases, Wal-Mart has rallied sufficient resident support to override the ordinances.

GOING VERTICAL

The next hurdle for Wal-Mart is how to build stores in densely populated urban areas. The retailer has one store on the edge of Philadelphia and several around Los Angeles, but None in Chicago or Manhattan.

"As they start to move more and more into urban areas, it's a different real estate game. You have to start thinking about multilevel stores, which are less convenient to consumers," said Michael Collins, partner with consulting firm Bain & Co.

The answer may lie underneath a soccer stadium in Dalian, China, where Wal-Mart has built a multilevel store. Wal-Mart has also opened a three-level store in the Baldwin Hills neighborhood of Los Angeles this year, so the retailer is clearly considering that model for U.S. expansion.

But going vertical can be problematic. Wal-Mart's supercenters work because customers like the convenience of stopping in for basic grocery items, but are often tempted to also pick up higher-margin items like clothing.

If groceries are on the ground floor, how many customers would venture upstairs to check out the more profitable merchandise? And if the groceries are on a higher floor, will it still be convenient enough to lure customers away from other grocery stores?

"People hate to go up," said Thom McKay, a vice president with architecture and consulting firm RTKL. "They may go up one level if they know there's food there. They're more likely to go down than up, especially if they can see down."

Wal-Mart's three-level store in Los Angeles has shopping cart escalators so people can bring their fully-loaded carts between floors, but McKay said the novelty quickly wears off, and the escalators can become an annoyance rather than a convenience.

The second option is going small -- at least by Wal-Mart standards. The retailer runs about 100 Neighborhood Market grocery stores that include pharmacies and photo finishing booths, but little in the way of general merchandise.

Those stores could easily find their way into major urban areas, but Wal-Mart plans only a handful of new ones this year, in part because it doesn't have enough store managers to open as many as it would like. The retailer said it was happy with the smaller stores, but supercenters are the priority for now.

Copyright 2003 Reuters Ltd

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