BAY POINT, Calif. — Wal-Mart's relentless rollout of new stores has foundered in California like a beached whale. Two years ago, the world's biggest company announced aggressive plans to build 40 of its trademark "supercenters" in this lucrative market of 35 million consumers, the last untapped domestic prize for a global behemoth whose "always low prices" stretch from China to Brazil.
But not a single supercenter has opened in California, and Wal-Mart's goal — a new one every two months — looks dubious. Nearly everywhere it turns, the Bentonville, Ark., retailer finds itself embroiled in lawsuits, politics and voter hostility toward its profitable blend of groceries and discount merchandise.
On Tuesday, voters in Inglewood, San Marcos and here in Contra Costa County will decide whether to prohibit "big-box" stores epitomized by Wal-Mart supercenters. Los Angeles, San Diego, Salinas and other cities are mulling similar bans. Lawsuits over Wal-Mart are pending in Alameda County, Bakersfield and Turlock.
Across the USA, Wal-Mart faces backlash where it once found welcome mats — often with taxpayer-financed sweeteners to boot. From Lawrence, Kan., to Sequim, Wash.; Milford, Ohio; Manatee County, Fla.; Manor, Pa.; Stoughton, Wis.; Urbana, Ill.; and Florence, S.C., communities are questioning whether Wal-Mart's ultracompetitive business practices — critics call them cutthroat and predatory — are in their best interest.
"Ten years ago, fighting Wal-Mart was so unusual it was a national story — small town beats Goliath," says Al Norman, founder of Sprawl-Busters, a Wal-Mart watchdog. "Today, these battles are raging all over."
But last week, Fortune magazine crowned Wal-Mart No. 1 on its annual list of the most admired companies for the second consecutive year. "There's a reason Wal-Mart is the largest retailer in the world," says George Whalin, a San Marcos retail consultant who doesn't work for Wal-Mart. "Consumers want to buy things at lower prices."
So why all the clashes? Supercenters were the catalyst, Norman says. In the 1970s and 1980s, discount stores in Wal-Mart's initial sweep through the South and Midwest were modest by today's standards — "40,000-, 50,000-square-foot little things," he says.
Not only are supercenters far grander — 200,000 square feet or about six football fields — but they often leave vacant older Wal-Marts behind. Norman counts 371 "dead" stores, up 39% since 1999.
"Communities are irritated that they're building stores right down the street from older stores," he says. "And they're irritated that they're getting the skeletal remains of the old stores."
California's lucrative market
In California, a volatile mix of circumstances makes the Wal-Mart wars unique. To a growth-driven company that looks beyond existing-store sales to satisfy Wall Street, the Golden State offers huge potential. Because local governments get a share of California sales taxes, elected officials are often eager for revenue-generating big-box retailers.
But many cities and counties have tough growth controls or grass-roots opposition. Gridlock on streets and highways fuels resistance to big-box developments on the suburban fringe that aggravate traffic and sprawl.
Politically potent unions see jobs threatened by supercenters selling groceries and offering consumers low-priced, one-stop shopping for most of their needs. Wal-Mart loomed large over the 4-month-old Southern California grocery strike, which ended Sunday after becoming the longest in the state's history. Supermarket chains, under intense pressure to stay competitive in an industry of skinny profit margins, want workers to pay more of health benefits, but the union resisted.
A study by the Bay Area Economic Forum, an organization of major employers, found that Wal-Mart's annual wages and benefits were $21,000 less per average worker than those of local supermarket chains.
"It's fear of the unknown," says Wal-Mart spokeswoman Amy Hill. "The food workers union is trying to scare people and create a myth that supercenters come in and shut everybody else down. But in 44 other states, people see that's not the case."
Since its first supercenter opened in 1988, Wal-Mart has shot from nowhere to America's grocery king, grabbing 21% of the market. A study by market researcher Retail Forward predicts that Wal-Mart grocery and drug sales will almost double to $162 billion by 2007, boosting its market share to 35% and "leaving a path of destruction in its wake" among competitors.
Wal-Mart's $256 billion in annual sales is at least $60 billion more than the USA's No. 2 company, General Motors. At its current rate, Wal-Mart will open 1,000 supercenters in the next five years.
Non-union, non-grocery discount chains such as Ames, Bradlee's and Caldors folded under the Wal-Mart onslaught, but unionized supermarkets are digging in. "This issue is much more contentious in California, because there's a tradition of 'I'll see you in court' or 'I'll see you at the ballot box,' " Norman says.
Wal-Mart fights back
Contra Costa, a suburban county of 1 million northeast of San Francisco, is a bellwether battleground because its demographics mirror the state's. In June, the Board of Supervisors voted to limit stores that devote more than 5% of space to groceries to 90,000 square feet. That effectively barred supercenters without naming Wal-Mart. Bulk-food sellers such as Costco were exempted.
"Unincorporated areas are where we want to protect open space," says Supervisor John Gioia. "Large developments don't generate enough sales tax revenue to mitigate the negative impact."
Wal-Mart gathered enough signatures to put a referendum on today's ballot and will spend more than $1 million on the vote, although the company says it has no plans for supercenters in Contra Costa. With $500,000 from Safeway and unions, opponents have knocked on tens of thousands of doors with a plea to keep Wal-Mart from big-footing in local politics.
"This is about the right to choose," says Dee Dee Ferro, president of a Bay Point chapter of ACORN — Association of Community Organizations for Reform Now. "We've already decided to ban supercenters. Just because Wal-Mart has money, they can come in and take over our land-use decisions?"
Wal-Mart foes say supercenters wipe out competitors, especially independently owned neighborhood mom-and-pop stores. "No way they can compete with bargain-basement prices," Ferro says.
Wal-Mart's painful impact on local business is a rallying cry. The company says new stores create jobs, while opponents contend they're merely low-paying substitutes for jobs swept away by Wal-Mart. Besides more traffic and pollution — a supercenter adds 3,300 daily trips — Wal-Mart kills supermarkets that anchor neighborhood strip malls, hastening urban blight, critics say.
In 1997-2002, Wal-Mart blanketed Oklahoma City with seven supercenters and seven of its "neighborhood markets" that mimic stand-alone supermarkets. It added a Sam's Club warehouse store to three already in the metro area. Result: 30 competing supermarkets closed, according to Retail Forward. In Dallas over the same period, Wal-Mart added 34 stores. Winn-Dixie abandoned all of its 15 stores.
Opponents conjure up the ruthless image of a powerful multinational bent on squeezing workers and suppliers, dispensing poverty-level wages and abusing Third World workers. "We're a blue-collar, middle-class area and we'd rather not engage in the race to the bottom," says Rep. George Miller, D-Calif., who represents most of Contra Costa.
But to legions of fans, especially cost-conscious shoppers, Wal-Mart's low prices and vast selection guard household budgets. Wal-Mart's speed, efficiency and innovation undercut competitors who foolishly go head-to-head on price instead of finding other niches, retail experts say.
"They're not the evil empire," says retail consultant Whalin. "They're formidable. They're tough. They're very good at what they do. But we know retailers around the country — Target's an example — that do quite well in the same marketplace."
Wal-Mart says in court papers that an Alameda County big-box ordinance limiting groceries illegally targets the company. But county officials say such bans also could cover Target or Sears superstores that sell groceries, though neither has plans in California.
"If they're trying to just stop all big box, write the ordinance that says no store over a certain square feet can come in," says Wal-Mart's Hill.
Wal-Mart is nothing if not adaptable. Last month, its first smaller, 99,000-square-foot supercenter opened in Tampa. It's meant for urban areas — and to circumvent bans of more than 100,000 square feet.
Search for low prices
Supercenter prohibitions arguably penalize low-income consumers. A year ago, a Wal-Mart store became a long-sought anchor for a fading regional mall in a south Los Angeles community torn by 1992 riots. Residents no longer had to depend on mom-and-pops or long trips to find low prices, says John Mack, president of the Los Angeles Urban League. The store provided more than 300 badly needed jobs.
A city council proposal to ban big-box stores that sell groceries is short-sighted, Mack says: "This can't be a cookie-cutter approach. What may make sense in the overdeveloped San Fernando Valley and west Los Angeles may not make sense in underdeveloped south Los Angeles."
Studies in San Diego and Orange County predict a net economic loss for California when Wal-Mart jobs replace union jobs. Wal-Mart fired back with its own study by the Los Angeles County Economic Development Corp., a coalition of groups promoting new business, that found shoppers usually pay 20% less at supercenters than at union supermarkets.
Surveys show that eight Americans in 10 have shopped at Wal-Mart. "People say Wal-Mart put small business out of business. Actually, they put big business like Montgomery Ward and Kmart out of business," says Roger Blackwell, an Ohio State University marketing professor. "It's little David beating up on Goliath, not the other way around, because 30 years ago Wal-Mart was just a little independent chain."
Blackwell's take on Wal-Mart bashing: "People who want to hang onto the past fighting the innovations Wal-Mart brings to the marketplace."
For all the bad press and battles over new stores, the fact is, Wal-Mart usually wins.
Al Norman's Web site, www.sprawl-busters.com, lists nearly 200 communities that have "beaten big-box stores," mostly Wal-Marts, since 1998. But over the same period, Wal-Mart has opened nearly 600 new stores and expanded more than 500 others.
And it doesn't always lose at the ballot box. In Calexico, Calif., two years ago, more than 70% of voters defeated a proposed supercenter ban. Clark County, Nev., supervisors passed a ban but quickly rescinded it when Wal-Mart began collecting signatures in metropolitan Las Vegas.
In Inglewood, a working-class, heavily minority city of 117,000 bordering Los Angeles International Airport, Wal-Mart twice had to troll for signatures to try to overturn a supercenter ban. Today's outcome could foreshadow bitter battles to come: Voters will be torn between the needs of low-income residents and the union sympathies of airport and port workers.
As Wal-Mart opens its first California supercenter this week in La Quinta near Palm Springs, the votes could move the war to a new phase. Wal-Mart may be vulnerable to lawsuits if it uses the ballot box to skirt environmental and other local mandates.
Still, for every place that snubs Wal-Mart, plenty of others embrace it. "We'd welcome a supercenter," says Terrence Grindall, economic development manager in Manteca, a city of 60,000 near Turlock, whose supercenter ban triggered a lawsuit. "We're pro-business."
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