Small grocers learn to adapt as Wal-Mart opens more supercenters –
JOHN SHARP
PEKIN – During 40 years in the grocery business, Mark Wrhel’s store has faced plenty of retail battles, all of which his West Peoria store has adapted to.
As an independent grocer, Wrhel, owner of Haddad’s Market, survived the influx of big-box retailers, shopping centers and online retailing.
The future is sure to bring more challenges for independently owned grocery stores like Haddad’s.
Sometime this year, Wal-Mart Stores Inc. will open two new supercenters in Pekin and Washington that will replace its smaller- sized discount centers. Another supercenter will open in Morton in either late 2004 or early 2005.
The three Tazewell County stores join similar stores in East Peoria and Peoria. There is also some discussion among Wal-Mart officials in transforming its North University Street store into a supercenter.
The supercenters, which typically range from 100,000 square feet to more than 200,000 square feet, combine a full-line supermarket with a discount department store.
The supercenter expansion here is part of
Wal-Mart’s overall plan to open more than 200 new supercenters nationwide. The Bentonville, Ark.-based company also plans to open 50 new discount stores in the coming year.
“That’s been the trend for the past seven years,” said John Bisio, manager of community affairs for Wal-Mart’s 14-state Midwest region. “Certainly, five years ago, the (trend) was 100 supercenters opening and 50 discount stores.”
The first supercenter to open in this region was in East Peoria in 1996. Since then, commercial development around the store has boomed, turning what was once barren riverfront property into a popular shopping center known as Riverside Center.
For more than five years, East Peoria’s store was a regional draw. But the store has outgrown itself, prompting Wal-Mart to open the three new Tazewell County stores.
“When you have the East Peoria store only, you were creating a more regional hub,” Bisio said. “Certainly if you look at how that area has developed, (the Wal-Mart supercenter) has been quite an economic engine.
“We could probably continue to operate things that way, but it doesn’t make sense when your focus is on community. By opening an updated Wal-Mart concept, you’re able to make those stores more community focused.”
Community leaders agree that Wal-Mart’s new supercenter approach is more local-based than regional.
“I don’t know if we’ve seen anything like this in this area,” said Bill Fleming, executive director of the Pekin Area Chamber of Commerce. “It’s unprecedented to see the size of these structures in every community.”
Surviving the Supercenter
Wal-Mart’s slogan of “everyday low prices” has been a message of change the stores’ critics fear. Whether those fears are proven or not, critics blame Wal-Mart for the decay of independent “mom and pop” businesses and shifting the economic growth from a community’s downtown to a completely different section of town.
“They will put a building of 200,000 square feet in a town of 10,000 people,” said Jim Linsley of Lindy’s Downtown Market in Washington about the 184,000-square-foot supercenter that will open at Illinois Route 8 and McClugage Road. “It will be at the expense of other businesses.”
Wal-Mart and its supporters claim the store’s changing consumer base is meeting the demands of area shoppers who want convenience at bargain prices.
As such, Linsley said the only way his 15,000-square-foot store can survive is to offer something “different.”
“About five years ago, I found myself trapped in a pricing game to compete with everyone else,” Linsley said. “We quit doing that. We wanted to be leaders instead of the followers.”
Linsley said that’s when Lindy’s began selling the high-quality and hard-to-find Boar’s Head-style lunch meats and cheeses. Today, Linsley said he has people who will drive from LeRoy to his store just to buy his products.
“With the speciality foods we carry, it is my hope to take care of the people who want quality and service,” Linsley said. “Wal-Mart will have their bargain hunters, and we’ll take care of our clientele.”
For Haddad’s Wrhel, outdoing Wal-Mart isn’t about providing lower prices. For instance, he said there is no way he could sell products like Nabisco brands at the same value that Wal-Mart does and expect to be competitive.
“We’re not talking nickels and dimes here, we’re talking dollars,” Wrhel said. “And that’s why they are killing everyone.”
Wal-Mart’s Bisio said there might be instances where the company’s prices might change from community to community in order to compete with other stores and to be marketable to a city’s demographics.
But for the most part, Bisio said Wal-Mart’s pricing strategy is about driving out “wasteful costs.”
“It is the result of constantly challenging ourselves to drive out cost and waste in the old merchandise process and analyzing how your customers shop and updating your distribution center network,” Bisio said. “It’s a lot of things that a lot of folks haven’t done.”
Bernard Goitein, director of Bradley University’s Center for Business and Economic Research, citing figures from www.retailforward.com, an online consulting firm, said Wal-Mart’s pricing advantage might have more to do with an increase in accepting cheaper imported products.
Citing the data, Goitein said in 1995, only 6 percent of Wal-Mart products were imported from other countries. In 2003, that number increased to 50 to 60 percent, he said.
“Clearly, this will be a challenge to its competitors,” he said.
Organizational woes
Union officials who have long opposed Wal-Mart’s business practices are especially vigilant now that the nation’s largest company is expanding in central Illinois. A host of union officials already have picketed in front of the developing Washington store. And if the Morton store is built with few or no union contractors, expect the same there, union leaders warn.
Bisio said the Pekin and Peoria stores were built primarily with union workers, although the company makes no promises it will do the same in other communities.
“We find that many times our labor unions are competitive and certainly provide the best product for us,” Bisio said. “We’re glad to do that, but in the end, we try not to discern whether you’re union or non-union.”
Mike Everett, president of the Labor Council of West Central Illinois, argues that Wal-Mart, with $240 billion in revenues every year, should support this region’s local demographics, which he says is pro-union.
“The original Wal-Mart stores, they were all built union,” Everett said. “(Wal-Mart Stores founder) Sam Walton would respect the demographics of an area. Today’s Wal-Mart is about the almighty dollar, and they no longer respect local demographics.”
Nationally, Wal-Mart continues to get a black eye for how it treats its employees. Recently, the company was the subject of criticism when Sam’s Club, a Wal-Mart subsidiary, had locked in its overnight workers in areas of high crime to keep robbers out and prevent thefts. Wal-Mart has since changed its policy to ensure that every overnight shift at every store has a night manager with a key to let workers out in emergencies.
Also there are some who say Wal-Mart offers low pay and few benefits to its employees.
Last year, Steve Hill, secretary/treasurer of United Food and Commercial Workers Local 536, warned that Wal-Mart would attract 200 to 250 non-union labor positions to Pekin alone.
“How many of these things do you need 15 minutes from your driveway?” Everett said. “In the long run, the American consumer will regret being an avid supporter of this.”
Wal-Mart – which refers to its employees as associates – said its wages are competitive with other retailers and that the company provides unlimited career opportunities.
“Two-thirds of our management today started in hourly positions, and more than 70 percent of our associate base is full time,” Bisio said last year.
A local jewel
While union leaders and independent stores owners frown upon Wal- Mart, city officials in Washington, Morton and Pekin want to see how these supercenters will benefit their sales-tax base.
In Pekin, the 204,000-square-foot supercenter is located across the road from the former Pekin Mall, now East Court Village, which is developing from a dilapidated enclosed shopping center to what developers expect to be a miniature version of The Shoppes at Grand Prairie.
City leaders hope the supercenter provides a boost to the mall area, which has experienced growth of its own in the past year.
In addition, the city could use a sales-tax revenue bump. From May 2002 to April 2003, the city’s municipal sales tax revenue declined 5.4 percent to $4.38 million compared to $4.63 million in 2001 and 2002.
Meanwhile, Pekin’s income tax receipts dropped from $2.6 million in May 2000 to April 2001 to $2.2 million from May 2002 to April 2003, or 10.6 percent.
Shawn Christ, planning and development director in Washington, said in his city, Wal-Mart’s construction permit allowed Washington to generate $12.1 million in aggregate combined construction value of new commercial and industrial development in 2003. That’s compared to past figures of $700,000 in 2002; $2.8 million in 2001; and $500,000 in 2000.
“In one single year, that was the most commercial activity we’ve seen in several years here in Washington,” Christ said.
Copyright 2004
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