Wal-Mart’s Giant Steps Bringing It to O.C. in ’94 : Retailing: Nation’s largest chain will open stores in 1994 at sites including Anaheim, Lake Forest and Laguna Niguel.

It’s not the ghost of Christmas Past that’s haunting Orange County retailers this shopping season. Rather, it’s the ghost of the late Sam Walton, the Arkansas businessman who reshaped the nation’s retail industry.

Walton’s legacy, the Wal-Mart chain, is the nation’s largest and most powerful retailer. Its financial numbers, like a football star’s statistics, are staggering. It earned $1.99 billion last year on $55.5 billion in revenue. It employs 500,000 people at 1,994 locations and has been opening 100 new stores per year.

It is an empire from which Orange County retailers have escaped head-to-head competition.

But those days are numbered.

Over the next year, the Bentonville, Ark., chain will open a handful of stores in Orange and Los Angeles counties. Sites will include malls in Anaheim, Laguna Niguel and Lake Forest.

Wal-Mart’s arrival will have a dramatic impact on Southland shopping because it comes at a time when economically stressed retailers are vulnerable to attack by a strong, well-run competitor.

The chain’s debut is “great news for consumers” as possible price wars loom, said Nate Franke, who tracks the retail industry from Costa Mesa for the Deloitte & Touche accounting firm.

“But it’s not necessarily good news for retailers who are already here,” Franke said. “Most retailers in Southern California have seen declines in store volumes in recent years. When you bring this type of competitor into the marketplace, it puts a further drag on them.”

Wal-Mart’s move into major Southland markets is a “bold step” for a company that has built its reputation in small towns and cities where it easily became the dominant retail force, said Tracey Hall, president of the Hall Olsen Marketing Group, a Newport Beach consulting firm.

Though it has 61 stores in California, Wal-Mart has tip-toed around the edges of the state’s heavily populated areas. In Southern California, the chain has opened stores in East Highland, Colton, Rialto, Redlands and Fontana.

“They’ve succeeded by going into small markets, and there are still a lot of those good, little markets left,” Hall said. “Regardless of that availability, they’ve decided to come to Los Angeles and go head-to-head. They’ve decided that it’s time to be here.”

Local retailers will get a double-dose of Walton’s retail medicine during the coming year because Wal-Mart Stores Inc.’s 331-unit Sam’s Club warehouse chain acquired 91 Pace Membership Warehouse locations in November from Kmart Corp.

Pace operated 31 stores in California, including half a dozen in Orange County. Most of those are expected to be converted to Sam’s Club stores but Wal-Mart isn’t disclosing its plans yet.

Wal-Mart executives, in fact, declined comment on when the chain’s first locations would open in Orange and Los Angeles counties. A spokesman said only that 1994 store openings are planned in Glendora, Cerritos, Chico, Lake Elsinore, Milpitas, Paramount, Paso Robles and Vista.

Local development sources, however, said the chain also intends to open stores at the revamped Anaheim Plaza in Anaheim, the Foothill Ranch Towne Centre being constructed five miles northeast of the El Toro Y interchange and at The Marketplace, a new shopping center in Laguna Niguel.

Wal-Mart’s appearance could prompt price wars, industry observers said, as existing retailers attempt to blunt the chain’s entry. But some companies will be hard-pressed to compete with Wal-Mart on cost basis because the chain has been so successful at cutting costs out of its distribution system, Franke said.

Kmart, Sears, Target and other national chains, reacting to Wal-Mart’s presence in California and across the nation, have been renovating stores, juggling merchandise and opening massive, new stores that are better suited to go head-to-head with Wal-Mart.

That wave of change has a direct, positive impact on consumers.

Shortly after Wal-Mart signed to open a store in Rialto, “the Kmart people went through and remodeled,” said Frankie Jones, executive director of the Rialto Chamber of Commerce. “Then they had a grand reopening.”

In addition, she said, the Price Club offered membership enhancements to show off its Rialto store.

“It’s the same thing as when Smiths (a grocery chain) moved into town,” Jones said. “Then, Vons remodeled. They’d gotten complacent. . . . The good old capitalist system works. Competition is good.”

Wal-Mart’s arrival wouldn’t have been as important had it occurred during the go-go days of the 1980s, when Southern California’s economy was booming. But with the job market shriveling up during the long recession, “the pie is shrinking,” Franke said.

In the Inland Empire, the company undoubtedly forced some retailers out of business, local observers said. But the casualties are hard to locate because Wal-Mart carefully placed most of its stores in locations where there’s little direct competition.

“The only store we heard of being scared off by Wal-Mart was Sprouse-Reitz Stores, which is evidently being phased out in California,” said Pam Gregory, an administrative assistant at the Colton Chamber of Commerce. Sprouse-Reitz, a Portland-based company, declined to comment on the store closing.

Merchants in several towns in Eastern states have alleged that Wal-Mart uses predatory pricing to undercut competition. But “we really haven’t had any complaints from our members,” said Nancy Hooper, Chamber of Commerce president in Fontana, where a Wal-Mart opened about a year ago.

Most of Fontana’s smaller retail outlets quickly found ways to compete by offering products and services that didn’t compete head-on with Wal-Mart, Hooper said. And Wal-Mart’s strategy of locating in towns where there were no major competitors meant that it rarely went head-to-head with major competitors.

Civic and government leaders in Fontana and other smaller Inland Empire cities and towns welcomed Wal-Mart’s arrival because it boosted local sales tax receipts. In Fontana’s case, Wal-Mart took an “old, blighted area . . . and made it into a nice shopping center,” Hooper said.

Wal-Mart’s arrival also will force consumers to become smarter shoppers and possibly join several of the membership-only discount warehouses like Price Club.

“They each offer different products so I have (membership) cards for all of them,” Jones said.

After months of comparing prices and products, Jones prefers Wal-Mart for plumbing supplies and small appliances; Price Club for bulk grocery items and major appliances; Pace for clothing, computer supplies and software; Kmart for clothes and Costco for its bakery.

Retailers will have to get used to such changes in shopping habits much as those in the consumer electronics sector faced changes spawned by big new competitors during the past decade, said Franke.

“When Circuit City and the Good Guys arrived from the East Coast, they redefined the way consumer electronics are sold,” Franke said. “They made it a price-sensitive market and everyone now competes on price.

“That’s what’s going to happen as Wal-Mart moves in,” Franke said. “Everyone will have to compete more fiercely for consumer dollars, including those people who are already here.”