Wal-Mart Superstores Find Their Niche

Wal-Mart’s success in winning approval for its first Los Angeles County Supercenter in Rosemead points to a tried-and-true strategy by the retail giant to make small, struggling communities the beachheads of its expansion efforts.

Wal-Mart wants to eventually build 40 Supercenters throughout the state, but so far, all the planned Supercenters have been in outlying areas where jobs are few and shopping options are limited. The company has been particularly aggressive in Riverside and San Bernardino counties, where local politicians have in many cases welcomed the stores.

“That was their forte,” said Kenneth E. Stone, emeritus professor of economics at Iowa State University in Ames, who has studied the corporation since 1988. “Sam Walton’s philosophy was to put down markets in small towns.”

California’s first and only Supercenter so far opened in March in the desert town of La Quinta, and a Hemet store is slated to open in October. Elsewhere in Riverside and San Bernardino counties, stores have been approved in Palm Springs, Palm Desert, San Jacinto and Beaumont and have been proposed in Riverside, Blythe and Rialto.

The stores, which sell traditional discount merchandise as well as groceries, have faced strong opposition in urban areas, notably Los Angeles, where politicians and labor leaders have argued that the retail centers depress wages and harm the local economy.

Wal-Mart opponents argue that cities embracing the Supercenters might see short-term sales tax gains but that, ultimately, the stores would put traditional grocery stores out of business, taking with them higher-paying jobs.

But these arguments have not swayed officials in some Inland Empire towns.

In Hemet, for example, city leaders are betting that the Supercenter will draw thousands of bargain hunters from across the desert -- shoppers who will also help revive the city’s desolate downtown.

“Out here, it’s all about value,” said Rhonda Gauthier, a cashier at a small Hemet liquor store and longtime Wal-Mart shopper. “Who would want to keep Wal-Mart out? Wal-Mart’s the store of stores!”

Officials in Hemet, a dusty town 91 miles east of Los Angeles, expect the new Supercenter to deliver $400,000 in annual sales tax revenue. The community has seen dramatic home building and population increases in recent years, but shopping and dining opportunities have lagged.

“This end of the world is not as economically developed as downtown L.A. and some of larger areas are,” said Patti Drusky, chief executive officer of the Hemet/San Jacinto Valley Chamber of Commerce. “It’s our turn to grow in Southern California.”

Indeed, economists said many of the communities Wal-Mart has chosen for Supercenters are in transition: small towns seeing a boom in home construction.

“You have the land. You have the desire, because the Inland Empire feels they’re still under-retailed. And you have a more realistic point of view on the part of local governments,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., a private, nonprofit organization which has conducted studies for Wal-Mart. “It’s just easier to get a foot in the market.”

Los Angeles County has been a different story.

Last month, the Los Angeles City Council passed an ordinance requiring economic impact studies for Supercenters and other extra-large stores. This year, Inglewood voters overwhelmingly defeated an initiative that would have allowed such stores to be built without normal planning processes, such as traffic studies and public hearings. The vote was a rare defeat for Wal-Mart, which spent more than $1 million pushing the initiative. The company has scored ballot-box victories in Calexico and Contra Costa County.

But while national attention was focused on the Inglewood fight, Wal-Mart was busy winning approvals from city councils and constructing stores in Riverside and San Bernardino counties.

Stone and other Wal-Mart experts said the company’s success in those two counties can be partly attributed to the lack of powerful labor unions in the area.

“The unions lead the fight [against Wal-Mart] for the most part,” he said. “The unions don’t have the resources to fight every battle. Where they’re going to fight is what they view as the most important markets where they have the most to lose, and that certainly would include the Los Angeles area.”

Indeed, labor leaders note that the drive to defeat the Wal-Mart initiative in Inglewood was greatly assisted by unions.

“You have a very organized labor movement where there’s lots of community allies in urban cities,” said Miguel Contreras, chief of the Los Angeles County Labor Federation. “In Los Angeles County, there are 800,000 union members, plus allies.”

He noted that unions don’t have that kind of political power in outlying areas such as the Inland Empire.

But labor also could not convince officials in Rosemead, a suburb 12 miles east of downtown Los Angeles. On Wednesday, the City Council unanimously voted in favor of the Supercenter project, saying it could not pass up the added tax revenue.

Wal-Mart spokesman Peter Kanelos said he believes most of the opposition to Supercenters in California has come from unions. “This is a battle between organized labor and their long-standing campaign against Wal-Mart,” Kanelos said. “The rank-and-file consumers show they support Wal-Mart, which was evident by the great reception we had in La Quinta.”

Some say that as Supercenters spread across the Inland Empire, more opposition might rise.

Jack H. Brown, CEO of Stater Bros. supermarkets, said he expects more cities to follow in the footsteps of Los Angeles and Inglewood. Brown, whose stores compete directly with the Supercenters, said he is paying special attention to the financial impacts of building a Supercenter, including taxpayers covering the medical costs for workers without health insurance.

City leaders, Brown said, should take into account that Stater Bros., which operates 159 supermarkets throughout California, provides health benefits to all of its employees. Wal-Mart opponents note that the company’s health benefits are much less generous than those at other California supermarket chains.

The decision to bring a Supercenter to Hemet lacked much of the drama that unfolded in Inglewood. Hemet’s City Council voted 4 to 1 in favor, saying, like Rosemead, that it could not pass up the added sales tax revenue, plus the shopping opportunity.

Supporters see the Supercenter as another sign that corporations recognize Hemet’s growth. Starbucks recently decided to open up shop there.

“We’ve been in a rural area so long, we’re happy to see some of the bigger things come in,” said Shannon Conn, 38, a stay-at-home mother.

Hemet Councilwoman Marge Tandy was the sole opponent on the board. She questions whether the area can support two Supercenters -- Wal-Mart is building another one less than six miles away, in San Jacinto.

“They see the money,” she said of her council colleagues, “and they see a new, clean store.”