Strange Hero Indeed
Like so much of life these days, the merger between Federated and May, two chains of old-fashioned department stores, is actually about Wal-Mart. Wal-Mart has led the coalition of retailers that has driven a wedge through the battalion of middle-class shoppers, pushing some of them up-market to the likes of Nordstrom and Neiman-Marcus -- or out to specialty stores like the Gap or Bed, Bath and Beyond -- and some of them down-market to Target and to Wal-Mart itself.
The traditional department stores saw their slice of the market in geographical terms, not demographic ones. Macy’s was New York. Bullock’s was Southern California. The decline of these local institutions has hurt local economies and other local institutions, such as (ahem) newspapers. The local department store was, and sometimes still is, the local paper’s biggest advertiser.
May’s big Southern California chain, Robinsons-May, sputtered for years trying to be a species that went extinct at least a decade ago: the mid-level department store. Even the name, which resulted after May bought the Robinsons chain, indicated that the owners in St. Louis didn’t get it; companies that understand branding tend to pick one name after a merger, hence the nation’s headline writers aren’t stuck with a mouthful like Walt Disney Co.-Capital Cities/ABC.
Oddly, though, this alliance between the two biggest collections of its traditional rivals may give Wal-Mart an opportunity to improve its image. There are 28 malls in Southern California in which both of the merging chains have stores. The merged company probably will close quite a few of those outlets. Mall owners will be in a tough spot. It is a bit hard to imagine who will want to rent an empty hulk that once contained a large department store. And empty retail space can be contagious, especially when a mall loses one of its anchors. Many of these malls, which once were vilified as soulless community destroyers, not unlike the way Wal-Mart is today, have become community gathering places.
But wait. There is one potential occupant for these soon-to-be-empty retail spaces: Wal-Mart. Who else? The company traditionally prefers flat, open sites near a mall, and malls traditionally prefer tenants a bit more upscale. Wal-Mart’s customer demographics don’t match those of most mall stores. But the financial logic may overcome the scruples of both sides, especially in struggling malls in low-income communities.
The usual accusation against Wal-Mart is that it comes in and drives everyone else out of business. In this scenario, it drives its rivals out of business and then moves in. In reality, there may not be much difference. But to the public, Wal-Mart may come to seem like the hero instead of the villain.
