INGLEWOOD, Calif. — Bad timing and poor p.r.
Those were the factors that contributed to a surprisingly overwhelming loss for Wal-Mart as Inglewood voters said no thanks to a supercenter. The vote also got caught up in the increasing outcry over rising unemployment and jobs moving overseas, both of which are central issues in the presidential campaign.
This story first appeared in the April 8, 2004 issue of WWD. Subscribe Today.
But while voters’ rejection could have broader implications for Wal-Mart’s expansion plans elsewhere in California — where it hopes to open 40 supercenters within the next three to five years — and even in other states, it was taking the loss in stride on Wednesday. After all, Wal-Mart simply may find another empty lot in another community down the road.
“To those in Inglewood who supported this project, we thank you,” said Bob McAdam, vice president of state and local government relations for Wal-Mart Stores Inc., in a statement. “Wal-Mart remains committed to finding ways to provide you and your families with access to convenient shopping and low prices. We look forward to serving all of our Inglewood customers at some other location in the future.”
Only 11,624 people out of a population of 112,000 in Inglewood voted in Tuesday’s one-item ballot. All 29 precincts and absentee ballots counted late Tuesday night revealed 7,049 residents voted against Wal-Mart while 4,575 voted in favor. There are about 40,000 registered voters in the city, according to City Hall.
“We are disappointed that a small group of Inglewood leaders together with representatives of outside special interests were able to convince a majority of Inglewood voters that they don’t deserve the job opportunities and shopping choices that others in the L.A. area enjoy,” McAdam said. “It is a shame that a small number of voters have determined that more than 100,000 Inglewood residents will have to leave their community to enjoy the shopping opportunities that others have close to home.”
Liz Pierce, a senior analyst at Sanders Morris Harris, said Wal-Mart suffered from bad timing in Southern California. The supercenter’s non-unionized grocery component was not welcome in a market still raw from the longest supermarket strike in its history, which ended earlier this year. Thousands of grocery workers protested reductions in health benefits supermarket owners said were needed to compete with Wal-Mart. “There’s still a lot of distrust, if you will, by grocery workers here, not to mention consumers who were affected [by not crossing picket lines],” said Pierce.
She said Wal-Mart may now have to rethink its strategy. “While there may be a groundswell of euphoria among opponents, this will perhaps make Wal-Mart more vocal and will do more work to point out its benefits,” she said. “Are they going to back away? No. The [California] market overall is too attractive for them.”
Linda Berman, vice president of strategic brand development at Caruso Affiliated that owns the popular The Grove shopping center in West Hollywood, Calif., said, “All brands try to achieve emotional status in the minds of consumers. I’m not sure this kind of emotional positioning is what Wal-Mart was looking for, but it proves that consumers do have emotional connections to or biases against retailers and that is the zeitgeist. And it changes. It’s much less predictable for those of us that watch this stuff for a living than it used to be.”
Kurt Barnard, consultant and founder of Barnard’s Retail Trends Report, said he was surprised by Wal-Mart’s loss. Still, he sees the world’s largest company continuing its drive in the state.
“Wal-Mart will continue to try to expand,” Barnard said. “It’s not going to make a single different move. They’re very good at what they’re doing, proved by the enormous growth they’ve had. For Wal-Mart, it will not mean anything other than they will not be able to open a store at that particular location. Consumers will be deprived of low prices.”
Walter Loeb, president of Loeb Associates Inc., also was perplexed over Tuesday’s referendum.
“The people have spoken,” Loeb said. “I don’t get it, the area has other discount stores [including a Target and a Costco]. It’s also not an elite kind of community, therefore it would make a lot of sense to bring it in the community. I’m very surprised. They’re not going to go away, and frankly, this is a defeat for them but not one that will change their course of action.”
In the end, though, the Inglewood vote boiled down to a referendum on Wal-Mart’s corporate reputation — and its credibility as an employer. The result was a firm thumbs down.
“There is a real message here for Wal-Mart that they are going to need to work on [their public relations],” observed Babson College professor James Hoopes, who covers Wal-Mart in social history classes. “What dominated the day in Inglewood was the perception that a Wal-Mart job is a lousy job.”
Hoopes said Wal-Mart’s “Good Jobs” television campaign hasn’t been particularly effective because it doesn’t address broad economic anxieties about global production and job loss.
“The fact remains that not too long ago General Motors was the largest U.S. employer, paying workers three times minimum wage. Now it’s Wal-Mart, paying minimum wage and that hurts,” he said.
Although Wal-Mart isn’t solely responsible for these macroeconomic shifts, he said the company’s status as the country’s biggest and most visible employer means Wal-Mart “has to reinvent itself” or risk carrying all the baggage of globalization.
The retailer needs to be “a pioneer in a new form of corporate leadership on community issues, because too many people work at Wal-Mart and live in poverty,” Hoopes asserted.
That’s precisely the wedge the Union of Food and Commercial Workers, one of Wal-Mart’s fiercest opponents, has driven into communities, polarizing city councils. The UFCW has drummed up its staunchest support by contrasting its wage-and-benefit packages with those of prototypical Wal-Mart workers.
In fact, Wal-Mart and the UFCW have been sparring for years over attempts to unionize the retailer’s 1.4 million workforce, a move that would force Wal-Mart to raise wages and radically impact its profit model.
Neil Stern, senior retail partner with consultant McMillan Doolittle, said the retailer should gird itself for similar challenges, and even preemptive strikes through legislation, in other union strongholds such as New York, Detroit and Boston.
“The union standpoint is becoming: ‘It’s a lot better to keep them out than fight with them once they are in,’’’ observed Stern.
In fact, in Chicago, another union bastion, the retailer has reportedly run into difficulty getting a permit for its first planned store — a 150,000-square-foot conversion of a former shampoo factory slated to open in spring 2005. When the project was announced in July, alderman Emma Mitts cheered the development, describing her constituency — 73 percent African-American and 25 percent Hispanic — as desperately underserved for retail.
A call to the alderman’s office wasn’t returned at press time.
Richard Hastings, senior retail analyst at Bernard Sands, said Wal-Mart needs to realize its folksy, “aw-shucks” public image is too flimsy a conceit for the cities.
“Certainly Wal-Mart is the greatest distribution, procurement and sourcing company in the world,” he said. “But when it comes to image-making and controlling perception, they are one of the worst. If I were Wal-Mart, I wouldn’t be patting myself on the back for giving consumers low prices, I would be getting anxious about blowback from bad p.r.”
In Tuesday’s loss, Hastings sees a “crack in the armor.” From here, Wal-Mart will have to be more flexible in how it builds and operates stores, Hastings said, as well as better communicate the variety of ways it can add value to communities.
“Wal-Mart thinks generating tax revenues and offering consumers low prices is everything,” he said of the 300 to 500 jobs and up to $5 million in tax revenues the retailer claims are generated by a supercenter. “What we’re finding is those two items are not deeply compelling everywhere in the United States.”
However, for Inglewood at least, Wal-Mart should have been a slam-dunk, given the city’s needs and the retailer’s resources.
Some city officials, including Mayor Roosevelt Dorn, expressed disappointment Wednesday morning. “I’m disappointed less than 10 percent of the people determined the outcome that could have had an economic boost for the city,” said David P. Stewart, president of the Inglewood Chamber of Commerce, lamenting the 1,000 permanent jobs and 2,000 construction jobs lost, in addition to the millions in tax revenues. “You get zero with a concrete slab out there. My concern is that we don’t send a message to nonunion investors that they are not welcome in Inglewood.”
The supercenter in Inglewood would have been Los Angeles County’s first. In voting Wal-Mart out, residents also voted against a 60-acre shopping center that would have been located in what is now a paved parking lot between The Great Western Forum and the Hollywood Racetrack. The project would have also included a Best Buy and Linens ‘n Things, among other retailers.
Wal-Mart spent more than $1 million in its Inglewood campaign, according to campaign finance records. On Tuesday, an attorney who wished to remain anonymous at one polling place said he had been hired by Wal-Mart to monitor the voting process. He said Wal-Mart had hired several lawyers from outside firms to be sent to polling places throughout the city.
Some residents said they were swayed by Wal-Mart’s insistence that the supercenter would bring jobs to the town and generate $3 million to $5 million in sales tax revenue for better police services and new community centers.
But ultimately, residents were alarmed about the prospects of a big-box in their town, said officials. The opposition — including city, county and state officials, and clergy from the Southern Christian Leadership Conference, Nation of Islam and St. Michael’s Catholic Church in Inglewood — ended up spending a fraction in their campaign efforts of what Wal-Mart spent. Jesse Jackson and Rep. Maxine Waters (D-Los Angeles) joined the fight against the retailer Monday.
After the La Quinta store that opened in March, Wal-Mart’s next supercenters are scheduled to touch down in Palm Desert and Palm Springs, followed by as-yet-unscheduled openings in Bakersfield, Hanford, Chico and Redding, among other cities.
In all, opposition to Wal-Mart’s entry has emerged in about a dozen cities in California. In addition to Inglewood, Wal-Mart supercenters have been voted out of San Marcos near San Diego but won over the Contra Costa county suburb near San Francisco, Rosemead and Gilroy. In January, Wal-Mart filed a lawsuit against Alameda County to challenge its ban.
Although the retailer has not publicly announced a location in L.A., the battle shaping up between the mega retailer and megalopolis will be the most significant in the state. Los Angeles County has proposed an ordinance banning stores of over 100,000 square feet.
“We’re feeling very confident,” said Josh Kamensky, a spokesman for council member Eric Garcetti, an original proponent of the store ban scheduled for a final vote in early summer. “Wal-Mart has said my way or the highway but Inglewood voters have said to the largest company in the world, it’s the highway,” he said. “Inglewood dispelled the idea that Wal-Mart can go to any puny little city that is desperate and trade bad jobs that undercut good jobs.”
A spokesman at L.A. Mayor Hahn’s office said communities are not necessarily singling out Wal-Mart but any so-called big boxes. “We’re talking about any business that comes in and affects the existing shopping infrastructure,” said Yusef Robb, noting a Target Greatland would receive the same flack. “It’s any type of supercenter we’re concerned with. A Wal-Mart out in a newly built suburb may be a different story.”
— With contributions from Ross Tucker, New York
Total population: 112,000
(evenly split between African-Americans and Hispanics)
Registered voters: 40,000
23 percent of African-Americans earn between $10,000 and $24,999
31.6 percent of Hispanics earn between $10,000 and $24,999
27.7 percent of African-Americans earn $50,000 or more
19.5 percent of Hispanics earn $50,000 or more
Source: City of Inglewood’s Panning Division, City Hall