NEW YORK — Wal-Mart is getting flexible — and it’s hoping that approach will help it crack New York City at last.
This story first appeared in the December 30, 2010 issue of WWD. Subscribe Today.
The world’s largest retailer tried unsuccessfully in 2005 to open a store in New York — it searched for a site for a SuperCenter, but finding the necessary 185,000 square feet of space was, and still remains, difficult. Now, five years later, the Bentonville, Ark.-based company is adopting a new strategy armed with an arsenal of store formats, including some never-before-seen concepts and a rejigged SuperCenter — its size reduced to as little as 80,000 square feet and categories not crucial to urban areas, such as lawn and garden centers, eliminated.
The redefined approach stems partly from necessity — the suburbs have become saturated and Wal-Mart needs to enter more urban markets if it is to grow in the U.S.
“We’re addressing size and being more flexible in our approach,” said Steven Restivo, Wal-Mart Stores Inc.’s director of community relations for the Northeast. “The way we’re bridging the gap between larger traditional stores and smaller, more efficient formats is our site-to-store multichannel experience option.”
The retailer’s latest format is a 3,500-square-foot store called Wal-Mart on Campus, which will open at the University of Arkansas next month, replacing a university-run pharmacy. “It’s probably the smallest-format store,” Restivo said. “It’s a [pharmacy] and campus merchandising store with licensed apparel.” Wal-Mart on Campus was developed at the university’s behest as a one-off to meet the university’s needs. While there are no similar stores in the works, lessons might be gleaned from the project and its size could be appealing in urban areas.
Restivo said the company will open 30 to 40 small- to medium-sized stores next year. “The most substantial part of our real estate plan for 2011 will be stores over 60,000 square feet, which includes Neighborhood Markets,” he said, adding that a 30,000-square-foot store format “has been designated as a pilot program for next year. We don’t have any in existence yet and we don’t know where the first test sites will be. These stores will have some type of grocery component. A lot of the other category details are being decided.”
New York City has stubbornly resisted Wal-Mart’s advances. Wal-Mart SuperCenters and Sam’s Clubs ring New York City, and the retailer said it found that New York City residents spend $165 million annually in those stores, with the second-highest dollar amount spent coming from Manhattan. Wal-Mart would focus on neighborhoods that are underserved in terms of jobs and access to affordable food, Restivo said.
Four small-size Wal-Mart SuperCenters proposed for Washington, D.C., were cited as examples of how the retailer is more responsive to communities and what stores in New York City could look like. In renderings, one of the Washington SuperCenters looks like a Whole Foods store, with two sides of the building covered entirely in glass and cantilevered Wal-Mart signs hanging above Meatpacking District-style awnings. “The aesthetics are much improved,” Restivo said.
Although Wal-Mart hasn’t made the leap to New York City, competitors such as Target Corp. have unveiled stores in Harlem, Queens, Brooklyn and the Bronx. City Council speaker Christine Quinn, long an opponent of Wal-Mart in New York City, scheduled in December a public meeting to discuss the retailer’s interest in a site at the proposed Gateway II shopping center expansion in the Spring Creek section of Brooklyn. Quinn postponed the meeting until Jan. 12 when she learned how many people wanted to attend.
“We’re questioning why [the City Council] would have a hearing without us announcing a store or project in the city,” Restivo said. “Meanwhile, there are hundreds of similarly sized retailers and grocery stores that exist today in New York City. My understanding is that the Target stores in the city are selling groceries, and we have a very similar business model. We find the hearing a bit curious.”
“Nothing has changed about [Wal-Mart’s] corporate philosophy and behavior,” Quinn said in an interview. “Nothing has changed about whether I want them in New York City. I don’t. Wal-Mart is still the company with the worst record on gender discrimination lawsuits. Their labor practices are in no way near the standards we have in New York City. Supermarket workers get time-and-a-half here on Sunday. Wal-Mart used to pay an extra dollar an hour and then stopped doing that.”
Restivo confirmed that Wal-Mart stopped paying an extra dollar an hour on Sundays. “We went in line with the majority of other retailers across the country,” he added. “Every [existing] Wal-Mart associate is grandfathered in for the extra dollar per hour. That’s 1.5 million people. There’s this disconnect between what our wages and benefits are and what they’re perceived to be. Our wages, at $12.21 per hour, and benefits are competitive today. As we get closer to opening stores [in New York City,] our wages may get even better. We do periodic wage assessments when we enter a market.”
Restivo said Wal-Mart has no new projects to announce, but then added, “The Brooklyn site doesn’t need approval [because of its size]. Our position has stayed the same for eight or nine months. We’re evaluating sites. We hope to be there [in New York City] soon. We’re looking at new construction opportunities, revival of dormant properties, small [less than 30,000 square feet], medium [60,000 square feet] and large, [over 80,000 square feet.] We’re looking at a range of options.”
“In 2005, Wal-Mart could have moved into the Queens Center mall, but because it knew the city didn’t want it here, it retreated,” Quinn said. “We’re in touch with Related Companies [the developer of Gateway II, Related Retail Corporation is an affiliate of The Related Companies] on different projects and my staff has made very clear my opposition to Wal-Mart. Related is very clear on how I feel. What they do with an as-of-right site is up to them.”
Charles Barron, a councilman representing the section of Brooklyn where the Gateway project is located, said, “We negotiated with Related and the city. We had an agreement with Related with regard to small stores [in Gateway II]. That was the plan. Related will have to come before the City Council again for other projects, and they don’t want to sever ties. It’s not so much that we’re pleased with these other companies [such as Target, which operates a store at Gateway in Brooklyn]. The size of Wal-Mart will destroy every other business surrounding it. Target is small and doesn’t do as much damage.”