LOS ANGELES — The ambitions of the world’s largest company were centered in Inglewood, Calif., on Tuesday.
Wal-Mart was the sole issue on a ballot in this community, 12 miles southeast of Los Angeles, as voters were deciding whether to allow the retailer to locate a supercenter in their backyard. Their decision, either way, could have seismic implications for Wal-Mart and its never-ending goal to expand, not just in California but in other cities and states.
This story first appeared in the April 7, 2004 issue of WWD. Subscribe Today.
At press time, low voter turnout was anticipated. Early exit polling revealed that it wouldn’t be an easy win for Wal-Mart.
The first impact of the vote, estimated to be tallied several hours after the polls close, could be felt in the fierce battle that is revving up in Los Angeles, the country’s second-largest city. Los Angeles city officials are currently finalizing a drafted ordinance to ban supercenters in virtually every part of the city that would have land suitable for their construction. Opponents, including grocery unions and political leaders, contend the stores depress employee wages, undercut and force out small businesses and create traffic and environmental problems.
The proposal is expected to be voted on as soon as this summer. Los Angeles Mayor James Hahn supports the ban.
Wal-Mart said that in Inglewood and elsewhere in California — where it hopes to open 40 large stores over the next three to five years — its stores create jobs and residents should be able to decide for themselves whether or not they want a supercenter in their community.
On Monday, opponents’ campaigns in Inglewood shifted into overdrive as religious leaders and community activists, including the Rev. Jesse Jackson, turned out to urge voters — split between African-Americans and Latinos — to defeat the measure because it would allow the Bentonville, Ark., retailer to sidestep public zoning, traffic and environmental hearings or reviews before beginning construction.
Inglewood Chamber of Commerce president David P. Stewart pointed out that voters aren’t making a decision solely on Wal-Mart but whether or not to allow the construction of The Home Stretch at Hollywood Park Shopping Center, a proposed project that would occupy 60 acres and house other retailers such as Best Buy and Linen ‘N’ Things. The project is projected to bring in between $3 million and $5 million to the city in tax revenue, said Stewart. He and Inglewood Mayor Roosevelt F. Dorn are in favor of the project.
But they are among the minority in city government. Inglewood’s City Council last year blocked the shopping center. Within a month, Wal-Mart had collected more than 10,000 signatures to force Tuesday’s vote and will have spent an estimated $1 million in an election in which fewer than 10,000 people are expected to turn out in this city of approximately 112,000 people.
Experts reflected about the seeming irony of Inglewood — a sprawling, heavily minority community thirsty for jobs and tax revenues — surfacing as a hotbed of dissent. The community already houses several big-box retailers, including a Target.
“Inglewood is a funny place for this to be happening,” noted George Whalin, president of Retail Management Consultants in San Marcos, Calif. “This has usually been a Beverly Hills kind of battle where you have affluent, snobbish citizenry. But seeing this happening in Inglewood sets a road map for what Wal-Mart is going to face going forward.”
He noted the retailer has laid groundwork for a move into Southern California’s cities and minority communities for the past two years with television spots featuring African-American and Latino shoppers.
Several observers said Tuesday’s vote is filled with more symbolic than fiscal significance.
Deloitte Research director Ira Kalish, who addressed a faculty gathering Tuesday morning at the Fashion Institute of Design and Merchandising in New York on an unrelated topic, was startled to find the audience buzzing about Wal-Mart.
“Everybody was asking why Wal-Mart is running roughshod over the process,” he said. “There’s a perception in California that Wal-Mart is being unfair if it spends money on its point of view.”
Kalish believes Wal-Mart’s actions are a logical rebuttal to the special-interest groups marshaled by Southern California’s three dominant, unionized supermarket chains — Albertson, Safeway and Kroger. A ripple of job losses at competing supermarkets generally follows Wal-Mart supercenter openings.
Richard Hastings, retail sector analyst for research firm Bernard Sands, said the Inglewood fracas is fallout from Wal-Mart’s continued mishandling of public relations. He faults the retailer both for not leveraging its positives enough as well as for letting its opponents define the company as a ruthless behemoth.
“Wal-Mart has failed to derail the harmful mental associations — of low wages, labor displacement, class warfare, the big guy versus the little guy,” Hastings said. “They’ve allowed these associations to blow up all out of proportion. If they don’t start to get serious about handling them in a major, strategic repositioning, the risk is that the fallout will spill over and start slowing Wal-Mart’s sales in the future.”
In Hastings’ estimation, the retailer’s drive for voter referenda (relatively easy to get in California versus other states) shows the company is trying to “buy their future” by setting legal precedents that allow them to sidestep city councils.
“Any legal action provides a historical point of reference for future legal battles and Wal-Mart wants to make sure they keep the precedents in their favor,” said Hastings.
The retailer so far is batting .500 on California referendums — one in Contra Costa County near the San Francisco Bay area passed while one in San Diego was rejected.
Still, Wal-Mart has deep pockets when it comes to lobbying for these projects. The 1,500-plus supercenters Wal-Mart operates in the U.S. have been extremely popular since their debut in 1988, with some analysts estimating supercenters represent as much as 40 percent of the retailer’s revenues of almost $250 billion a year. Including California’s 40, the retailer is planning to open 1,000 supercenters in the U.S. over the next five years.
The average Wal-Mart supercenter brings up to 500 jobs to the community, three-fourths of which are full-time positions, according to the retailer’s data. A 200,000-square-foot supercenter generates between $75 million and $100 million a year in sales, spitting out up to $5 million annually in sales tax revenues. It’s a tantalizing amount for any cash-poor city.
Wal-Mart has already begun trying to turn the tide in Los Angeles. It commissioned a report by the Los Angeles Economic Development Corp. that claims its presence would save consumers “at least” $3.76 billion a year and add 36,400 jobs. It has also pointed to the nearby Baldwin Hills Crenshaw Plaza store, a non-supercenter format that brings in $2 million in local sales tax revenue to another African-American and Latino area. Former police chief Bernard Parks, now a Los Angeles city councilman, has come out on Wal-Mart’s side, noting the store is popular with residents and has improved a blighted area.
Whatever Tuesday’s vote, Wal-Mart has vowed it’s full steam ahead with all 40 supercenters in the state, even if it means sidestepping bans and ordinances by moving to other cities, San Diego-based spokesman Peter J. Kanelos told WWD last month when the first supercenter in California opened in La Quinta.
Kanelos said despite opponents’ attempts to portray Wal-Mart as a rule-breaker, the retailer worked in good faith with the Inglewood city council for close to a year.
“We had every intention of taking this through the city, but after the city made it clear they were not willing to approve this project because they did not want to go against the wishes of organized labor we realized we had to take additional measures,” he said.
Tuesday’s vote is in fact the latest chapter in a battle that’s been raging for several years, beginning when the city council passed a Union of Food and Commercial Workers-endorsed grocery ordinance in 2001 that would have specifically prohibited supercenter formats. When Wal-Mart collected twice the number of signatures required for a repeal, the city council voluntarily struck the ordinance from the books, according to Kanelos.
Asked if he expected to be as successful this time around, Kanelos declined to comment.
Responding to Jesse Jackson’s outspoken position against the project, he said, “I don’t think Jesse Jackson or any of the groups sponsored by organized labor are representative of the true interests of Inglewood residents.”
Emanuel Weintraub, president and chief executive officer of Weintraub Associates, said that if Wal-Mart succeeds, “it’s a good strategy and tactic. If they win, then they can say, ‘We can’t be denied’ when they go to the next community. If they lose this, probably they will carefully select another and try it again. If that doesn’t work, they’ll probably abandon it. When you’re the biggest and the richest guy on the block everybody wants to take a shot at you.”
— With contributions from Ross Tucker