Owensboro's Wal-Mart Presence:

Economic boon or bad for business?

by Charly Wood

Wal-Mart is big, and almost everything said for or against the giant in our midst comes down to just that. Wal-Mart is the largest retail business in Owensboro, with two Supercenters and a Sam’s Club, where customers who pay a membership fee can buy groceries and other items in bulk. The three stores employ 617 full-time and 323 part-time workers altogether.

As the largest retailer in America -- in fact, the world -- it is thus one of the most controversial retailers as well. Supporters point out that Wal-Mart’s low prices have influenced the marketplace on behalf of consumers. Critics claim Wal-Mart’s business practices weaken the viability of smaller competitors who can’t offer the same low prices. What is the case in Owensboro? Views vary, but there is no doubt that Owensboro’s economic landscape is changing as other retailers, small and large, shift their sales strategies to compete with Wal-Mart -- or risk going out of business.

Why is Wal-Mart so dominant?

Any analysis of Wal-Mart’s impact probably should begin with asking just why the stores are so popular. The simple answer is that the company’s size allows it to offer lower prices, greater variety and convenient one-stop shopping for customers. The stores themselves are big and easy to reach, featuring gargantuan parking lots. Inside, the stores are usually bright and clean. They can be addictive
to shoppers.

However, the trend toward large chain stores locating in small communities did not begin with Wal-Mart -- rather it began with J.C. Penney, Woolworth’s, Sears, Montgomery Ward and other department stores.

The muscling out of locally owned stores by multipurpose “big boxes” didn’t start with Wal-Mart either. In Owensboro, shopping
habits began shifting away from downtown and smaller retailers with the opening of Towne Square Mall in 1978.

What Wal-Mart has done, however, is to combine the concept of the large department store and the mall. Under one roof customers
can buy clothing, shoes, books, appliances, prescription drugs, prescription eyeglasses, auto services and groceries. And Wal-Mart is now moving to sell gasoline and open its own banks.

Among the casualties are the department stores and malls that initially displaced the locally owned retail stores. In 2002 the
Messenger-Inquirer’s editorial board brought together 13 people to discuss the economic future of Owensboro. Developer David
Hocker pointed out that Towne Square Mall was having difficulty and alluded to a Wal-Mart factor. “Wal-Mart will probably generate
about as much retail sales in that one store as the entire mall does,” he said. And this was before the Supercenter on KY 54 and
the new Sam’s Club opened.

More recently Wal-Mart has begun having an impact on grocery chains. Nationally, with Winn-Dixie in bankruptcy and the Albertsons chain being bought out, only Kroger remains as a major competitor. Wal-Mart is challenging Kroger aggressively, even defiantly, with plans to open 20 Supercenters in Kroger’s hometown of Cincinnati in the next two years. At the same time, Kroger is opening its own version of a Supercenter called “Marketplace” -- twice-as-large grocery stores that also handle items such as office supplies, furniture,
kitchenware and jewelry.

Closer to home, the Wyndall’s grocery chain announced in April that it was closing Owensboro’s oldest existing grocery, the Parrish
Avenue Foodland. Ted Belcher of Wyndall’s Enterprises declined to say that Wal-Mart contributed to that closing, commenting only that
“any business that is in competition with you will have an effect on your business.”

But the closing of the Parrish Avenue store may say more about how even small retailers are trying to combat Wal-Mart. In recent years, Wyndall’s has been shifting from smaller to larger but fewer stores. The company closed its US 60E store in 2005, hoping its customers would shop instead at its newest and largest store on KY 54. The Parrish Avenue Foodland was comparatively small with only 10,000 sq. ft. and 20 employees, and to keep it open, Wyndall’s would have had to upgrade its aging building. Closing it may simply allow Wyndall’s to compete more effectively with Wal-Mart and other big outlets.

Wal-Mart affects communities

Wal-Mart itself has evolved in Owensboro much like it has nationally. It began here with a single store in the strip mall which now houses Big Lots. David Epling of The Earle men’s clothing store in Owensboro recalled, “They attracted a lot of other merchants who
came in there because of the traffic Wal-Mart brings. Then Wal-Mart left. That created quite a hardship for some of the merchants that had joined them, particularly ones that had signed long-term leases. Wal- Mart can leave and pay their lease for years and years … But that practice leaves a lot of stores in limbo when Wal-Mart leaves.”

Wal-Mart has been criticized for similar practices in many other communities; its critics argue that it holds onto the leases to keep
competitors away, and that the businesses left behind, clustered around a vacant building, must either move or go under. Wal-Mart
says it is merely honoring its leases.

And some local businesspeople defend Wal-Mart’s approach, saying it would be unrealistic to expect Wal-Mart to curtail its own
growth for fear of hurting small businesses around it. Nor is it likely that Wal-Mart is trying to drive those small businesses into the
ground, said Kirk Kirkpatrick, video division president of WaxWorks in Owensboro. Kirkpatrick believes Wal-Mart is simply focused on
finding the most profitable locations.

Wal-Mart also contributes significantly to the local economy, businesspeople say. Its sheer size as the city’s largest retailer helps the area, said J. Todd Inman, president of the Greater Owensboro Chamber of Commerce. Wal-Mart may not provide high-paying jobs, he said, but any successful business returns tax dollars to the city and county. He also pointed out that other retailers have come to Owensboro at least partly because of Wal-Mart, including the Bob Evans restaurant and other businesses on KY 54, site of the new Supercenter.

Wal-Mart itself answers its critics by detailing the ways it contributes to state and local economies. For instance, the company spent
$1.9 billion with 1,177 Kentucky suppliers in 2005, it says. Wal-Mart also has nearly 32,000 employees in Kentucky and estimates that
about two-thirds of them working full-time for an average of $9.94 an hour, nearly twice the minimum wage.

Local businesses adapt

Still, there is no question that Wal-Mart affects existing businesses in large and small ways. Some are driven out by the giant, but
others manage to co-exist.

For example, some smaller businesses are expanding their products and services in order to compete. Wal-Mart sells gasoline and so
does Foodland at its Carter Road and KY 54 stores. Kroger recently opened a gasoline station at its Parrish Avenue store.

Other businesses have lost sales and regrouped. Ten years ago WaxWorks, a video and DVD distributor, was a supplier to Wal-Mart.
But as Wal-Mart grew it began buying products directly from manufacturers, Kirkpatrick said. “Wal-Mart’s clout is such now that they
are able to dictate prices to the extent that it does impact WaxWorks. Wal-Mart even undersells the wholesalers,” he said. “That part does concern me. I think you can make a case for the American dream of supply and demand run amok.”

Of course it’s common in business to sell some products below cost to attract customers and to hurt or even eliminate competing
businesses. But Wal-Mart has another edge, Kirkpatrick said. “I’m convinced because Wal-Mart is so big that they are getting better
pricing than we are. I mean, we’re a distributor so we sell to thousands and thousands of stores. But they have thousands and thousands of stores. And the studios can move 30 percent or 40 percent of a new (video) release through Wal-Mart in the first weeks. So the studios need Wal-Mart. It’s kind of become an addiction—they’ve got to go to Wal-Mart.”

Still other businesses have felt Wal-Mart’s impact only indirectly. Epling’s business is Owensboro’s only men’s apparel store. He has
not been seriously impacted by Wal-Mart, he said, because The Earle competes in a higher-end market.

However even some higher-end retailers are expanding so they can move more merchandise, allowing them to charge lower prices –which eventually could affect The Earle. Epling recently heard from a customer that a Nashville Costco store was selling some sweaters retail at a lower price than he was paying wholesale for the same item. He asked the manufacturer and was told that the company had an unsold inventory of those sweaters and Costco offered to take all of them at a low price.

Wal-Mart’s influence is felt in other ways

Less clear than Wal-Mart’s effect on sales strategies of other businesses in Owensboro is what its influence will be in employee pay
and benefits and environmental matters. Nationally, Wal-Mart has been criticized for employing about a third of its workers part-time,
influencing other retailers to do the same. These employees may earn so little that they qualify for food stamps and Medicaid, costs borne by taxpayers. Reacting to that criticism, Wal-Mart recently improved its part-time benefits, allowing part-time employees to become eligible for health insurance after one year instead of two.

Wal-Mart also announced recently that to save expenses all stores will move toward solar energy and low-energy electrical use in general.

Aloma Dew an activist with the local chapter of the Sierra Club, praises Wal-Mart for such efforts but says Wal-Mart will remain a target of critics simply because its reach is so wide. While another major retailer might not treat its employees well or be very environmentally oriented (the Sierra Club argues that Wal-Mart contributes to counterproductive sprawl in local communities) Wal-Mart as the biggest retailer must be dealt with first, she said. In addition, attacking other retailers might backfire by weakening them while strengthening
Wal-Mart, she said.

Ultimately it may come down to what Wal-Mart’s customers are willing to accept. Kirkpatrick, of WaxWorks, praises Wal-Mart’s efficiency
and says he doesn’t blame it for negative impacts on other businesses.

“They are going to succeed not on what they do but what we, as consumers, do,” he said. “And we all shop at Wal-Mart.”

 

Wal-Mart Information on the Internet

www.wal-mart.com is the company’s source of information and is positive in its views about the company

www.wakeupwalmart.com presents a negative view of Wal-Mart’s business practices

www.aflcio.org/corporatewatch/walmart is recommended by the Sierra Club and deals with business and environmental issues

 

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