January 2004

Evil Empire? Critics, fans debate Wal-Mart

By David Grant Long

“As Wal-Mart rolled out its franchises, it sucked commerce off Main Streets, destroying traditional retailers that had served their communities for generations. But in the face of the abundance Wal-Mart produced, in the form of new jobs, consumer savings and expanded trade, the loss of Main Street seemed an incidental price to pay.” — Edward O. Welles, from an article in Inc., July 1993

“Quite a few smaller stores have gone out of business during the time of Wal-Mart’s growth. Some people have tried to turn it into this big controversy, sort of a ‘Save the Small Town Merchants’ deal, like they were whales, or whooping cranes or something that has the right to be protected.”
— Sam Walton, from an article in Time, June 15, 1992

Last spring Wal-Mart, the company that the late Sam Walton grew from humble Arkansas roots to become the world’s biggest corporation, was named the most admired company in America by Fortune Magazine.

Last year it earned $244 billion in revenue from its 3,000 stores in the U.S. alone. In 1992, Walton was given the Medal of Freedom, the highest government award given to a civilian.

But lately Wal-Mart has been taking it in the chops.

A plethora of critics maintains the company exploits its employees, or “associates,” as they are called, by paying low wages and hiring many of them only part-time so they don’t qualify for benefits and thus become a strain on public services; that it undermines domestic manufacturing by filling its stores with cheaply made foreign goods; that it kills off competition by selling some items under cost; and, the most common complaint, that it runs smaller retail stores out of business.

None of the company’s 1.2 million U.S. employees are unionized, according to the Los Angeles Times, and a report found that, in 2002, Wal-Mart workers in California were 50 percent more likely to receive taxpayer-subsidized health care than workers at other large retailers.

In California, where Wal-Mart has plans to build 40 Super Wal-Marts similar to the one in Cortez, some towns have adopted ordinances that effectively shut out the company. An analyst hired by two city-council members in Los Angeles, which is also considering severe restrictions or an outright ban, concluded that allowing these giant retail/grocery operations to open could damage that sprawling city’s economy.

In return, Wal-Mart has vowed to fight to build more stores in California both in the courts and at the ballot box and is sponsoring referenda in some towns to open doors already closed by elected officials.

“We will not allow ourselves to be singled out and have separate rules apply to us that do not apply to our competitors,” vowed the company’s community-relations specialist there.

Company spokespersons defend its business practices by pointing out that the introduction of a Super Wal-Mart into a small town greatly increases the number of regional shoppers, which boosts sales-tax revenue and has a spillover effect that benefits merchants of all stripes.

They also defend its hiring policies, which, they say, enable many people who might otherwise be jobless to become more self-sufficient, actually lessening the demand for such public services as health care and food stamps. (Full-time associates qualify for health-care benefits after six months on the job, and part-time employees after two years, according to Bill Moyer’s PBS show “NOW.”)

So how has the local Wal-Mart supercenter affected the Cortez business climate? Do small businesses here see themselves directly competing with a hungry giant in some David-and-Goliath struggle? Is the downtown core of stores and restaurants shriveling on its ancient vines?

Or is Cortez better off economically than in its pre-Wal-Mart days when smaller stores served many of the needs now filled by the mega-market?

‘Pretty grim-looking’

Susan Keck, city manager from 1983 through 1991 and owner of Susie’s Hallmark in the heart of downtown Cortez for the past decade, weighed the pros and cons during a recent interview.

“In a small rural community, (Wal-Mart) will have a negative effect on the independently-owned business person downtown, because people tend to go there for everything,” Keck said. “So instead of going to the drugstore, like Wilson’s (a former downtown business whose owner once sued the Wal-Mart pharmacy over alleged prescription price-fixing), and coming in here for a card, and maybe going to Slavens (Hardware) to pick up a tool, people go there and buy all of it, so definitely it does have an impact.”

But when Wal-Mart first opened at Cortez Plaza in the mid-’80s, Keck said, the local economy was already suffering because the Dolores Project was near completion, and the construction workers who created one of the last major federal dam-building projects were leaving the area in droves.

“Sales-tax revenues were pretty low – they weren’t growing at all and there were a couple businesses that had closed anyway,” she said. “If you go back and take a look at pictures taken during the Centennial Parade in ’86 of downtown, it was pretty grim-looking.”

During city meetings about Wal-Mart’s plans to open its first store in Cortez, Keck said she doesn’t remember receiving any negative input from the business community directly.

“Some business owners later reported they were negatively impacted,” she said, mentioning Gambel’s, a now-defunct general-merchandise store that carried hardware. The owner said “it really affected them negatively,” she recalled.

But it wouldn’t be fair to attribute all the downtown vacancies in the ’80s to Wal-Mart, Keck said.

“There was kind of an attrition of businesses – people getting ready to retire, and the people involved in building the Dolores Project. Once those construction folks left town, things kind of quieted down.”

‘Both good and bad’

The opening of the Supercenter four years ago initially made a dent in her business, Keck said, but that didn’t last.

“The first few seasons of the store for Valentine’s Day and graduation, we were definitely impacted by that, and then the newness wore off, and (business) came back.

“Yes, we consider them competition, but we offer great customer service (and) do great with cards.” However, she added, “we don’t move a lot of gift-wrap. We have good-quality wrap and unique designs, but they have a lot less expensive wrap, so we have noticed an effect on that.”

Keck said that personal attention, such as locating specific merchandise for customers, taking phone orders and shipping purchases elsewhere, is an important part of her success.

“I think that sets small businesses apart from mass merchandisers,” she said. “That’s how you compete with them, you be more personable and give that service.

“You have to work for the business, and that’s a good thing. It keeps you aware that it’s the customer who counts.

“From that aspect,” she said, Wal-Mart is “probably a plus for the consumer.”

Wal-Mart’s effect on the city and business climate overall similarly has positive and negative aspects, locals say.

“In ’86, we saw an increase in the sales-tax revenue when the Wal-Mart got put in, so it was kind of a positive from that standpoint,” Keck said. “Additionally, the Cortez Plaza, which was anchored by Wal-Mart, was filled with other businesses.

“It was seen as providing people with more opportunities to shop.”

In fact, the city became so dependent on the sales-tax revenue from Wal-Mart that council quickly backed down when a controversy arose over the design of the new store.

When city planners tried to pass regulations – the infamous Gateway Ordinance – that would have required the building to look more like the Durango Super Wal-Mart instead of a plain concrete-block box, it took only Wal-Mart’s threat to build outside the city to squelch that notion.

Besides, a Wal-Mart representative argued at one planning meeting, the demographics are different in Durango than in Cortez, apparently meaning the people there are more upscale and deserved a building that reflected this.

The amount of sales taxes paid by any particular business is proprietary information, but educated guesses run upwards of $1 million in local sales-tax dollars that are generated from the store. Obviously, the company’s departure would have left a giant hole in the city’s general fund.

Overall, said City Manager Hal Shepherd recently, the impact of the Super Wal-Mart has been “both good and bad.”

“It makes it more difficult for small retailers that were here before Wal-Mart, he said. “The good thing it provides is drawing people from outside the city.

“If we didn’t have the Super Wal-Mart, I don’t think we’d get the visitors from Blanding, Monticello, Bluff and the Navajo reservation who make it a point to come here to do their shopping.

“Hopefully, they’ll do their shopping at Wal-Mart and then have dinner in one of our restaurants downtown. I think that actually happens. They’re buying gasoline here, they’re buying food at the restaurants, and they might stop at one of our specialty stores.

“So I think that’s a plus.”

Leaving a huge void

There’s no question that Wal-Mart, City Market and Safeway, lumped together under “grocery/retail” in the city’s revenue pie chart, collect a huge portion of the sales-tax revenue with which Cortez pays its bills. Combined, they account for nearly half – 46 percent – of the total, according to Shepherd.

By comparison, the next largest category – restaurants – collects slightly over 10 percent of the city sales-tax, and the “other retail,” wedge of the pie, made up mainly of downtown businesses, accounts for about 8 percent.

“Obviously there’s an impact any time a Wal-Mart comes in,” Shepherd said, “but in our case, I’m glad they’re (located) in the city limits. They do generate sales tax for the city and that covers general-fund activities,” including law enforcement, operation of the parks system and other essential services.

Shepherd said he’d visited several towns in the Midwest where the discount giant had located outside the city limits, devastating the existing businesses in town and lowering sales-tax revenue needed to pay for existing services.

For example, he visited one Indiana town close to a Wal-Mart that was built just off the interstate. “I drove on into town and every little store that used to be there probably 10 years ago is closed up and gone because Wal-Mart is on the outskirts.

“That’s a real disaster, because you don’t get the benefit of any of the sales tax that you could put to use in the town” to help small merchants survive, he said.

In additional to the retail-enhancement program, which promotes the town’s businesses regionally through radio and TV spots, Cortez spends $24,000 annually on a Main Street program that holds special events to draw people downtown.

“I think that’s money well-spent,” Shepherd said. “I’m certainly satisfied that we don’t have a lot of vacancies downtown like a lot of communities.” He pointed out that Canyon Sports, an outdoor-gear store, recently expanded and three new retail clothing stores have opened this year. Plus, the owners of a new bookstore/café where Goldie’s used to be have completely renovated the building.

The TV and radio ads seem to be bringing more people to town, he said, although this is hard to prove.

“I think that certainly showed in our September and October sales-tax revenue,” which increased around 5 percent over those months last year, he said.

But the fact that Wal-Mart left a huge void in the Cortez Plaza when it moved from there to open the supercenter troubles many citizens. Shepherd said one person recently asked him why the city allowed Wal-Mart to build a new store and let its old building stand vacant.

“We don’t control private property,” he said. “I don’t like it, and I don’t like it when Wal-Mart pulls out on all the small businesses (in the plaza). That’s one reason we started the retail-enhancement program, to advertise Cortez for the small businesses that can’t afford that kind of advertising (individually).”

One person with long-standing ties to the business community who wished to remain anonymous said the vacancies Wal-Mart creates when it relocates are a big problem because other businesses around it tend to move as well.

“I believe in the free-market system,” the person said, “and therefore Wal-Mart has the right to be anywhere, everywhere they want to and I wouldn’t ever try to infringe on that right.

“But I do see some downsides, particularly in small towns. We have a huge vacant space right now where Wal-Mart used to be, and it’ll be a challenge to ever got it filled. When Wal-Mart pulled out, that whole shopping center pretty much dried up.

“You’ll see that in small towns throughout the West and Midwest. When they vacate a store, that space tends to stay empty. Because they command so much traffic, other businesses, logically, will try to locate as close to them as they can, to benefit from it.”

Still, the person said, some businesses continue to thrive in spite of this overshadowing presence.

“One interesting example in our community is Slavens. It not only has successfully competed since Wal-Mart came to town, but they’ve doubled and doubled again in size. They don’t compete with them in price, but they carry higher-quality brand and have employees who are more knowedgable.

And the expanded marketing area has helped all the businesses, the person said.

“Our retail area is larger geographically than it used to be because of Wal-Mart, there’s no question,” the person added, “and that gives other retailers an opportunity to try to sell to those people those things that Wal-Mart doesn’t carry.”

Joe Paumen, who along with his wife Kerry opened the Optical Shoppe downtown in 1998, said although they compete with Super Wal-Mart’s optical department, there’s been no decline in their trade.

“When they first came to Cortez we didn’t have any loss of business – we kept gaining,” Paumen said, “but you can’t tell if we’d have gained more.”

He said the Optical Shoppe offers “better warranties, better service and better product, all the way around.

“Basically, Wal-Mart is for people who don’t like to compare anything,” he said, “that just want to go and be hypnotized into thinking Wal-Mart is always lower-priced.

“But it depends on what you mean by low. Low meaning buying a throw-away product once a year – in some ways, yeah, it’s cheaper,” he added, “but if you want your products to last more than a short time, then you should look around.”

Wal-Mart attracts consumers who consider only the price of an item, he said.

The new Wal-Mart has had some impact on most small merchants, Pausen said, but he didn’t know of any that had actually been driven out of business. He agreed that the downtown area has improved markedly over the 1980s when “there seemed to be an empty building every other store.”

$100,000 in donations

Brice Carruth, who’s managed the Super Wal-Mart since it opened, said he believes the store contributes to the town’s welfare in many ways.

It provides around 400 jobs, depending on the season, that pay an average of $10 an hour, he said, with three-quarters of those being full-time.

Carruth pointed out that Wal-Mart also contributes in a major way to local service organizations and animal-protection groups.

“This year we going to be right at $100,000 in donations for the community,” he said. Contributions include such items as clothing that’s been accidentally soiled and can’t be sold, and torn bags of pet food.

“A couple of the organizations have said if it wasn’t for us, they wouldn’t be able to stay in business because we give thousands of pounds of mainly dog food, but some cat food and different types of pet supplies – even bird seed, if (the bag) is broken.

“Actually, I had to get permission to do that,” he added. “Generally speaking, we throw it away, and I can’t see wasting it, especially when there are organizations that direly need it.”

Carruth strongly rejected the idea that Wal-Mart harms small businesses. He said he recalls when Wal-Mart was the “little dog” chasing the “big dog” of Kmart.

“It was like, ‘Wow, they’re about to catch them, go Wal-Mart, they’re so good,’” he said, “and then all of a sudden the title they give us is The Mom-and-Pop Killer, The Small-downtown Killer.

“In my experience, having been around retail since the ’60s, nothing kills a business – for the most part – except the business owners,” he said. “I personally don’t think we kill small businesses – the owners do from poor business (practices).”

And Wal-Mart has been a boon to consumers’ pocketbooks, he maintained.

“We’ve brought the price of retail across the United States down greatly in the last few years, and we’ll probably continue to do it,” he said.

Additionally, Carruth said, the presence of a Wal-Mart attracts other retailers.

“Businesses flock to where we are, try to get as close to us as they can.”

Donna Metzler, city manager in Moab, Utah, agrees that Wal-Marts can attract other businesses. “There’s a potential for complementary businesses to be created, for example specialty stores, restaurants and higher-end stores surrounding the Wal-Mart,” she said.

But that hasn’t happened in Moab because, so far, the city of 4,800, which is growing at 5 percent a year, doesn’t have a Wal-Mart.

The retail giant “has not made a specific effort to come here,” she said. “My understanding is it’s because the market area is not yet large enough.”

Instead, locals often drive to Grand Junction to visit one of its Wal-Marts.

Those people probably would welcome the presence of a supercenter, she said, but there would be others who would resist it.

“We also have a part of the citizenry that is not into the whole big-box look and they fear what it does to the community,” she said. Moab, in fact, has no big-box stores, the closest thing being an Alco.

“We have a certain character of our small businesses and they’re flourishing, and a lot of people want to see that continue,” she said.

But, she noted, many of those businesses are tourist shops or specialty stores that offer products different from what Wal-Mart would carry.

Carruth said Wal-Mart’s pluses outweigh its minuses.

“We do bring a lot of people to town,” he said, “and I and other associates send business to many small businesses in town,” for such items as sporting goods, hand guns and hardware that Wal-Mart doesn’t carry.

“I try very hard to keep the Cortez dollar in Cortez,” he said. “Some monies do go out of the community with Wal-Mart . . . but a great deal of it stays here. Our payroll is astronomical, it’s millions of dollars that stay here.

“Are we perfect? Far from it,” he said, “but we do try very hard.”

So like it or not, Cortez has become part of the “Wal-Mart culture” in which small businesses must figure out new survival strategies to keep their doors open and cash registers ringing.

In rural America, where many people are living paycheck to paycheck, the bottom line is that they will shop where goods are cheapest, regardless of whether those goods come from overseas or whether Wal-Mart employees are well-paid themselves.

And from the perspective of customers, the presence of the giant retailer in Cortez has another important benefit: Smaller merchants must become more sensitive to consumer appetites.

“You definitely have to try harder when you’re a small business and there’s a Wal-Mart,” Keck said. “You really have to be aware of what people need and what they want.

“You have to make it fun for them to shop,” she said, “and you have to work your tail off.”