The Wal-Mart Debate

January 3, 2011  |  

By Brittany Hutson

The race is accelerating between big-box retailers to seize valuable real estate in inner cities and attract potential consumers. This move is being fueled by the opportunity to tap into underserved urban areas, a market that is reportedly worth $100 billion annually. The trend gained momentum within the past year since options for retailers in the suburbs—once prime territory for cheap and ample space to open locations in shopping centers and strip malls—have been exhausted.

There are at least a half-dozen retailers that are setting their sights on urban neighborhoods, according to Businessweek, including CVS, Walgreen, Supervalu, Family Dollar Stores and of course, Target and Wal-Mart. Retailers are banking on their strategy of introducing smaller stores that can provide diverse merchandise and fresh food to areas that have had limited access to such options in order to appeal to new customers. But not everyone is feeling hospitable about having a big retail chain as his or her neighbor. Out of all the retailers participating in this aggressive move, the most controversial player has been retail giant Wal-Mart.

Along with their competitor Target, Wal-Mart plans to open between 30 and 40 stores across the country, particularly in Los Angeles, Seattle, Washington D.C., Chicago and New York. Wal-Mart’s stores will be smaller than their SuperCenters, which are typically 195,000 square feet; future plans for urban neighborhoods could see stores running as small as 30,000 square feet.

Though fans enjoy the retailer for its low prices and merchandise variety, for those that live in New York City and travel to the suburbs of New Jersey and New York to patron the store, many would prefer that it maintain its distance in its suburban home. Wal-Mart is no stranger to resistance because this is their third attempt at entering the New York City market. Previously, the retail giant tried to propose locations in Queens and Staten Island. Though it is now evaluating locations in all five of the city’s boroughs, Wal-Mart is specifically closing in on the Jamaica Bay neighborhood of Brooklyn.

The retailer is a complex case study because all of the opposition they face falls on what initially sounds like the best thing going for them—low prices. “You can pretty much be guaranteed as a shopper that you’re getting the lowest price you can in the marketplace,” said Jim Joseph, marketing expert and author of The Experience Effect. “The problem is what Wal-Mart has is an infrastructure that is built around low prices so nobody can really compete, particularly in an urban area where there are a lot of small businesses.”

Gotham Government Relations, a firm that represents small to medium sized grocery stores throughout New York City, is greatly opposed to Wal-Mart’s entry because not only will they “drive a dagger into the heart of the entrepreneurial spirit” of the neighborhood, but will also fail to provide worthwhile employment , according to David Schwartz, Esq., a representative of Gotham.

“Wal-Mart takes away good union jobs with full benefits and replaces [them] with minimum wage jobs, no benefits, no healthcare and an inability for employees to support their family and provide for children,” he says.

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