When Wal-Mart Comes to Town

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In the process of understanding the Wal-Mart phenomenon, Stone began advising local merchant groups on how to parry the retailing giant's thrusts. In that capacity he has traveled to every state in which Wal-Mart now has a store.

Two years ago Wal-Mart announced it was entering yet another state -- Maine -- building about 12 stores there, all to open within about 15 months. The number of stores occasionally expanded to 15, inevitably the product of Arkansas secrecy and Maine rumor. The sites shifted, as did the opening dates. But what emerged for sure was that Wal-Mart would build on the outskirts of Brunswick, about 6 miles west of Bath; in Rockland, 45 miles to the north; and in Auburn, 30 miles northwest. Bath would not come under siege on its eastern flank, as Wal-Mart had yet to float an offshore platform on which to put a store.

Bath, Maine, is a predominantly blue-collar town dominated by shipbuilding, a trade embodied by Bath Iron Works (BIW), whose giant cranes loom above the town, competing with the church steeples that pierce the sky. BIW has been building ships for the navy since World War I, and before that Bath's shipyards built many of the great clipper ships of the 19th century. In 1890 Bath was the fifth-largest shipbuilding center on the East Coast. Today it is a sleepy town of 10,000.

With defense cutbacks, BIW, which once employed 10,000 people and drew workers from as far away as 100 miles, has been in slow and steady decline for the past 10 years. Into that void there have stepped -- to some degree -- specialty retailers who have scratched a living from the spartan Maine economy. The specter of decline recedes in downtown Bath, with its occupied storefronts, brick sidewalks, and street lamps harking back to the gaslit days.

The prospect of a Wal-Mart opening just six miles away, on the outskirts of Brunswick, divided Bath's business community. On one side, a comfortable old guard looked at the traditionally high occupancy rates in Bath's busy downtown and wondered what all the fuss was about. "There was a fear on the part of some people that if you talked about something negative, it would make everything negative," says Jayne Palmer. "We, on the other hand, saw Wal-Mart's coming as the catalyst that would mobilize and organize the downtown merchants."

Palmer and Bill King, the owner of RVI, which sells motorcycle and snowmobile accessories, led the faction that split off from the chamber of commerce to form a new, more activist group, the Bath Business Association (BBA), which claims 75 members. "Wal-Mart is a threat to every small business in Bath," says King. "That's not to say it's going to put everyone out of business, but there are certain things you have to do or else it'll kill you." He immediately went out and bought some Wal-Mart stock. "I started photocopying its quarterly P&Ls and bringing them to our meetings just to scare people."

Bob Reny, who had spent four days trooping through Wal-Marts in Florida, came to Bath to speak before the BBA about the company and its tactics. The association also organized two exhaustive four-hour sessions in the face of Wal-Mart's imminent arrival, which amounted to sort of a plumbing of the civic soul. "Each of us had to make a commitment of what we were willing to do to make the community move forward," recalls Halcyon Blake.

In the spring of 1992 Ken Stone came to Maine to address merchant groups from towns in the path of the Wal-Mart advance. His advice was simple and direct: don't compete directly with Wal-Mart; specialize and carry harder-to-get and better-quality products; emphasize customer service; extend your hours; advertise more -- not just your products but your business -- and perhaps most pertinent of all to this group of Yankee individualists, work together.

In 1992, after hearing Stone's pep talk, Jayne Palmer increased her advertising budget by 30%. She computerized her inventory and tied her system in with General Electric Credit, enabling her to order GE products direct from the company and save money by getting better terms. She extended her hours and eased credit to customers. She created a room in her store where people could watch TV while their children played on the floor. She cut back on the low end of her inventory, knowing Wal-Mart could always undersell her there.

John Hichborn, who operates the True Value Hardware store in Bath, which had been in his wife's family for four generations, felt he was well positioned -- even though Ken Stone's Iowa data showed that hardware stores took a huge market-share hit, minus 30.9%, when Wal-Mart came into the state. "Our customers know our inventory and are responsible for it," says Hichborn. People had been coming to the store for generations and apprising Hichborn of their hardware needs, and there they'd always find employees who knew the inventory. "Each department is run distinctly with two employees responsible for all decisions within it, including purchasing and merchandising," says Hichborn.

Craig Burgess extended the hours of the family market and stepped up promotions. "It's important that we keep on emphasizing the low prices we do have," he says. He claims that Wal-Mart creates the illusion that it always undersells the market, based on a handful of heavily marketed items at rock-bottom prices, but that the rest of Wal-Mart's inventory is not all that competitive on price. He says that if customers perceive that Wal-Mart consistently undersells specialty retailers, those retailers are as good as dead.

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