When Wal-Mart Comes to Town

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The Bath merchants also came together for the Christmas 1992 shopping season, with 39 of them kicking in $220 each to fund a campaign promoting downtown as a shopping destination, the first time that had ever happened. They lit every tree in town. Sales in December were brisk. Bill King recalls how customers coming to his store told him how relieved they were to get out of the malls and do their shopping in the relative peace of downtown Bath.

The merchants' efforts even extended to some informal intelligence gathering. Some of them used the same contractors that had worked on the Wal-Mart construction. They tapped into that source to guess at a completion date for the building, so they could mount a preemptive ad campaign. They continued to comparison shop at Wal-Mart stores in New Hampshire, in the process getting thrown out for taking notes. They then started using concealed tape recorders activated by voice.

Wal-Mart could also play that game. Last summer it sent Don Shinkle, its vice-president of corporate affairs, to Maine for two weeks to soothe groups of local merchants. Jayne Palmer recalls few if any substantive answers to questions at the meeting she attended.

In late January 1993 the Holiday Inn in Bath received a call from Wal-Mart asking for a quote on 30 rooms for six weeks -- an obvious tip-off of the grand opening. Which six weeks, the motel asked? We can't tell you that, replied Wal-Mart, just give us a price.

Matt Eddy, the town planner in Bath, says, "Wal-Mart is exceptionally well organized. Before most people knew it was even coming to Maine, it had four or five building sites it had strong options on and was going through the simultaneous review-and-approval process."

Wal-Mart likes to move as quickly -- and as quietly -- as possible. That is understandable, given that wherever the retailer goes, it sends inevitable ripples through local economies. Developers and bankers become camp followers of Wal-Mart because they know that when the company puts up a building, it immediately creates value for miles around. Andy Rosenthal, a Maine developer who has worked with Wal-Mart, notes that typically Wal-Mart owns land until it has its building built -- then it sells the land and becomes a tenant. "That gives it control when the project is under construction, and flexibility once it's up," Rosenthal explains.

Wal-Mart thus recoups its investment and is on the hook only for its lease. Ken Stone explains the rationale behind that strategy: "If K mart comes into the market with a bigger store, you can bet your bottom dollar that Wal-Mart will soon find a place for a bigger store." He notes that according to Wal-Mart's 1992 10-K report, the company owns only 16% of the properties on which its Wal-Mart stores are located.

That is not atypical for large retailers, which are not, after all, in the land business. But Wal-Mart's tendencies implied a lack of commitment that worried people in Bath, many of whose families and businesses had stayed put for generations. Another troubling element involved the disjunction between how many jobs Wal-Mart claimed it would create and how many of those jobs were really only part-time -- as many as 60% by some estimates. "That creates a hidden cost to the community," asserts Jayne Palmer. She reasons that if Wal-Mart ends up "paying less than people can live on" and doesn't offer sufficient benefits, local taxpayers will simply end up subsidizing a ragtag work force.

Again, a high percentage of part-time jobs is not atypical in retailing, and Wal-Mart's Don Shinkle maintains that the company's work force is at least 60% full-time. But Wal-Mart hardly defines full-time in a conventional way. By the company's standard, any employee who works at least 28 hours a week is eligible for benefits -- and thus is considered full-time.

Beyond the Wal-Martspeak about who qualifies as a full-time worker, Bath had bigger things to worry about, namely, Wal-Mart's quest to vertically integrate the shopping experience. The traditional Wal-Mart discount store -- which powered the bulk of Wal-Mart's first $50 billion in sales -- can be seen as just the first of three waves of multibillion-dollar corporate growth. The second wave began in 1983, when the company entered the club-store/warehouse business, opening its first Sam's, which sold dry goods in bulk. Bill King recalls recently going into a Sam's and finding motor oil priced below what his distributor charges. That meant that Sam's, buying in significant quantities, had the power to "turn the market on itself," as King puts it. Retailers could simply bypass their distributors in favor of Sam's -- and Sam's could take revenues from local merchants on two levels: as a supplier at the wholesale level, and as a competitor at retail. Wal-Mart envisions being a $100-billion company by the year 2000, with the spread of Sam's stores to as many as 500 units fueling much of that growth.

And then there is the third wave of the Wal-Mart growth strategy, which could turn the corporation into a retailing colossus. That involves entering the $362-billion-a-year grocery market, which Wal-Mart has begun addressing through its Supercenters, combination discount stores and supermarkets. (The first of those opened in 1988, and today there are 35.) Also, in 1991 Wal-Mart bought McLane's, a grocery distributor with $3.7 billion in sales. In 1992 it bought the Phillips Cos., an Arkansas-based grocery chain with $290 million in sales. Taken together, those two acquisitions allow Wal-Mart to operate a controlled experiment and refine the concept before rolling it out nationwide.

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