When Wal-Mart Comes to Town

Another possible misstep involved advertising. Wal-Mart prides itself on its low advertising costs, the product of economies of scale realized, in part, by generating print advertising from Arkansas in the form of preprinted inserts sent to local newspapers or distributed via direct mail 13 times a year. But Dave Morse says that local merchants can outflank a monthly insert by setting ads on their desktops and getting them in the local paper weekly, to niche around Wal-Mart's less timely advertising and more centralized marketing strategy.

Wal-Mart's slow start in Rockland degenerated from there into strange financial dealings and growing employee discontent. The store was stringing out local suppliers for up to 10 weeks. Then, in April, the Rockland manager, Kevin Arnold, abruptly resigned. Wal-Mart's Don Shinkle refuses to specify if Arnold resigned or was fired. "That's a personnel matter." He does add, though: "Like any good business, we believe in paying our bills with a sense of urgency. Does that happen in each and every one of our stores? No, but when it doesn't, we react and respond as we did in Rockland."

Meanwhile, management in Rockland, in an effort to limit its labor costs to no more than 10% of sales each week, would summarily tell employees to go home, curtailing their hours, wages, and enthusiasm for their employer. When the local paper, the Rockland Courier Gazette, ran a story suggesting there was employee discontent at Wal-Mart, store managers turned the newspaper box outside the store face down on the sidewalk and called the paper to come retrieve it.

Back in Bath the merchants are sounding confident as the late-April opening of the Brunswick store approaches. John Hichborn at True Value Hardware notes that "people have to drive six miles past my door to get to Wal-Mart. I'd be surprised if I had this place up for sale in two years."

Craig Burgess sees "no massive door closings." He believes that in today's economy, people "crave service," something Wal-Mart can offer "only on a superficial level." Burgess envisions a pendular swing in retailing, away from price and back toward the level of service that existed after the war, when people bought clothing not from catalogs but from their local haberdasher, when milk arrived in glass bottles on the doorstep.

Mary Danzer, an editor at the local Bath weekly, the Coastal Journal, says that everyone she knows who has made the mini-pilgrimage to the Rockland Wal-Mart was underwhelmed. "Everyone came back and said, 'What's the big deal? It's just K mart with the stuff stacked a little higher.' "

That moves Danzer's thoughts to the macro if not the cosmic. "When you think about the 1980s, Wal-Mart matches the excess of that decade. People are now talking new values, and it takes a while before that translates into action, but the trend is definitely toward decentralization. Megagovernment, megainvestment, and megaretailing are going the way of IBM and Sears. And Wal-Mart will be the next white elephant."

When measured against Wal-Mart's phenomenal success, that kind of talk could be considered wishful thinking of the first order. Walter Loeb, a noted retail analyst, says, "Last year Wal-Mart did $55 billion in sales, and this year it's looking at $69 billion. Wal-Mart's an amazing company, powered by the dedication and drive of its management people. I believe it will continue to grow."

But to Bath merchants like Halcyon Blake, growth is not the issue: "We have to tell people that the Bath merchants are not just taking it all in. We have to focus on being good citizens and giving back to the community. We have to focus on making that story available to people -- not just making it available but stuffing it down people's throats.

"There's no argument that you can get a damn light bulb for 10¢ cheaper at Wal-Mart than you can at John Hichborn's hardware store. But do people know that John Hichborn is a major contributor to Elmhurst [a local trade school for the handicapped]? He works at finding jobs for people from Elmhurst. If Hichborn goes out of business because people want a cheaper light bulb, then you lose more than just the tax revenues that business generated."

In some strange way Bob Reny likes Wal-Mart. It gets his retailing juices flowing and reminds him how he has already seen a lot of retailers -- Sears, Penney's, Grant's, Woolworth's -- come and go, while he has steadily prospered. Reny has been in business 43 years, and he has withstood them all. But now, at 66, he finds himself confronted by a new force, perhaps more formidable than the others. "Wal-Mart thinks it's invincible," says Reny. "The problem is, it does not want just its share. It wants it all. A lot of small towns in the world need to survive. Wal-Mart comes and goes, but after Wal-Mart goes, there's nothing left."

But to Reny the moral of the Wal-Mart story is that as you sow so shall you ultimately reap, and in his view Wal-Mart has scorched the market. "The real secret is, if you step on a lot of hands on the way up, those hands won't be there to catch you when you come back down." He adds: "They're affecting our business, that's for sure, but we'll survive -- provided we can get communities to fight back and come together like never before. If not, a lot of people will get hurt real bad."

Follow Inc. magazine at @incmagazine

 PREV  1 | 2 | 3 | 4 | 5 | 6 | 7