STRATEGY

Small-Business Groups Assail Wal-Mart Program

The world’s largest retail says its new urban initiative is designed to help smaller competitors.
Advertisement

Small-business advocates and other Wal-Mart critics began mounting a counteroffensive against the world's largest retailer on Wednesday, following the announcement of a new program it says will help mom-and-pop competitors.

The initiative, which Wal-Mart CEO Lee Scott announced on Tuesday, will establish 10 Wal-Mart Jobs and Opportunity Zones in urban areas around the country. Each will be anchored by a Wal-Mart store and reach out to small businesses through development grants, local and in-store advertising, seminars on becoming Wal-Mart suppliers, as well as seminars on how to compete effectively.

The first zone is currently being built on the west side of Chicago, and will be accompanied by part of a $500,000 donation to local chambers of commerce from the Wal-Mart Foundation. Nine other locations will be announced in upcoming months.

The move comes as the Bentonville, Ark.-based company continues to struggle with public backlash -- over health care, hiring, and competitive practices.

Promoting the program as good corporate citizenship, Wal-Mart, which already employs more than 1.3 million Americans, insists that new urban locations will create jobs in minority communities and could produce as much as $100 million in tax revenue.

"We want to work even closer with small businesses to bring more economic prosperity to the surrounding neighborhoods, Scott said, stressing his commitment to minority- and women-owned businesses.

But critics claim the move is little more than a public-relations stunt.

"They are looking for a first entry strategy into urban markets, said Matt Lipsky, communications director for the Neighborhood Retail Alliance, a New York-based group. "They know their biggest criticism is their negative impact on small business and they're trying to cover that up.

Paul Blank, campaign director for WakeUpWalMart.com, a Washington, D.C.-based online advocacy group, said the initiative does not mark a shift for the retail giant. "In the face of a faltering public image, Wal-Mart seems determined to launch almost daily public relations stunts that speak loudly about change, but fall terribly short, he said in a statement.

Blank suggested that Wal-Mart "start addressing why so many of its employees are paid poverty-level wages, why hundreds of thousands of its workers and families are provided unaffordable health care or left uninsured, and why town after town must struggle with crime, traffic, sprawl, and the loss of both small businesses and good-paying manufacturing jobs.

A recent study by Civic Economics, a Chicago-based economic analysis firm, examined the impact of chain stores in Chicago neighborhoods, and found that 68% of money spent at local firms stays in the Chicago economy, in contrast to only 43% spent at chains.

Not only, as the study concluded, does the "replacement of local businesses with chains reduce the overall vigor of the local economy, but it often hurts minorities the most.

Dan Houston, a partner with Civic Economics, stopped short of calling the initiative simply a stunt, but questioned how realistic it is for a retailer to actually help competitors.

"I wouldn't say it's entirely a public relations campaign, but I am skeptical, Houston said. "It's hard to imagine Wal-Mart identifying a niche large enough for smaller businesses to take advantage of, and not wanting to move in itself.

Last updated: Apr 5, 2006




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: