The Urban Neighborhood Wal-Mart: A Blessing Or A Curse?
This is the first in a two-part story about Wal-Mart. Listen to Part 1 above, and tune into Morning Edition Thursday to hear Part 2.
The corner of First and H streets in downtown Washington, D.C., is a reflection of the changing face of the nation's capital. From here, you can see the Capitol dome, while across the street are a concrete public housing complex and a hip new Peruvian chicken restaurant.
You can also see a new Wal-Mart.
With wide, flat windows and exposed brick, it blends subtly into the surrounding urban architecture. The sleek building defies all stereotypes of the big-box store as most picture it: a monolith of consumerism, an island surrounded by the sprawl of a parking lot, tucked away in the suburbs.
That Wal-Mart chose to open a store in a rapidly developing urban neighborhood is indicative of where this company sees its future. More than 80 percent of America's population lives in cities. So while big-box stores are likely to continue opening in rural and suburban areas, Wal-Mart must go smaller if it wants to get bigger.
Most urban stores are 25 percent of the size of their rural and suburban cousins. They feature a slightly modified selection of products that caters more to a grab-and-go culture. That reflects a shift in consumer demand, as more Americans make their evening meal decisions in the late afternoon, says food industry analyst Justin Massa.
That's one reason freshly prepared foods are so important to Wal-Mart and its competitors like Target and other big grocery chains. And in densely populated cities like Washington, ready-to-go foods are even more of a focus.
"In some stores, we might sell lots of iceberg lettuce, for example," explains Dorn Wenninger, vice president for produce and floral at Wal-Mart U.S. "But in Washington, D.C., stores you might see us selling much more of prepared salads, or kits, or the full salad bistro bowls, which are really on fire."
An NPR analysis found that in 2005, none of Washington's 600,000 residents were within 1 mile of a Wal-Mart store. Today, almost 13 percent are. Chicago has experienced an even more dramatic transition. In 2005, only one-half of 1 percent of the city's 2.7 million residents lived within 1 mile of a Wal-Mart. Today, more than 22 percent do. (All estimates are based on 2010 U.S. Census population numbers.)
"Many of the areas they're moving into, they've been able to identify as 'food deserts,' " neighborhoods where residents have few options for fresh groceries, says Paul Trussell, an equity research analyst at Deutsche Bank who works in retail and big-box-store analysis. "Areas on the South Side of Chicago, for example, really stand out as places that Wal-Mart has found success — there's very limited competition."
Pushback in some urban areas has been fierce, however, including in Washington, D.C. And some cities, such as San Francisco, Seattle and New York, remain holdouts against the chain.
In the 1990s, when Wal-Mart was first expanding into rural areas, there were fears that large chains would overpower local businesses. Since then, a more complex dynamic has emerged in places where Wal-Mart locates.
Stores like the one in Robertsdale, Ala., a town with a population of 6,000, experienced little community pushback when the store opened six months ago. Mayor Charles Murphy sees Wal-Mart as a catalyst for other local and new businesses. "You're just building a bigger pie," he says. The store has already brought in state investment for infrastructure and has potential to reshape the local economy, he says.
Now that the company is moving into cities nationwide, the question becomes whether it has the capacity to reshape those spaces, too.
"Wal-Mart is very excited about this current neighborhood market store, and there is an opportunity for them to roll out hundreds of these boxes," says analyst Trussell. "That will certainly change the landscape of shopping and grocery — potentially as much as we saw [Wal-Mart] change the landscape 20 years ago as they started to roll out the supercenter model aggressively.
"Certainly, this is a story that we should all stay in tune and watch closely," Trussell says.
NPR's Uri Berliner, Debbie Elliott and Chris Groskopf contributed reporting to this story.
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Transcript
STEVE INSKEEP, HOST:
Wal-Mart is shifting its business strategy. The company is evolving over time, and when Wal-Mart makes a business decision, it matters a lot. Think about this; Wal-Mart is the third-largest employer in the world. It trails only the U.S. Defense Department and China's People's Liberation Army. In other words, Wal-Mart is the world's largest employer that does not operate large numbers of tanks and artillery. As the nation's biggest retailer, it influences what other retailers do. When Wal-Mart pushed down prices, its suppliers cut costs by moving overseas. And when Wal-Mart announced it would boost wages, competitors like Target followed suit. So we're going to spend some time examining Wal-Mart's past and future. This company, known for stores in small towns and suburbs, is pushing into center cities. Some local governments are pushing back. There was great controversy before Wal-Mart opened up two stores in Washington, D.C., a little more than a year ago. One of those two Wal-Marts is just down the street from NPR's headquarters in a changing neighborhood, and our colleague, David Greene, starts our story there.
DAVID GREENE, HOST:
I am standing right now in downtown Washington, D.C., at a street corner that really is a reflection of the changing face of the nation's capital. This is a place where power and poverty meet. And from right here, I can see the dome of the U.S. Capitol, and across the street from me, there's a complex of concrete public housing. There's kind of a sleek, new Peruvian chicken restaurant right there. And there is Wal-Mart. You can see skylights inside, and on the outside it's, you know, like, a four- or five-story building - very urban. This is defying all stereotypes of the big-box store we think about.
The fact that Wal-Mart chose a place on the cusp of change really gives you an idea of where this company sees its future. And for the next two days, we're going to explore different facets of Wal-Mart. It's America's largest retailer, and it sets trends for the country's economy and its workforce. Now, before we talk about the future, we need to remember how Wal-Mart became the powerhouse it is today, and largely that was in rural communities. Wal-Mart is still arriving in rural places, and we want to turn to one of those places where my colleague Debbie Elliott is right now. It's Robertsdale, Ala. Debbie is on the line. Hey, Debbie.
DEBBIE ELLIOTT, BYLINE: Hi, David. How are you?
GREENE: I'm well, thank you. So paint me a picture of where you are exactly.
ELLIOTT: So I'm in this small town. It's Robertsdale, Ala., population about 6,000 people. And I am sitting out in the parking lot where the garden department has sort of spilled out. There are pink, potted azaleas for sale. This is your typical Wal-Mart big-box store.
GREENE: Debbie, I mean, it was the sense that local mom-and-pop businesses would just go under whenever a Wal-Mart would come to town. Was that part of the debate in Robertsdale, that these low prices Wal-Mart charges would really drive local businesses out?
ELLIOTT: You know, it was not. The mayor here, Charles Murphy, met me in front of the store to talk a little bit about the impact. He says while there wasn't a huge political outcry, there was a little bit of concern.
MAYOR CHARLES MURPHY: Where we have seen the most competition that they have generated has been through the other two local grocery store chains.
ELLIOTT: On the other hand, Mayor Murphy says since the Wal-Mart opened here, other local stores have actually seen a bit of a bump in walk-in traffic.
MURPHY: Actually, what you're doing - you're just building a bigger pie. With the production of this store, probably on an average, they're pushing somewhere around 2,000 cars a day. So if you're a local business, then what you want to try to do is try to capture some of those customers that are coming to Wal-Mart to come to your business because now you've got something that stops them in Robertsdale.
ELLIOTT: Already you can sort of see how Wal-Mart is beginning to shape the economy here. There's construction underway in the outparcels here. I talked with Mayor Murphy about that as well, and he thinks that Wal-Mart can be a catalyst for new business. And in fact, it brought some state investment - a million dollars the state of Alabama put into improving the roadways around here. And when the mayor looks out over the new corner that's been put in here, he sees potential for more commercial development on the south end of his town. And that's all because the Wal-Mart came.
GREENE: Deb, you cover rural America often. I guess I just wonder, as you look back 10, 15 years, people were so concerned about losing the look of their towns when a Wal-Mart would come, small businesses would be driven out. The fact that it sounds like there are more people accepting of this, that you say large chains like Wal-Mart arrive and there's less opposition, what does that say about rural America today?
ELLIOTT: Well, I just think that the changes over the last 20 years have taken root, and people don't notice them the way that they once did. Now most people have probably shopped at Wal-Mart somewhere, even if not in their hometown.
GREENE: That's NPR's Debbie Elliott who is talking to us from a new Wal-Mart in the city of Robertsdale, Ala. Deb, thanks a lot.
ELLIOTT: Thank you.
GREENE: Now, as we mentioned, Wal-Mart is really trying to move into communities that look very different from the one that Debbie was just describing to us, and I'm standing in one of those places. We're in downtown Washington, D.C. This Wal-Mart looks entirely different. I'm standing here with NPR's Uri Berliner, who's been spending some time here. And, Uri, tell me what this means. What is Wal-Mart's strategy that brings them to a place like this?
URI BERLINER, BYLINE: Well, Wal-Mart, if it wants to grow, it has to be in big cities. It's saturated the small towns and suburbs of America. It's everywhere. But in Northeastern cities and West Coast cities, that's really where Wal-Mart has been blocked or it hasn't really established a presence in walking cities, in blue state cities.
GREENE: And this looks so different. We should say where we're standing. I mean, there's a bike rack here. It's like urban bike sharing. I mean, this neighborhood - it's just - it doesn't scream Wal-Mart.
BERLINER: Right. There's a Bikeshare. There's a Starbucks around the corner, a luxury apartment building. And one thing you'll notice is that people are walking into the stores on foot. You don't see that in your suburban Wal-Mart.
GREENE: All the differences, does that mean different challenges for the company as they come to places like the?
BERLINER: A lot of different challenges. There are challenges of design. There's challenges of political opposition that they might not face in a small town or suburb. And then there's challenge of, what do you put in the store? And, David, I've spent some time in this store, and why don't we meet some of the people I've met?
DONNA THOMAS: I got a rotisserie chicken (laughter) and a card and my prescription.
BERLINER: That's that Donna Thomas (ph). She's walked over to this Wal-Mart near Capitol Hill on her lunch break. Thomas is as an executive assistant at Comcast.
THOMAS: It's very practical for me, you know, because a lot of times when I - I don't have a lot of time to go shopping. So it's just convenient. I can just come in here, grab something and go.
BERLINER: We're living in grab-and-go times. Meals planned out days in advance - that's just not happening. Justin Massa is the founder of a company called Food Genius that analyzes data for the food industry.
JUSTIN MASSA: Depending on the version of the survey that you look at, somewhere between, you know, 70 to 80 percent of us don't know what we're going to have for dinner at about 4 p.m.
BERLINER: That's one reason freshly prepared foods are so important to Wal-Mart and its competitors like Target and the big grocery chains. And in densely populated cities like Washington, ready-to-go is even more of a focus.
DORN WENNINGER: So in some stores, we might sell lots of iceberg lettuce, for example.
BERLINER: Dorn Wenninger is vice president for produce and floral at Wal-Mart U.S.
WENNINGER: But in the Washington, D.C., stores, you may see us selling much more of prepared salads or kits or the full salad bistro bowls, which are really on fire.
BERLINER: Back at the store, Morgan Jones (ph) is buying one of those prepared salads. It's Southwest-style, marked down to $1.99 from $3.98. Yep, he likes the price.
MORGAN JONES: You go to the store - this costs you $10 in a restaurant. It's a good deal, $1.99 - probably my lunch and my dinner. It's a lot of it. It's a lot of lettuce and stuff, and it's really nice.
BERLINER: Jones is studying hospitality at a local committee college. His verdict on Wal-Mart - salads, nice; labor practices, not as nice.
JONES: There's a lot of problems. Sometimes they don't treat the cashiers right. They don't treat them right here. So, you know, they won't talk about it, but they don't treat the people right here sometimes.
BERLINER: In this way, Jones is like many Wal-Mart customers. Any qualms they may have about worker pay or Chinese imports or Wal-Mart's obliteration of the mom-and-pop store downtown, they're outweighed by those low prices.
JONES: I think it's a good deal. They need to treat the people a little bit better here. But other than that, it's a good deal.
BERLINER: As Wal-Mart seeks a stronghold in big cities, it needs to do more than offer good deals. The company has plenty of competition, and not just from dollar stores and grocery chains. Wal-Mart is battling it out with restaurants, where, according to Justin Massa of Food Genius, Americans are spending half of their food dollars.
MASSA: If you look in dense, urban areas, you will see that kind of split between grocery and restaurants go from, you know, roughly 50/50 to, you know, 70/30, 80/20 in favor of restaurants.
BERLINER: And in big cities, Wal-Mart must cater to a different kind of customer, customers arriving by foot or bus, customers with smaller refrigerators and not much storage space, customers like Chi Fei Xie (ph), a law student at Georgetown. He's a buying just what he can carry back home, five minutes away.
CHI FEI XIE: Just some salad, some bananas, yogurt, milk, cereal and some ramen noodles.
GREENE: That last voice there, one of the customers NPR's Uri Berliner met inside the Wal-Mart here in downtown Washington, D.C. I'm standing with Uri outside the Wal-Mart. And, Uri, really, totally different territory, different questions for this company in a place like this.
BERLINER: A lot of challenges here - customers coming into their stores on foot, buying fewer items at a time, customers who walk away from the store with their groceries in a backpack instead of a car or an SUV - very different kind of customer here.
GREENE: And fierce opposition when Wal-Mart has come into cities. I mean, like, they were used to facing it in the past, but a different kind here, right?
BERLINER: There was a big fight to get two Wal-Mart stores into Washington, D.C. And there are several cities, like Boston and New York and Seattle and San Francisco, where there are still no Wal-Marts. There's often a fight, especially when Wal-Mart comes into big cities.
GREENE: And some of those fights have been about jobs. And we're going to hear about that on our next installment on Wal-Mart as our reporting goes on. NPR's Uri Berliner, thanks a lot.
BERLINER: You're welcome, David. Transcript provided by NPR, Copyright NPR.
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