Wal-Mart winning over Chicago

Wal-Mart winning over ChicagoWal-Mart's battle to breach big cities is actually beginning to bear fruit. The behemoth's years-long attempt to open stores in Chicago is finally progressing. Wal-Mart is moving ahead withplans to open dozens of new locations within the city limits. If the "Chicago Community Investment Partnership" is successful, it could open the door for stores in difficult-to-enter urban markets elsewhere.

Wal-Mart has been trying to open discount stores in Chicago for years, but has met with stiff opposition from unions, politicians and some residents. One store did open on the city's West side in 2006, but plans for additional locations have been blocked by the City Council as members stump for votes from their own wards at the expense of those where Wal-Mart would seem most welcome, such as areas where some of the poorest Chicago residents live that offer few or no retail properties.

Wal-Mart could bring much-needed jobs and services to these communities. There are no small retailers to put out of business and vast wastelands of empty space that could be added to the city's tax rolls. But that won't happen until Wal-Mart makes concessions -- and, with the latest plan, it appears as if the retail behemoth is closer to making them.

It's an ambitious plan. The "Chicago Community Investment Partnership" aims to open several dozen stores in the city over the next five years. The company offers up five ways in which the plan will benefit Chicago:

  • Open several dozen stores across the city of varying size and formats, addressing Chicago's double-digit commercial vacancy rate and providing more convenient access to affordable groceries, especially those 600,000 residents living within Chicago's three, self-identified food deserts;
  • Create approximately 10,000 associate positions and 2,000 unionized construction jobs
  • Generate more than $500 million in sales and property taxes
  • Pay competitive wages at all levels
  • Develop charitable partnerships in Chicago worth $20 million
Wal-Mart has pledged to pay associates $8.75 an hour, or 50 cents more than the minimum wage mandates. It's still not enough to placate the City Council, more than half of whom are pushing for wages of $11 an hour, plus specified benefits.

Chicago's Mayor Daley backs Wal-Mart's entry and has from the beginning. However, it's the individual council members who are facing re-election next year that are blocking the deal. The unions back candidates and raise campaign funds, and anti-Wal-Mart sentiment plays well among the liberal constituents in many Chicago neighborhoods -- those neighborhood not considered to be food deserts, or in need of this kind of development.

For Wal-Mart, conquering Chicago is an important step in revving up growth and profits in its home country. With more than 4,100 stores and clubs in this country -- and close to 8,500 worldwide -- there isn't a lot of room for the retailer to expand locally. That said, it's been growing by leaps and bounds internationally, but the company just can't seem to get any respect as a global powerhouse from Wall Street. The company's stock price has been stagnant, hovering between $50 and $60 per share for the past decade as growth overseas continued full throttle. Wal-Mart is after all, a publicly-traded company and as such, its mission is to increase shareholder value.

If Wal-Mart is to grow in the United States, it must conquer urban markets, the last uncharted territory for the retailer. The plan has long been for Wal-Mart to open smaller discount stores of less than 100,000 square feet, paired with the smaller Neighborhood Market grocery formats for fill-in trips in addition to the less frequent stock-up trips to the larger discount center.

The trick was to develop the smaller formats to fit into denser areas where real estate is at a premium and to comply with zoning restrictions. Some municipalities have actually barred construction of stores 100,000 square feet or larger, and, at 99,000 square feet, Wal-Mart's units comply with these zoning restrictions.

But union towns like Chicago present an even bigger barrier than real estate. When paired with Chicago's infamous machine politics, Wal-Mart has a bigger battle on its hands than it would in many other locations, and Wal-Mart's efforts here are looked at as a bellwether for growth elsewhere.

If Wal-Mart can break into Chicago, it should be able to conquer other cities in short order.
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