Wednesday, September 22, 2010

Wal-Mart's Stealth Plan for New York

The Observer (and welcome Matt Chabon) is reporting on the renewed effort by Wal-Mart to penetrate, with smaller stores, the last frontier-New York City's neighborhoods: "Among the laments for the Death of New York is the disappearance of many of the mom-and-pops that once lined the city's streets. As bank branches and pharmacies and Marc Jacobses have descended on the city, the small-time merchants have fallen prey. Now they may be facing their biggest threat yet, as Walmart tries once again to plant its bottom-dollar flag in the city. And this time the world's largest retailer just might succeed."

And why's that? According to the Observer, the Walmonster has been educated by its successful effort to build in the Second City: "If the company follows the same model it did to finally crack Chicago, perhaps Walmarts could soon be as prevalent as Duane Reades, or at the very least Traders Joe."

Here's how it succeeded there: "Three things helped Walmart succeed against opposition from labor unions and liberal alderman in the Second City. First, it argued it was creating desperately needed jobs (albeit ones of debatable quality or compensation), which means the downturn is probably the perfect time for its latest move. Second, the retailer hitched its store to a larger development on the outskirts of the city, which gave it the ability to claim it was creating not only jobs for the economically depressed Far South Side but also much needed affordable housing and services in a veritable food desert. This also gave the project the imprimatur of a developer with local political connections and clout. Third, and perhaps most crucially, Walmart pitted the construction unions, who were desperate to build the store, against the retail unions, who feared the impact it might have on its members and the city at large."

Well, there's a reason why they call Chicago the Second City-and being sold a bill of goods by the Walmonster underscores how different it is from the Big Apple. The Observer admits this dissimilarity: "Whether this success can be duplicated here in the five boroughs remains to be seen. Consider that no less a developer than the Related Companies, with the backing of the construction unions and the mayor, recently failed with its plans to redevelop the Kingsbridge Armory. Granted, that project lacked a Walmart, but it still had a non-union grocery store that was opposed by the community and the retail unions, a defense that will no doubt be mounted once again when Walmart makes its plans clear. But unlike Kingsbridge, Walmart need not be tied to a single location. The company may well find a councilman more sympathetic to a new store, especially a smaller one, in a more desperate corner of the city. And it can probably expect the support of the mayor."

A few thoughts here. In the first place, the key variable will always be the zoning status-and size plays into this. If Wal-Mart can find an as of right location for any store then size doesn't matter. On the issue of a location that will need a special use permit-and any store over 10,000 square feet in an M-Zone will need such a permit-we don't believe that the support of a local council member will prove to be insurmountable by the anti Wal-mart forces; at least not if the opposition of Speaker Quinn remains as strong as it is today.

And the defeat of the Armory plan-sans Wal-Mart-surely isn't a harbinger of any successful foray by Wal-Mart into the city, since it was never clear (in spite of what the Observer says) just what large food retailer was going to tenant the Armory site. If Wal-Mart had been proposed for Kingsbridge, there wouldn't even have been a fight-it would have been an immediate non-starter.

That being said, it looks as if the retail giant is getting serious-and we are prepared, as the Observer points out, to meet it head on: "The Neighborhood Retail Alliance has already expressed dismay at the news: "So, while the more virulent manifestation of the Wal-Mart disease may rear its ugly head—in the form of a supercenter—at the Gateway Mall in East New York, the generalized illness appears ready to metastasize into NYC's neighborhoods." The group has vowed to mount a vigorous challenge to the new plans, as they have before."

There are some of our fellow anti-Wal-Mart stakeholders who don't see Gateway as a real future Wal-Mart location; but having done this work for three decades my only advice is, to be forewarned, is to be forearmed; and any dilatory behavior could have serious negative consequences. If the Gateway site actually does materialize, allowing Wal-Mart to get up a head of steam could prove to be deadly.

But the battle seems about to be engaged, and if all of the anti-Wal-Mart forces remain coalescent, the Walmonster will soon realize, to paraphrase the Wizard of Oz, they're not in Kansas (or Chicago) anymore.