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Wal-Mart to Focus on Building Stores in Struggling Communities

Posted on: Tuesday, 4 April 2006, 21:00 CDT

CHICAGO _ Starting with its new big box under construction in Chicago, Wal-Mart Stores Inc. said it will build 50 stores in urban neighborhoods distressed by high unemployment and other social problems in cities around the country.

Lee Scott, the company's chief executive, made the announcement Tuesday at the Austin neighborhood construction site of Chicago's first Wal-Mart store.

He said the new stores planned for inner-city neighborhoods over the next two years would create 15,000 to 20,000 new jobs.

"We will be bringing back about 400 jobs in this store," Scott said. He said the Austin store, like some urban stores elsewhere in the country, will have special programs to benefit local businesses, such as help with selling to Wal-Mart.

Local minority- and women-owned businesses will be sought out for construction work on the new stores, Scott said. The general contractor for the Austin store is an African-American woman and minorities and women were among those hired as subcontractors. The store is to open this summer.

Wal-Mart said it has not decided where it would locate the new stores.

"We have been approached in the past by Detroit." John Bisio, spokesman for Wal-Mart. "You could also look at communities in parts of Houston."

He said Philadelphia might also be a candidate.

Economists say an increasing number of businesses are recognizing that while residents of some urban neighborhoods may be poor, the density of population makes for substantial buying power.

As evidence, outlets for Staples, Old Navy, Harris Bank and Walgreens are located a short distance from the Austin store site.

Wal-Mart, the world's largest retailer, has faced obstacles to its plans for stores in Chicago, New York, Los Angeles and elsewhere.

In Chicago, for example, organized labor and other opponents helped block construction of a Wal-Mart on the city's south side. The retailer responded by opening a store in Evergreen Park, just outside the Chicago city limits.

Unions accuse Wal-Mart of paying too little and charging too much for health insurance. Scott said the average starting wage at the Austin store will be $10.98 per hour.

Critics say small merchants cannot compete with Wal-Mart's prices and that many of its employees end up on Medicaid because of low incomes and high insurance costs.

Until recently, Wal-Mart stores were more likely to be found in rural areas or suburbs than in the heart of major cities. But analysts say the company is now intent on locating in densely populated city neighborhoods, even those where household incomes are low and crime is high.

Joseph Beaulieu, stock analyst with Morningstar, said Wal-Mart realizes it must remake its image if it is to be welcomed by cities.

"They have had a hard time working with municipalities," Beaulieu said. "Over the past year and a half, they have shown increasing flexibility.

"They are going to have to change their reputation," he said.

In recent months Wal-Mart has begun promoting organic foods and announced it would hire a director of global ethics.

Scott said Wal-Mart will work on job creation and economic improvement in the neighborhoods served by the new stores. Wal-Mart will feature small businesses in advertisement in local newspapers, for example, and broadcast free advertising for them on its in-store radio network.

"I don't like to think it's about image," Scott said of the initiative. "What we want to do are things of substance."

Not everyone is convinced that Wal-Mart belongs in low-income neighborhoods, or anywhere else.

"You are talking about a company that has a more devastating effect on communities than any other in America," said Chris Kofinis, communications director for Wakeupwalmart.com, an organization sponsored by the United Food and Commercial Workers union. The union has tried and failed to organize Wal-Mart stores.

Kofinis said the company offers poverty-level wages and health insurance so expensive that few employees can afford it. He said Wal-Mart's focus on low cost products has helped outsource American manufacturing jobs to other countries where labor is cheaper.

But some Chicagoans don't seem put off by Wal-Mart coming to town.

"This was a good job for us," said Leona Thomas, president of Thomas Mechanical Corp., which is handling the plumbing work.

"We are a union contractor," said Thomas, who is black. Her company is located a few blocks from the Wal-Mart site and her business card includes the phrase: "A Minority/Women Owned Business."

Wal-Mart said it has received 2,800 applications for jobs at the Austin store.

Among those filling out application forms Monday were Geraline Brown and Linda Norwood, both employed part-time as city crossing guards.

"We need more money," Norwood said.

She said the city offers her benefits, but not enough hours. Wal-Mart offers many part-time jobs.

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(c) 2006, Chicago Tribune.

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Source: Chicago Tribune

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