- The Washington Times - Tuesday, September 23, 2003

BENTONVILLE, Ark. - Wal-Mart’s town is becoming the new global business address. Hundreds of name-brand suppliers are opening offices and sending top representatives to the Bentonville area to be near the retail titan and, they hope, win a bigger chunk of sales from the nation’s largest vendor of DVDs, books, groceries, toys and a host of other products.In the process, they are creating a nucleus of corporate America and white-collar life in a corner of Arkansas long known for poultry farms and Civil War history.They also are reshaping the retail business relationship elsewhere, as companies take away concepts and practices that change how they do business within their own firms and with others.Just as some local residents are bristling at rising property taxes and increased traffic, some industry experts worry about a power imbalance, with Wal-Mart at the apex. But so far those concerns are doing little to moderate a missionary-life fervor among those absorbing the Wal-Mart way of business.”This has helped us reinvent our company,” said Tom Muccio, president of global customer teams at Procter & Gamble, the first supplier to open an office in the area, in nearby Fayetteville in the late 1980s. Now it has more than 200 people here.Over the past few years, P&G; has established offices near some of its other key retail customers, such as Costco Wholesale Corp. It has begun duplicating initiatives created with Wal-Mart, such as shipping display-ready cases to cut down on store labor costs.Another big presence is Kraft Foods Inc.The burgeoning vendor community is a testament to the enormous power of Wal-Mart Stores Inc. — which made $244 billion in sales last year — to attract the corporate elite to a region that’s still perceived as a backwater.Levi Strauss & Co., which sells a line of jeans to the discounter, has just set up shop. Walt Disney Co., wanting to bring back the magic of Winnie the Pooh and other characters, doubled its office space this past summer and relocated the head of retail-business development from Los Angeles to nearby Rogers.Ocean Spray Cranberries Inc.’s business with the discounter in the noncarbonated juice category has almost tripled to 11 percent since establishing an office in the area in 1998.The notion of suppliers getting close to big-money clients isn’t new. Subcontractors long have huddled around aerospace giants like Boeing.But Wal-Mart’s vendor community in northwest Arkansas seems to be taking things to a whole new level. Some worry it has gone too far.”I applaud this Wal-Mart-vendor partnership, but I think it’s getting uncontrolled and creates an economic and competitive imbalance that could cause the collapse of up to half of the U.S. chains in the next decade,” predicts Burt Flickinger, managing partner at the consulting firm Strategic Resource Group in New York.”Vendors cannot afford to do what they do for other stores, and these other stores are not getting their fair share” of staff support, he said.No one knows the exact number of Wal-Mart suppliers in the area. Raymond Burns, who heads the Chamber of Commerce for the nearby Rogers-Lowell area, estimates there are 500 to 600. That’s up from about 200 only two years ago.Based on the demand for new office space, the total is likely to be 1,200 within three years.That is not including the 200 companies that supply the main vendors, including packagers like Smurfit-Stone and New Creature, Mr. Burns said.Wal-Mart has more than 20,000 suppliers. As more of the biggest — or most ambitious — of them move to the Bentonville area, their offices are stretching out in a 20-mile radius from Wal-Mart’s own drab brick headquarters. Many are filling new high-rise clusters, a big difference from the strip centers that were rented in the past.In 2005, two 16-story office towers, the tallest in northwest Arkansas, will open in Rogers. Half the space is expected to house Wal-Mart suppliers, according to Bill Schwywart, a partner at the Pinnacle Group, which is developing the project.These satellite offices become messengers of a corporate culture that shrewdly focuses on squeezing costs and getting the lowest price for the consumer. Some companies like Nestle post specific sales goals for Wal-Mart at their entrances.Wal-Mart isn’t the most loyal partner, but many companies say their Wal-Mart account is the most profitable because the discounter pushes them to squeeze fat from their operations, saving them money on all their accounts.And while Wal-Mart’s competitors have tried to duplicate Wal-Mart’s computer systems that offer the most updated data on vendors’ business at their stores, suppliers say most are far behind.”Wal-Mart’s tools are phenomenal, and they are at a different level,” said Anton Rabie, president and co-chief executive of Spin Master Toys in Toronto, which has doubled its business with Wal-Mart since opening an office here a year ago. “They have changed the relationship between the supplier and retailer, because the tools are so strong. They make you more accountable, but that is a good thing.”Wal-Mart officials said the company neither encourages nor discourages companies from coming to the area.”There are lots more vendors not here that still have a very good relationship,” said Jay Allen, a company spokesman. “It’s not about geography.”

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