- The Washington Times - Sunday, February 25, 2007

CHICAGO

Baggy clothes and Mexican CDs line the aisles. Catfish bait and automobile decorations sit on the shelves. A local restaurant serves up fried chicken near the checkout stands.

After blanketing rural America, Wal-Mart is pushing into big cities with a new strategy: catering to local shoppers — in this case, black and Hispanic customers in a West Side Chicago neighborhood — while making efforts to help other local businesses survive.

A lot is riding on Wal-Mart’s success at this store, which opened in September, both for the struggling neighborhood and the company.

Chicago is the biggest city that Wal-Mart has entered, but it did so only after a long battle over worker pay and benefits and concerns that it would crush local businesses. They are the same issues that have dogged Wal-Mart for years and prevented it from cracking New York City and other markets.

The retail giant has long been criticized by union-backed groups, who say the company pays poverty wages, runs small businesses out of town and pushes employees onto tax-funded public health care. Wal-Mart denies those accusations.

“Wal-Mart has to show that it is willing and committed to forming a true relationship with that [Chicago] community that goes beyond a big retailer that sells socks cheaper than anybody else,” said Steven Silvers, a corporate reputation management analyst with consultant GBSM Inc. in Denver.

Francisco Soto worries whether such a relationship will happen, or whether so many customers will go to Wal-Mart that he will be driven out of business.

Mr. Soto, who owns Midwest Audio, less than a block from Wal-Mart, said that during the holiday shopping season, Wal-Mart sold television-radios for $25 less than he paid for them.

“That’s my bread and butter,” Mr. Soto said. “I don’t know what my future here holds.”

Wal-Mart insists that it can help both businesses and residents in a community where the unemployment rate is in double digits, noting that 15,000 people applied for 400 jobs there.

To prove it wants to be a good neighbor, the store caters to local residents and says it has a plan to help other businesses.

It carries a wide selection of items such as clothing, music and foods favored by blacks and Hispanics, who account for 90 percent of the customers, manager Ed Smith said.

The aisles are wider than in many other stores because people here often shop in large family groups, said Mia Masten, a Wal-Mart spokeswoman in Chicago. Signs for various sections of the store are in both English and Spanish.

The Uncle Remus Saucy Fried Chicken restaurant is another nod to the neighborhood, Ms. Masten said.

“We were the first store to open to have a local restaurant from the neighborhood come into our store,” Ms. Masten said.

The restaurant was one of the first things Patricia Wright noticed when she walked inside the new Wal-Mart.

“The fact you have an Uncle Remus here, you wouldn’t find one … in the suburbs,” said Ms. Wright, 44, of Chicago.

The store, included in the “Wal-Mart Jobs and Opportunity Zones” initiative announced in April, bought ads in local newspapers for two hardware stores, a bakery and other small businesses and will produce ads for the same five businesses to be broadcast over the in-store radio feed. Last week, Wal-Mart announced that the program would expand to nine more stores in other cities’ economically struggling areas.

“We want to work with them in partnership to revitalize their business,” Mr. Smith said.

Critics say the program is simply a publicity stunt.

“The idea that a giant company is going to teach small companies to compete with it seems ridiculous,” said Nu Wexler of Wal-Mart Watch, a union-backed organization.

Others say the program is the kind of thing Wal-Mart needs to do.

“Wal-Mart knows there are enough people who don’t go there because of its reputation,” said Mr. Silvers.

Although Wal-Mart said it would hold seminars for Chicago businesses, Mr. Smith said, he doesn’t know whether that has happened. The store has not begun selling products by local vendors, as officials promised before the store opened. They say applications from local vendors are being analyzed.

Author Charles Fishman said Wal-Mart must be careful to deliver on its promises.

“If they don’t, rather than helping the community they simply increase cynicism,” said Mr. Fishman, who wrote “The Wal-Mart Effect: How the World’s Most Powerful Company Really Works and How It’s Transforming the American Economy.”

Just how the new Wal-Mart and its strategy will affect local businesses in Chicago remains to be seen.

A few businesses have closed or are in the process of closing, but they are primarily clothing stores that barely were surviving before Wal-Mart opened, said Pete Schmugge, executive director of the North Pulaski-Armitage Chamber of Commerce.

“Wal-Mart was basically the final push,” he said.

Top Line Fashion, a tired-looking store a few blocks from Wal-Mart, is about to close.

“The economy [has] not been good the last year,” said owner Chung Yoo, adding that she knew her store was finished when she walked into Wal-Mart and saw the lower prices.

Even those whose businesses aren’t in immediate danger are worried — including some who got free advertising from Wal-Mart.

“It scares me,” said Norman Delrahim, who has owned B&S; Hardware for 25 years. “But I’m happy to get those ads. Hopefully, they’re going to help us.”

Emma Mitts, the alderman who pushed successfully for the Wal-Mart to be built in her ward, said there are signs that Wal-Mart is encouraging other business to come to the area.

“I can see the retailers and developers want to come in,” said Ms. Mitts.

Various companies — including Starbucks, which Ms. Mitts said will build a coffee shop in the area — say they don’t comment on reasons for locating in particular areas. Starbucks did confirm that it is looking in the Chicago neighborhood.

Anybody who has been to the store, particularly on the weekends, can’t miss the traffic jams out front and packed aisles inside. The fact is, said Mr. Silvers, Wal-Mart is a well-established anchor tenant, and smaller companies don’t agree to build in an area until such a tenant is in place.

“That was the attraction for them,” said Camille Lilly, executive director of the Austin Chamber of Commerce on the city’s West Side. “They wanted to have an anchor such as Wal-Mart.”

What happens next will be of interest far beyond the city limits, said Mr. Fishman. When Wal-Mart wants to “move into an urban area where it hasn’t been or encounters resistance, city officials will immediately say: ‘How’s that Chicago store doing?’ ” Mr. Fishman said.

For Mr. Soto, the question is whether the other retailers will experience the same kind of traffic — and shoppers — that Wal-Mart has now: the kind who pass them by on their way to Wal-Mart.

Shoppers like Josephine Gatling.

“I don’t have to be going to all the stores,” said Ms. Gatling, who lives five blocks from the store, as she wheeled her cart through Wal-Mart. “Everything I want is here.”

Mr. Soto isn’t waiting to find out whether his store dies or survives.

“I opened up a second location [in neighboring Cicero] because of Wal-Mart,” he said. “I can sleep at night now.”

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