Advertisement
News

INVASION ON THE RETAIL FRONT Stores in 4 Md. counties facing a challenge from the No. 1 chain, Wal-Mart

PRINCE FREDERICK — PRINCE FREDERICK -- After Phil Weiner paid his first visit to a Wal-Mart store last month, he ruefully remarked to his fiancee that he might as well hang it up.

As he wandered through the football-field-size store in York, Pa., the 33-year-old owner of the Ben Franklin store in Prince Frederick took it all in with the trained eye of a veteran retailer. He noticed the wide aisles, the bright lighting, the well-stocked shelves, the helpful staff. He checked the prices and found that some were lower than what he pays wholesale.

Advertisement

"I was a little awe-struck," he recalls.

But Mr. Weiner quickly shook off the jitters. And now he's preparing a strategy to meet the biggest threat of his retailing career: the 91,440-square-foot Wal-Mart store that is rushing toward completion a half-mile up the highway in this quiet Southern Maryland county seat. He's changing his product mix, planning special services and actively seeking the market niches that Wal-Mart won't fill.

Advertisement

The challenge Mr. Weiner faces is one that will confront retailers big and small throughout Maryland in coming years. Wal-Mart -- the best-loved (by consumers), most-loathed (by competitors) and largest retailer in the nation -- is launching what may be the most awesome invasion of Maryland since the Civil War. Retailing may never be the same here.

The Prince Frederick Wal-Mart, scheduled to open in November, is in the vanguard of the Wal-Mart advance, along with stores in Hagerstown, Easton and Waldorf.

Wal-Mart Stores Inc. will not discuss its plans beyond those four locations. But within three years, the Arkansas-based discounter will almost certainly plunge into the heart of the Baltimore-Washington region.

A store in Bowie has already received preliminary approval from the town government and could open in late 1992 or in 1993. In Howard County, the chain wants to rezone land at U.S. 40 and U.S. 29 so it can build a Wal-Mart store and a Sam's Club, Wal-Mart's fast-growing membership club affiliate.

In Anne Arundel County, it is looking at a site across from Annapolis Mall in Parole for a Sam's outlet. And in Harford and Frederick counties, Wal-Mart has been scouting sites, according local real estate brokers.

Some of these reports may be what Wal-Mart spokesman Don Shinkel calls "Elvis sightings," but Wal-Mart's invasion is unlikely to stop with a half-dozen stores. If reaction to the first four stores is favorable, he said, "certainly our presence in the state of Maryland would be several times what it is now."

He could not think of any states where reaction had not been favorable. Neither can anybody else.

"Our customers love us"

Advertisement

Most Americans know Wal-Mart well.

From its original stronghold in the South, Wal-Mart swept across the Midwest and West in the 1980s to pass Sears as the nation's largest retailer in 1990, with $32.6 billion in sales its last fiscal year. Meanwhile, the value of its stock has grown thirtyfold the past 10 years, giving its founder and chairman, Sam Walton, a fortune second only to that of the sultan of Brunei, according to Fortune magazine.

And it all happened before Wal-Mart sold a stick of gum in the Northeast. Only last fall did it open its first stores in Pennsylvania, the only outposts northeast of the Potomac.

Now, Wal-Mart is expanding nationwide. Mr. Walton has set a target of $125 billion in sales by 2000 -- a goal some retail analysts believe Wal-Mart will achieve with ease. By the end of the decade, say Oppenheimer & Co. analysts Bernard Sosnick and Dorothy Lakner, Wal-Mart alone will account for 20 cents of every dollar spent in the United States in the huge category of general merchandise, apparel and furniture.

On top of that, it will take a hefty chunk of the nation's food business, they predict.

For many competitors, Wal-Mart is the Darth Vader of Discount, aiming its massive bulk-buying power at helpless mom-and-pop stores and strangling regional chains with its coldly precise distribution system.

Advertisement

But there's a lot more than muscle to Wal-Mart's success. The fuel for its money machine may come from the lowest expense ratios and the highest sales per square foot in the discount retail industry. But the lubricant is its culture of service.

Each Wal-Mart store has a "greeter" whose job is to welcome shoppers and direct them to the departments they want. Ask a sales associate where to find an item of merchandise and you won't be told it's in aisle 20; the employee will lead you to the product and put it in your hands.

"Our customers love us, and we love our customers," said Mr. Shinkel. It's an oft-repeated phrase that could be called the corporate mantra.

This love affair between Wal-Mart and America's shoppers can cause a lot of heartbreak for the chain's rivals. When a new Wal-Mart opens, an estimated 80 percent of its business is drawn from existing retailers -- about two-thirds from big discount chains and the remainder from small specialty retailers.

In Galax, a small city in southwest Virginia, Wal-Mart's entry four years ago "hurt the smaller stores," said Tobie Davis, director of downtown development.

Two or three downtown stores were lost, she said, and the troubled Heck's regional discount department store chain closed its branch. Hardware dealers had an especially tough time, she said.

Advertisement

Nevertheless, said Ms. Davis, Wal-Mart is regarded as a model corporate citizen. "They sponsor a lot of events and they're sensitive to the needs of downtown," she said.

While Wal-Mart routinely squashes competitors, it treads carefully when it comes to local sensitivities.

Even before it opens its doors in a town, Wal-Mart frequently sends representatives to pay courtesy calls to community leaders. That impressed Joan Connell, executive director of Calvert County's Chamber of Commerce.

"They want to know, do people garden, do people craft, what's the most popular sport," she said. "I have never had a business call me before to ask for a detailed profile of Calvert County consumers."

Wal-Mart's targets

Nowhere is the impact of a new Wal-Mart felt more strongly than in a small community such as Prince Frederick, with a population of about 6,000 in a county of 21,000. In one way or another, Wal-Mart will end up competing with virtually every retailer in town.

Advertisement

A quick drive through the Calvert County seat makes it clear how broad Wal-Mart's reach will be. On the left as you come into town from Baltimore is a construction site where K mart, once the nation's No. 1 discounter, is racing to beat its rival to opening day.

Still, K mart doesn't inspire the same awe among Prince Frederick merchants. "Wal-Mart really concerns me. K mart doesn't so much," said Mr. Weiner, whose store will move into the same mall as K mart next year.

In that mall, construction crews also are building a new Giant grocery store.

Giant's chairman, Israel Cohen, recently wrote a letter to all employees in which he warned that Wal-Mart is coming. Wal-Mart won't be selling meat and produce -- for now, at least -- but it will come roaring into Prince Frederick with low prices on the health and beauty products that make up a good chunk of Giant's sales.

Just down the road is a vulnerable retailer: the Ames department store, whose ability to fight back is constrained by the bankruptcy reorganization of its corporate parent. And other stores will feel the impact of Wal-Mart. Safeway and Super Fresh stores will face the same challenges as Giant; Rite-Aid will find itself up against the nation's largest dispenser of prescription drugs; and the auto parts dealer, the shoe store, hardware store, sporting goods and sewing stores all will compete with strong Wal-Mart departments.

Wal-Mart's arrival in Prince Frederick has many merchants concerned about survival -- concerned enough to recruit a consultant who has crossed the country telling retailers how to survive Wal-Mart.

Advertisement

Kenneth Stone, an economics professor at Iowa State University, told some 60 people at a meeting in Prince Frederick last month that small retailers can hold their own if they don't try to meet the juggernaut head-on. "There's still plenty of sales left in the voids that they've left," Mr. Stone said in an interview.

He counsels retailers to avoid carrying the same merchandise as Wal-Mart so consumers can't make direct price comparisons. Find a niche where Wal-Mart doesn't go, he says, and build up your business in that area.

"The main area where independents are going to have their big competitive advantage is in terms of service," he said.

Delivery, special orders, special financing and instructional classes are special services that small independents can provide.

And retailers who hope to coexist with Wal-Mart must provide at least the same level of service, making sure to greet every customer who enters the store. It is "imperative," he said, that retailers stay open later and offer Sunday shopping to match Wal-Mart's hours.

Even before Mr. Stone came to Prince Frederick, Mr. Weiner had recovered from the shock of his Wal-Mart visit and was forming a strategy. "My feet are back on the ground. I'm thinking logically," he said.

Advertisement

He plans to scale back such departments as toys, where he can't compete with Wal-Mart, and is beefing up such areas as custom framing and silk flowers. He also plans to offer classes in crafts.

"You can't wait till they open," he said.

For other retailers the adjustment might be more difficult.

Mike Combs and Marti Phelps, who run an unusual store that combines sporting goods and sewing, are willing to make changes in their product mix and operating hours. But they draw the line at matching Wal-Mart's Sunday hours.

"That's a principle of mine," says Mr. Combs, a devout Christian who worries that Wal-Mart and other retail development will disturb Prince Frederick's small-town character.

For some, Wal-Mart's entry into Prince Frederick is a blessing. Community leaders hope it will help stem the flow of dollars to stores outside Calvert County.

Advertisement

Even competitors say they could gain if Wal-Mart keeps Calvert County shoppers at home.

"I'm trying to look at it in a positive light," said Mr. Weiner. "Wal-Mart's going to expand our trade base. Prince Frederick's going to be an attraction."


Advertisement