Wal-Mart's eyes still on NYC


Wal-Mart Comes To New York
Robert Malone, 10.10.06, 3:25 PM ET

After a number of false starts, Wal-Mart Stores is planning to launch in New York City–the five boroughs, and especially the juicy, consumer-driven world of Manhattan.

“I think New York will be good for us, and we will be good for New York,” says H. Lee Scott, Wal-Mart’s CEO. And Philip Serghini, a company spokesman, says the nation’s largest retailer is actively looking for sites in the five boroughs.

This focus on New York follows a veto by Chicago’s Mayor Richard Daley of a city council measure that would have blocked Wal-Mart’s arrival in Chicago.

Wal-Mart’s interest in New York is a continuation of an effort that debuted years ago, when the retailer was barred from a location it had identified in Rego Park, Queens. At the same time, it decided not to proceed with a store on Staten Island.

Wal-Mart’s competitors are already very much a feature of New York’s retailing landscape. Kmart for years has had a huge megastore with a street-level entrance and two floors below ground on the corner opposite Macy’s sprawling Herald Square flagship facility. Another Kmart store is on Broadway south of Union Square. And Costco is targeting its first Manhattan location at a development site just off FDR Drive at East 116th St.

Wal-Mart, with 39,000 outlets worldwide, is one of the few national retailers with no presence in New York City, though it has opened in a number of other locations within an hour’s drive of Manhattan–including one just five miles across the Hudson River in Secaucus, N.J.; a two-story facility in White Plains in Westchester County; and five stores strategically placed east of New York on Long Island.

The average Wal-Mart store has some 135,000 square feet filled with food, clothes and electronic equipment. Many of its superstores, which are substantially larger, include full grocery stores, pharmacies, even beauty parlors and opticians. Distribution centers, which are upwards of 1 million square feet, serve multiple Wal-Marts via streams of 53-foot container trucks that trundle through the streets.

Wal-Mart officials believe that the arrival of the first New York City Wal-Mart will not immediately result in the arrival of a distribution center, since the first such stores can be supplied from the company’s existing distribution centers in New York (four centers) and Pennsylvania (five centers). These centers average 1 million square feet.

Serghini admits that the company must still persuade some skeptical city council members and a less-than-friendly local union. Moreover, space is at a premium within New York City limits, thought it may solve that problem with double-decker stores similar to the one it opened in White Plains.

“I’m not against all mega stores,” says James Vacca, the councilman from District 13 in the Bronx.

But any Wal-Mart presence in the Bronx “would have a terrific impact on any of our commercial strip stores,” he says. “I have fought to keep these smaller stores–8,000 square feet for instance–and their significant investment in our neighborhood. Would people, if asked, say ‘yes’ to a Wal-Mart? I think so, but they would not be thinking of the traffic implications or the economic consequences for little people. I want to enhance our existing stores.”

Richard Lipsky, head of the Neighborhood Retail Alliance, says the discount retailer “needs to get city council approval for any store over 10,000 square feet. However, if they found an existing store facility already available, they could slide into it.”

Lipsky adds that Wal-Mart was blocked by the Staten Island community from opening a store there. He thinks Wal-Mart played it cleverly in Chicago by getting an alderman on their side and positioning a store in a lower-income neighborhood.

The move into cities like New York and Chicago is not mere whimsy on the part of America’s savviest retailer. The company has essentially saturated the rural and suburban marketplace, where it had based much of its growth until now. And while big cities may be a challenge in political and social terms, and may pose a complex series of design and supply problems, it’s clear this is where the people are–and many of them will crave Wal-Mart’s rock-bottom prices.