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[13 comments]

Walmart presses on in California, Trader Joe's gives up in Oregon

February 12, 2014

It's not uncommon for a retailer to face resistance, sometimes strong, to opening a new store in a community. For the most part, the retailer makes its case to local government bodies responsible for approvals as it pursues its legitimate right to grow its business. Walmart knows all about opening stores in the face of local opposition. Trader Joe's — based on its relatively small store size and the fact that people have been known to start petitions to bring stores to their towns — probably not so much.

California, with its large population, is extremely important to Walmart's growth plans and the chain has continued to open stores despite facing fierce opposition from a variety of groups and politicians. The chain has been criticized for its labor practices, crime rates and for putting small mom and pops out of business.

In true Walmart fashion, the retailer recently published a study in California that concluded opening supercenters increased sales tax revenues and brought more jobs and small businesses to communities, particularly those in areas that were struggling economically.

In contrast, Trader Joe's recently found itself caught between warring parties in a local dispute in North Portland, OR. The chain was looking to open a store on a vacant lot in an Urban Renewal Area. In the end, Trader Joe's decided to look for less contentious pastures.

The chain issued the following statement: "We open a limited number of stores each year, in communities across the country. We run neighborhood stores, and our approach is simple: If a neighborhood does not want a Trader Joe's, we understand, and we won't open the store in question."

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Discussion Questions:

What are the keys to opening successful new stores in the face of community opposition? What is your reaction to how Walmart and Trader Joe's responded to the specific instances in this story?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How important a factor in deciding to open is opposition from local groups when a retailer believes a given location will result in high volume sales?

Comments:

Walmart cannot afford to allow societal malcontents to drive its corporate policy, and Trader Joe's cannot afford to buck the malcontents. Right policies for the right chains.

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Adjunct Senior Fellow, Ehrenberg-Bass Institute

At the end of the day, the community should get to decide what it wants through its zoning laws and review practices.

In the case of Walmart, many have preconceived views of its big ugly superstore. By last count, Walmart had at least 5 different formats. Its Marketside format is quite small and fits inconspicuously into a strip mall. Marketside doesn't even have a Walmart sign on it. Before rejecting Walmart out of hand, a community would be wise to look at the format options that fit community needs and values.

Trader Joe's statement about neighborhood stores is the right approach. If a community doesn't want a store built in their backyard, don't build one there. If the community opposes the store in all of the reviews, the retailer would have a tough time wooing them as shoppers.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

Good for Trader Joe's! Of course, I'd be delighted if a store opened near me, but alas, I have to drive an hour to get to one. And last time I went, there were people who'd traveled 90 minutes to get there. I'm sure the good folks in Portland had their reasons and they are entitled to them.

As for Walmart, it is relentless. I ended up on one of its corporate communications mailing lists during its push to overturn a city ordinance in Washington DC and was stunned by the sheer quantity and really annoying tenor of its emails. I took the opportunity to actually respond to one and ask why the company was insistent in opening a store in a particular location in Midtown Miami - where it really is out of place - when they'd be more than welcome just 40 blocks north...closer to my house, actually. The answer I received was stunning and robotic "People shouldn't have to travel 40 blocks to buy affordable merchandise." Seriously? With 3 Publix, a Target and a TJ Maxx steps from its proposed location? It struck me that they were acting like spoiled children, rather than good corporate citizens.

In the end, they fought the city, the protestors and hired people to wear "We Heart Walmart" t-shirts to council meetings (yes, that has been verified). And yes, they won. And in the end I had to request being unsubscribed TWICE (they switched me from one communications director to another).

The unfortunate thing is that Walmart has become so big and powerful, it's virtually impossible to defeat them once they set their minds on a location. It's most certainly bully-ish. Offensive, really.

So the short answer to your question is: The key to opening new stores in the face of community opposition is NOT TO. Doing so simply divides the community and...really does disregard the wishes of the majority.

And I fully expect some kind of repercussions for writing this response.

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Paula Rosenblum, Managing Partner, RSR Research

Walmart has grown into almost every community that welcomes their stores. In order to keep growing they need to build where they are not wanted. This means some vicious fights. This type of bare knuckle brawling does not appeal to Trader Joe's, and when they faced pushback in Portland, chose to leave, rather than fight.

The responses are in line with the perceived attributes of each brand. I'll bet that the folks in northeast Portland will come to regret their decision. And I'll bet that the people in California will not and will keep fighting Walmart.

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Max Goldberg, President, Max Goldberg & Associates

"When people plan the battle, they don't battle the plan."

First, Trader Joe's approach is unarguably the wisest strategy. My bet is some of these resistant communities come back and beg TJ to reconsider.

The problem with the big box people is they think they control the world. So they "announce" their intention and then proceed with the pretense of community involvement. They expect everyone to fall mindlessly in line. Let's face it - there is nothing "neighborly" about Walmart.

The secret is to do your homework but go to the population you want on your side with a blank sheet and engage them from the outset. In the grand scheme of things you need to bring on board very few community evangelists in order to create a movement. There is published research in The Journal of Conflict Resolution claiming that you have to win over only the square root of 1% of the population you're dealing with in order to move it in the desired direction. In a population of 250,000 people that's only 50 believers. Find them, send them out with the message, and you'll soon be welcomed with open arms...and wallets.

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Ian Percy, President, The Ian Percy Corporation

Walmart bashing aside, they are a mature business, at least on the brick and mortar side, so sales growth isn't easy to come by. To satisfy shareholders, they need to keep opening new stores, so they may get pushy about it at times.

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Al McClain, CEO, Founder, RetailWire.com

There is often lots of opposition to Walmart. And once the stores open, there are lots of people applying for those jobs and lots of customers shopping there.

I don't think those people were all opposed to Walmart. If a community really didn't want a Walmart, the parking lot outside would be empty.

There may be such a store somewhere, but I haven't seen one.

'EDG'

I have an issue with the premise here that a store can be successful despite opposition from the surrounding community. I don't think it can.

We talk of engaging consumers, creating emotional bonds with them, localizing assortments, personalizing offers, etc....all these require a healthy and mutually respectful relationship between retailer and consumer. Both retailers are smart enough to know this and work differently to get this done; knowing when and where to push and when to regroup. Example here in Southern California, Walmart bought a 60-acre lot in Inglewood near the Los Angeles Forum but the local community rejected a ballot initiative to build; Walmart just recently sold the land and moved on.

Yet, Walmart has opened three successful stores (one supercenter) in our community north of L.A., the same community with a fanatically loyal Trader Joe customer base - both thrive here because they offer different value and experience, and consumers self-select accordingly. Each company works to influence the communities in which they choose to have a presence. They just do it differently.

Walmart's future growth will come from smaller format stores that are less imposing on a community; Trader Joe's has the enviable position of consumers writing petitions for them to open a store in their community. Two different companies; two different strategies. Each needs to heed the voice of the community.

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Mohamed Amer, Vice President, Global Integrated Retail Unit, SAP

Trader Joe's most likely didn't really want to open a store in the Portland location. It wasn't priority and this was an opportune moment to back out and make it look like someone else's idea.

Walmart knows that a significant number of competitors in California are operated by ineffectual publicly owned or private equity owned chains. So it's only normal that Walmart produce the studies that say the right thing on taxes and jobs.

David Livingston, Principal, DJL Research

Understanding the community and showing the centers of influence what you can bring to the table to contribute would be extremely beneficial. It sounds like Trader Joe's figured out it had better chances with a store somewhere else. My opinion is they made the right move. Walmart is huge and in most cases it can outlast many of the forces in the community that are opposed to it. We have two Walmarts here in Canton MI. They were able to overcome the opposition they faced and are now thriving.

Tom Borg, Business Expert, Tom Borg Consulting, LLC

Hats off and kudos to Trader Joe's, "If they don't want us, we don't need to be there" unscientific approach.

Walmart's battle is usually an uphill fight. But in the end, there are more jobs and the economy usually is better than it had been. But I feel bad for the mom & pops they put out of business.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

One way to get a Walmart into a community that opposes it is through much better exterior and interior design. I speak from experience with said giant in that the expectations with the local P&Z team need to be changed. The idea of a big, ugly box store moving in on your block is appealing to no one, really. But, if you can spin that paradigm and create something that's actually appealing to many, a lot of walls will tumble.

Trader Joe's approach is somewhat egotistical, but I like it. "If you don't want us, we'll just leave and go somewhere that does." Wow, what a luxury. But obviously, pretty big disparity with Wally in terms of brand, footprint, people affected, jobs built, tax revenue, traffic. Not apples to apples.

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Lee Peterson, EVP Creative Services, WD Partners

I happened to be involved in the Walmart issue in DC as I am living in a part of the city that will have two Walmart city supercenters within a couple square miles, probably the only place where that is the case in the U.S.

I was the author of a report on the subject for our local neighborhood commission. I am agnostic on Walmart, specifically. I can choose not to shop there, but don't feel obligated to restrict the choices of others. However, I won't shop there because of their labor policies.

Historically, we know how to integrate big box stores into cities. The department store format dating back to the 1920s and before (A.T. Stewart...) is nothing new. The problem for me is that Walmart has no real interest in inserting stores into cities that are pro-urban design. They are agnostic about it.

If a developer has a pro-urban plan for a site that they want, they are fine going in there. If a developer has a plan that's suburban for the most part, they're fine with that too, if that's a site they want.

In short, expecting Walmart to do a better job on responding to urban context and being a positive force for projects that have additional revitalization and other benefits is a lost cause. They have no interest in it.

The point is that cities need to have the right design and review ordinances in place so that communities have a better chance at shaping the processes to get optimal results. And to be able to mitigate potential negative effects.

DC lacks the right ordinances.

Plus Walmart has far more capacity and understanding on these issues than any single community. They learn from every building project undertake. They aren't stupid people.

Plus they roll up the support of city elected officials before they announce, making it difficult for elected officials to stand up for better processes, even in response to citizen requests.

AND most importantly, Walmart knows that there will be opposition, a lot of it strident and somewhat inchoate. They use that deliberately to ensure that the process has lots of noise and the ability to deal substantively with substantive issues is significantly constrained. The process might be chaotic as a result but it ensures that they get more of what they want with minimal opposition.

Speaking of them not being stupid, most of the sites they chose in DC are "matter of right." Two projects didn't even trigger any review of the store at all, because they are/will be tenants in mixed use buildings where the store is a kind of incidental use.

And yes, as the story of Miami recounted above, they play hardball. See what happened in San Diego as another example.

On the other hand, the City of Hercules, CA used eminent domain to prevent a Walmart project from proceeding.

Richard Layman, Consultant, Retail Empire LLC

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