Wal-Mart welcomed hundreds of shoppers to its first two D.C. stores last week with holiday decor, high school bands and handshakes from Mayor Vincent C. Gray.
The arrival of the world’s largest retailer into the nation’s capital marked the culmination of more than a decade of lessons it learned fighting its way into Los Angeles, Boston and Chicago — particularly a hardscrabble neighborhood here, Austin.
When Wal-Mart chose a site next to the railroad tracks off North Cicero Avenue for its first Chicago location, this West Side neighborhood became a national battleground between the company and organized labor, a a case study for academics interested in the effect it has on urban communities and a model for D.C.
Boosters of the chain in Chicago say the company lowered prices for strapped families, created thousands of jobs and offered fresh foods and other goods that were otherwise unavailable in poor and minority neighborhoods like Austin. A CVS, Food 4 Less, Aldi and Menards soon followed.
On a summer afternoon this year, Joy Lambert entered the Austin store armed with flyers from other retailers — Jewel-Osco, Dominick’s and Walgreens — stores she said she frequented more often before Wal-Mart opened and offered to match competitors’ prices. “Now I can just come and get everything at one store,” she said.
Martha Frimpong, 21, came out with four pairs of shoes for her 3-year-old daughter’s birthday, which cost her about $43. She said she didn’t follow the debate years before in Chicago about whether Wal-Mart ought to pay higher wages — a debate D.C. officials nearly duplicated this year — but remembers paying more for shoes before the Wal-Mart opened. “Normally when I shopped at other stores, it cost like $16 for a pair,” she said.
Critics argue that the selection and lower prices have come at a cost to other retailers and workers in Chicago, a troubling sign for businesses near Wal-Mart’s first D.C. stores along Georgia Avenue and North Capitol Street.
When he heard that Wal-Mart was opening a superstore down the street from his carry-out restaurant in Austin, Ali Qureshi thought things were finally looking up. Candy factories nearby had laid of thousands of workers that used to buy his fish sandwiches, gyros and hot wings. That Wal-Mart had chosen a site not two blocks away seemed to be a change in fortune. “I was very, very excited,” he said. “I thought, ‘I am lucky.’ ”
But when it opened, the 141,000-square-foot superstore included a popular fried chicken restaurant that sold similar items. Qureshi tried dropping his prices — four pieces of fried chicken with french fries, hot sauce and a slice of white bread goes for $3.99 — but he said business has waned.
“You sit here four or five hours,” he said, “and nobody comes.”
When Chicago was at its peak as America’s candy-making king, the sweet smells of Starbrite mints, Milk Maid caramels and Maple Nut Goodies wafted down North Cicero Avenue. The Brach’s plant, first opened in 1924, grew into one of the world’s largest candy factories, home to thousands of union workers pumping out 200 varieties of chocolates and hard candies.
But in the 1990s, as American manufacturing moved overseas, the stream of departing blue-collar jobs here turned into a tidal wave. In 1993, Leaf Candy closed its factory, laying off 500 workers who used to make Whoppers malted milk balls. After dropping 2,800 jobs in 15 years, Brach’s moved its final 1,100 jobs to Mexico in 2003.
Elce Redmond started working as a community organizer in Austin in 1987, when it was still a largely middle-class neighborhood. Little replaced the lost factory jobs, he said.
Brach’s towering brick factory has remained vacant but for its cameo as Gotham General Hospital in the 2008 movie “The Dark Knight,” when part of it was detonated.
By 2003, when Wal-Mart announced its plans to open there, Redmond said the needs of the poor for housing, health care and jobs had increased dramatically. As factories continued to downsize, Austin’s jobless rate topped 22 percent from 2007-2011, with a quarter of families below poverty.
“Those jobs were wage jobs in the factories,” he said. “People could afford their car payments, their child care and had health care. And we wanted retailers to support those same things.”
Redmond and other activists campaigned for Chicago’s city council to require Wal-Mart and other big box stores to pay $10 per hour and another three dollars an hour in benefits. The Illinois minimum wage was $6.50 at the time (it is $8.25 now).
“We knew that it was an inevitability that Wal-Mart was going to come into Chicago. They had already taken over the suburbs,” Redmond said. “If you can’t pay your rent, if you can’t pay your energy bills, if you can’t feed your family, how the hell is that a job?”
The campaign grew into one of the most bruising political battles in the city’s history. Wal-Mart touted the jobs it would create, fresh produce it would sell and its low prices. Officials said they would make $20 million in local charitable contributions over the next five years and pay competitive wages. The company agreed to open an outpost of Uncle Remus Chicken & Barbecue, a local, African American-owned business, inside the store. It also offers a bakery, eye care center and pharmacy and services like photo printing and tax preparation.
Few other companies were willing to invest in Austin at the time, which Redmond said aided the company’s campaign. “They came and said, ‘Hey, we’re the savior.’ So I think it was a very calculated strategy.”
Backers of the bill were unable to attract support from some of the council members who represented poor, largely minority neighborhoods where Wal-Mart was eyeing new stores, including Emma Mitts, the alderman whose ward includes Austin. Although the measure passed the city council, Mayor Richard M. Daley issued Chicago’s first mayoral veto in 17 years, and three aldermen switched their votes to crack labor’s veto-proof majority.
Howard Brookins Jr., who represents the South Side neighborhood of Chatham, said the proposal unfairly targeted Wal-Mart while exempting chains like Walgreens.
“I agree that the workers at Wal-Mart should get paid more,” Brookins said. “If they can get more money they should get more money. But the ordinance that they proposed was a terrible ordinance. It exempted certain organizations and corporations that could certainly pay higher wages. The argument that it was connected to the size of the store didn’t make any sense to me.”
Wal-Mart now has 10 Chicago stores: four supercenters, four smaller Neighborhood Market stores (which primarily sell groceries) and two Wal-Mart Express stores as small as 13,000 square feet. Wal-Mart employs more than 4,000 people in Chicago. In September, the retailer opened its newest supercenter, in the South Side neighborhood of Pullman.
For all the differences between the two cities, drive down North Cicero Avenue through Austin and you could almost confuse it with upper Georgia Avenue in D.C.
One- and two-story brick storefronts advertise discount auto parts, liquor, manicures and Cash 4 Gold. Most of the restaurants are carry-out joints selling meals in foam or tinfoil containers.
There are no shuttered candy factories in the D.C. neighborhoods near the new Wal-Mart at the corner of Georgia and Missouri avenues, but the company’s arrival coincided with the closure of Walter Reed Army hospital, leaving Brightwood, Shepherd Park and Manor Park with a fenced-off campus where 5,000 people once worked.
When Wal-Mart plotted its entry into D.C., it again targeted neighborhoods lacking fresh groceries and jobs, just as it did in Chicago. It again offered tens of millions of dollars in charitable donations. And it furiously opposed a living wage bill that, like the Chicago bill, ended with a mayoral veto.
But it also learned from Chicago and other urban markets like Los Angeles, said Virginia Parks, associate professor at the University of Chicago School of Social Service Administration. Wal-Mart enhanced its store design further, agreeing to build two stores on the ground floor of apartment complexes. It touted its charitable contributions earlier. And it put many of its commitments to the District in writing (although the document is not a legal contract).
“They had years of experience by the time they got to D.C.,” Parks said.
Wal-Mart opened its fourth Chicago store, a 174,000-square-footer in the South Side neighborhood of Chatham, where Brookins is alderman. There are other grocery stores in the neighborhood, but he said the store offered some merchandise that was otherwise unavailable nearby.
“If you were a grandfather and wanted to take your grandson fishing, there wasn’t a place to buy a fishing pole,” Brookins said.
Brookins said that since the store opened last year, Wal-Mart has made good on promises to pay all its workers at least 50 cents more than minimum wage and to hire some people with felonies on their record. “Has it been the be-all and end-all and has it ended poverty and joblessness?” he said. “No, but it definitely helped.”
Brookins said he did not think the Chatham Wal-Mart has had a negative effect on small businesses or job growth, but academics from local universities say Wal-Mart has likely had a flat impact on jobs and that small businesses near some of its stores have suffered.
A three-year survey by researchers from Loyola University in Chicago found that 82 of 306 businesses near the Austin Wal-Mart went out of business within three years of Wal-Mart’s opening, causing the loss of some 300 full-time equivalent jobs, about the same number the store created.
Analyzing sales tax data, the authors found no net growth in economic activity.
If the pattern holds true in D.C., stores selling competing merchandise along Georgia Avenue NW or North Capitol Street, near the Wal-Mart at 99 H Street NW, could face new challenges.
“Having Wal-Mart is not a very good economic development strategy because what it sells other retailers can sell,” said one of the authors, David Merriman, now at the University of Illinois-Chicago. “It may be appropriate because you want an open retail market or you want lower prices, but it’s not a job creation strategy.”
Wal-Mart officials say the study failed to account for new businesses created and based its finding on an excessively large geographic area.
“The small businesses that surround our stores generally have products and services we don’t offer or are strong in areas where we can’t compete,” the company said in its rebuttal. “Chicago is a terrific example of our positive impact: Since we opened our doors there in 2006, we’ve helped attract close to two dozen new businesses to the surrounding neighborhood.”
The company’s first two D.C. stores, as well as another under construction and three others it plans for the city, will mostly serve neighborhoods with above average poverty rates that are often defined as food deserts — places that lack access to fresh groceries. None are west of Rock Creek Park.
But if Chicago continues to serve as a blueprint, the District’s tonier neighborhoods will be next up. In Lakeview East, there is a Neighborhood Market and an Express Wal-Mart located amongst bustling commercial and residential corridors. While vacancies mar the street scape in Austin, in Lakeview rents can reach as high as $50 per square foot, said Maureen Martino, executive director of the Lakeview East Chamber of Commerce. Martino said she and her members resisted Wal-Mart’s entry, saying they did not suffer from a lack of shopping options.
Once the stores opened, she was disappointed not to see the retailer play a more active role in sponsoring public schools or charities: “I don’t see them giving back without asking for anything back.”