Cities and the Coming Walmart Invasion

The world’s biggest retailer wants to build stores in urban areas. That’s good for cities, but they need to be careful.
by | June 7, 2012

In January 2008, early in my term as mayor of Kansas City, my wife and I attended our first U.S. Conference of Mayors meeting. I went to some sessions and she went to others. At the end of the day, she told me excitedly of a presentation she'd seen about how Walmart was interested in building small, environmentally friendly stores that offered fresh, wholesome food and organic produce. And it was looking to build these stores in "suitable" urban neighborhoods.

This was a big deal to us, because the No. 1 problem in Kansas City was the need to stanch the flow of families from the city's urban core, and one of the most frequent complaints by these families was the lack of access to a decent grocery store. I talked to the Walmart representative who had made the presentation about locating a store in Kansas City's urban core. I followed up with a hard pitch to David Glass, former president and CEO of Walmart and a member of the Walmart board with a strong connection to Kansas City (he donated $1,000 to my re-election campaign) through his ownership of the Kansas City Royals.

We were never able to get the deal done, but it turns out that what we saw at that mayors' conference was the beginning of an apparently successful urban strategy. As Ryan Holeywell reports in the current issue of Governing, Walmart is finally beginning to break into urban areas. Big cities have actively opposed Walmart, both because it was seen as a threat to "mom-and-pop" businesses and because labor unions opposed its anti-union business practices. These cities have employed various strategies, including using planning and zoning regulations, to block Walmart stores. But the impact of the recession has finally worn down many of these urban holdouts, and leaders in places like Chicago and Washington, D.C., now are actively courting Walmart.

There are good reasons to want Walmart, especially in the poorer parts of the city. In many cities, the poorest people often must pay higher prices for the things they need than people in the more affluent suburbs pay. Walmart brings low prices, and it can also bring groceries and fresh produce to parts of the city that are "food deserts." And it brings employment. Walmart is the largest private employer in the world.

Of course, that employment doesn't come without a price. There is what economists call the "Walmart effect"--declines in average wages in counties where Walmart has located. And while Walmart appears to have worked in recent years to improve the treatment of its workers, there is its history of allegations of abusive treatment--as documented in Steven Greenhouse's 2008 book "The Big Squeeze"--including violations of child-labor and immigration laws, shaving hours from employee time records, demanding that employees work off the clock and preventing workers from qualifying for benefits. Walmart didn't get to be the world's biggest retailer by playing patty-cake.

But cities need what Walmart brings, and now, after having saturated the rural and suburban markets, Walmart needs the cities. The company plays hardball, and city leaders should do the same. Don't offer tax incentives. Don't compromise on urban design. (Holeywell writes that Walmart has created new formats that seem well tailored to the urban environment.) Monitor the treatment of workers and be prepared to respond to abuses. Aggressive enforcement of wage and hours laws, along with a "living wage" ordinance, can level the playing field for other businesses in the city and militate against the Walmart effect. And finally, it's worth noting that Walmart stores are unionized in every country outside of North America. The company adapts to local circumstances.

The bottom line: Walmart is coming. Like every other change, it has to be managed to maximize the benefits and minimize the negatives.

Mark Funkhouser  |  Director, GOVERNING Institute
mfunkhouser@governing.com

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