Start Spreading the News: Walmart Could Take NYC

After Losing Previous Rounds, Retailer Finds Right Approach -- With Some Help From the Obamas

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Credit: Data for District of Columbia was not available. Source: Walmart Stores 2010 10-K, U.S. Census Bureau

If Walmart can make it there, it may well make it anywhere. And increasingly, it looks like earth's biggest retailer will get the foothold in New York it's sought for decades.

Even some who aren't fans of Walmart's big-city dreams, such as retail consultant Burt Flickinger, who frequently works for supermarket retailers whose business will be seriously affected by the retailer's New York expansion, believe things will be different this time. For that he largely credits a marketing and PR strategy that has turned the Obama administration from enemy to ally and neutralized or co-opted segments of the traditional Walmart opposition such as environmentalists, building trade unions and advocates for nutrition and the urban poor.

Progress in New York and other urban areas where Walmart is weak couldn't come at a more welcome time for the retailer. Walmart has had six consecutive quarters of declining same-store sales in the U.S., and signs point to the quarter ended Jan. 31 as being particularly rough (Walmart doesn't report results for its fiscal fourth quarter until Feb. 22 and declined to comment on results prior to that.)

Consumer panel data from SymphonyIRI, for example, show Walmart losing significant share in several packaged-goods categories, according to Deutsche Bank analyst Bill Schmitz. Marketers such as Church & Dwight have noted dollar stores have been taking share from Walmart and others.

Amid such pressures, it's become a priority to find growth where new Walmart stores won't cannibalize sales from old ones. New York City, where the closest Walmart stores are in Long Island and New Jersey, certainly qualifies. The U.S. as a whole has one Walmart per 83,000 people (not counting Sam's Clubs). To reach the same level of Walmart density, New York City would need nearly 100 of them.

Just getting one, of course, has been a challenge, one that the company's former CEO, now chairman, Lee Scott walked away from last decade. This time around under CEO Mike Duke and Walmart U.S. CEO Bill Simon, however, looks different.

For one thing, the marketing campaign has been far more extensive. Walmart began moving PR executives into New York last year to prepare for a battle launched largely this year. It's been running ads from the Martin Agency, Richmond, Va., on TV and radio focusing on employee testimonials, and culling credit-card data from suburban stores showing how many of the city's consumers already cross over to shop.

While Walmart has been engaged in the usual battle of dueling studies with opponents regarding its health benefits and whether its stores are net creators or killers of jobs and wealth, the retailer has changed its game significantly in New York.

For one, it's chosen so far not to fight City Hall, at least not for permission. Walmart didn't send representatives to a hearing last month where it was broadly excoriated by politicians and activists. Instead, it sent ads, such as a mailer to city residents that read: "You don't ask the special interests or the political insiders for permission to use the bathroom. So why should they decide where you shop?"

In that hearing, however, Walmart did get support from building trade unions as the retailer repeats a strategy that helped it win permission to build a supercenter in Chicago last year. Walmart secured that support by promising to use union labor on new-store construction -- something Mr. Restivo said Walmart has been doing in many places for years anyway.

Walmart spokesman Steven Restivo, the retailer's point man in New York, declined to comment on where it might seek to build stores, but most reports have it seeking developments where it wouldn't need a zone change or other new permits, such as a 100,000-square-foot Brooklyn site.

The retailer also is preparing a series of tests of small-store formats that would easily fit into New York or other urban areas. For the smallest, a 3,500-square-foot Walmart on Campus pharmacy/convenience store it opened in Fayetteville, Ark., last month, the retailer is using an outside delivery service to supply the store, though it has plenty of other options on its home turf, in an apparent effort to replicate how small urban stores might operate. Mr. Flickinger, principal in the consulting firm Strategic Resource Group, sees every indication Walmart's new strategy will work in New York, following successes in the past year getting supercenter approvals in Chicago and San Diego. He gives much credit in swaying public opinion in these and other urban locales to Walmart's wooing of "Team Obama," in a considerable turnabout.

Consider that the United Food and Commercial Workers Union, an implacable foe of Walmart expansion, played a pivotal role in shifting support to Mr. Obama from Hillary Clinton in the 2008 Iowa caucuses, while Walmart's Mr. Scott urged managers to do whatever they could to defeat Mr. Obama.

Three years later, thanks largely to the efforts of Wal-Mart Stores Exec VP-Corporate Affairs Leslie Dach, Mr. Flickinger said, Walmart last month became the linchpin corporate supporter of First Lady Michelle Obama's fight against childhood obesity.

It was a program that generated massive national coverage anchored by an early break in The New York Times, and Mr. Restivo acknowledged the messages regarding Walmart's commitment to locating stores in "food deserts" lacking affordable fresh produce dovetailed well with its efforts to build stores in New York and other urban areas.

The Walmart-Obama combo, Mr. Flickinger said, is "the most powerful pairing America may have ever seen. It's the worst nightmare for the supermarket sector, food retailers and wholesalers and [unions]."

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