Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, August 15, 1993 TAG: 9308110271
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: By CHRISTOPHER SULLIVAN ASSOCIATED PRESS
DATELINE: CONWAY, ARK. LENGTH: Long
Just off Conway's main street, a dozen customers browsed or waited for prescriptions at pharmacist Dwayne Goode's store, American Drugs.
The quietly busy routine gave no hint of the war preparations going ahead, a battle of retailers for those very customers and others like them in other still-thriving downtowns across the country - a $1 million lawsuit pitting Main Street vs. Wal-Mart.
The claim that Wal-Mart harms downtown business is an old one, debated by scholars and emphatically denied by the company. What this lawsuit claims to do is show how the discounters have harmed some businesses by an unlawful practice, which Wal-Mart also denies.
In the suit, Goode and two other druggists contend the world's largest retailer has used illegal "predatory pricing" to undercut and eliminate competition.
Their lawyer, Matt Adlong, said as many as 200 products may have been priced below cost.
"There is absolutely no question," said Goode, who has been surprised by the reaction to the first lawsuit he's ever filed. He's been invited to address pharmacy trade groups and received calls of support from merchants around the country.
Wal-Mart officials declined to comment on the pending suit, but the company's lawyer denied all of the druggists' claims in legal papers. The case is set for trial Aug. 23.
For years, small merchants and downtown preservationists have said Wal-Mart, with its high volume and low overhead, overruns and kills them.
For years, Wal-Mart has replied that it offers the low prices and friendly service that consumers want - and as for inefficient businesses, watch out!
Research indicates it's not that simple.
A 1991 University of Missouri study concluded that counties with Wal-Marts had higher economic growth rates than those without the store. It compared rural counties in 23 states.
"The longer a Wal-Mart existed in a county," said the study by Lori Franz and Edward Robb, "the more positive the impact on indicators." An earlier study, examining 17 Missouri towns with Wal-Marts, was funded by the discounter, but Robb said the company did not pay for the broader study.
Continuing studies by Iowa State University Professor Kenneth Stone found that total sales for Iowa towns where a Wal-Mart locates were up 5.3 percent more than the state average after three years. But Stone found winners and losers among merchants.
Wal-Mart itself was a big winner, as it garnered the lion's share of increased general merchandise sales, Stone found. Other winners were stores that sell furniture and other home furnishings that Wal-Mart generally does not carry; they were up 11.8 percent.
Losers, besides competing general merchandisers, included specialty stores carrying the same items as Wal-Mart, including drug and jewelry stores, sporting goods and gift shops, down an average of 11.8 percent. Hardware stores dropped 10.3 percent, apparel shops, 9.1 percent.
Stone also found sales in towns within a 20-mile radius of a Wal-Mart declined 23 percent after four years, more than double the 10.8 percent drop in other Iowa towns of the same size.
"It's extremely hard to go head-to-head with Wal-Mart," Stone said in an interview. Nonetheless, his studies conclude with strategies merchants can use to survive. "In a word, niches. You've got to find niches," he said.
Another researcher, Steve Torok of the University of Wyoming, agreed. "Look for the voids in their inventory," he said. Like others who advise downtown merchants, both Stone and Torok stressed improving service.
For decades, the economy in much of rural America has been in decline, due to factors like the restructuring of manufacturing and the farm crisis of the 1980s.
Many places have long sensed a need to take action but have not done so until the arrival of Wal-Mart, which consequently got the blame, some authorities say.
Sometimes that's unfair. Several years ago, Wal-Mart planned to move into Steamboat Springs, Colo., but after confronting opposition, "We quietly said, `Thanks, but no thanks,' " recalled Don Shinkle, head of Wal-Mart's public relations.
After that, three or four stores went out of business, and, "clearly, Wal-Mart would have been blamed for this," he said. The company has since returned and built a store.
"Panic is a great motivator for action," said Kennedy Smith, director of the National Main Street Center of the National Trust for Historic Preservation in Washington, D.C.
Of nearly 850 Main Streets across the country that have contacted her office for advice, up to half did so after a Wal-Mart came to town, electrifying merchants and town leaders.
Those are big numbers, and Wal-Mart replies with its own.
It solicited comment from chambers of commerce in Wal-Mart towns and received hundreds of replies, which it bound into a "Community Response Survey." Many letters thank Wal-Mart for its jobs and its charitable contributions.
"The economic impact has been very positive and comes at a time when our economy could certainly use a bright spot," said a typical letter, from Chanute, Kan.
From Waseca, Minn.: "You have helped us become a regional shopping area."
From Kendallville, Ind.: "We feel the customer service that Wal-Mart gives the community is a good example for our retailers."
Wal-Mart's opponents return fire with place names of their own, like Hearne, Texas.
That town was "killed twice" at the hands of Wal-Mart, wrote ex-resident Steve Bishop in a Dallas Morning News column last year - first when the discounter moved in and drew dollars and life out of many local businesses, again about five years later when Hearne's unprofitable Wal-Mart closed.
Perhaps, Bishop wrote, "this is all about greed. Greed on the part of Wal-Mart and greed on the part of Hearne's citizens, like myself, who left the people who had been part of our community so long to buy from the newcomer . . . to save $5 on a trash barrel."
If the anecdotal and research evidence is contradictory, some observers say one thing is certain: As mass merchandisers grow, a portion of the money spent in their communities leaves town.
"It's accruing to someone else, someplace else," said Kennedy Smith. "It doesn't take a rocket scientist to look at the list of the wealthiest people and see that four of them are Walton heirs."
by CNB