What Makes Wal-Mart and the Other Big Box Stores
More Threatening Than Macy's?
Right now, Wal-Mart, Ikea, and the other big boxes are trying to push their way into New York City, and in the next presidential election, the big boxes may be a political flashpoint. It's time to answer the question the City Comforts Blog recently asked here: How are the big boxes different from Macy's?
In fact, it's the business model, not the size, that makes the big boxes different. Unlike the Macy's business model, the big boxes' model calls for highly-centralized buying and administration, a flattened distribution system, vertical integration, and competition chiefly on price. The big box stores have not one but two main methods for lowering their prices: they obtain taxpayer subsidies, and they cut costs. Unlike Macy's, the big boxes obtain subsidies ranging from zoning changes, tax breaks, empire zone advantages, eminent domain, and brownfields cleanup bonuses, to free new infrastructure and upgrades, sewers and roads and 24-hour policing, to medical care for uninsured or underinsured employees and their families. To cut costs, unlike Macy's, the big boxes use standardized stores around the world; they sell standardized products; they use centralized, computerized inventory and distribution systems with frequent re-supply by tractor-trailer trucks; they tightly
control suppliers' charges, often forcing suppliers to move manufacturing overseas; and they offer low wages and few benefits to their employees, who are often part-time. Unlike Macy's, a big box chain opens dozens to hundreds of new stores each year, aiming to site stores so close together that they will squeeze competitors out of business and in the end cannibalize--their term--only their own stores.
Unlike Macy's, big boxes are automobile-dependent. Typically, each big box store is a windowless warehouse 100,000 square feet or more in size, close to an expressway off-ramp, set back from the street behind 10 acres or more of parking lots, and re-supplied many times daily by tractor-trailer trucks.
When they campaign for zoning variances, new infrastructure, and other taxpayer subsidies, big box stores promise politicians jobs for constituents and increased sales tax revenues. They also threaten that if the jurisdiction doesn't give them what they want, they will locate in some other nearby jurisdiction instead, bleeding the local treasury rather than filling it.
The big box stores have had decades in which to hone their public relations campaigns. They promise voters low prices and jobs. They paint themselves as on the side of consumers, and they accuse opponents of belonging to "special interest groups." They paint themselves as benefactors of low-income people and minorities, and they slam opponents as indifferent to people's need for jobs and insensitive to the sacrifices that other people must make to buy groceries, paper towels, building supplies, and furniture. They do not hesitate to employ racial divisiveness or to play on the guilt of middle-class voters. Meanwhile, according to Forbes, the founder of Ikea, Ingvar Kamprad, and five members of the founding family of Wal-Mart, the Waltons, are among the top 20 billionaires in the world.
As I show in many places, including my Newsday op-ed Superstores Come With Too High a Price, and my Brooklyn Papers op-ed Why Red Hook Ikea Project Should be Rejected, in campaigning to get into New York City, the big box stores do not accurately represent the facts. Nor are they likely to keep their promises here, any more than they have elsewhere. For other conservative arguments against big box stores, see The Neighborhood Retail Alliance and Professor Bainbridge. As I argue in many posts on Big Cities Big Boxes, including here, if we do not constrain them by zoning and other laws, the automobile-dependent big box stores with their low wages will drive down the income of workingclass New Yorkers, and they will pose a threat to the 400 walkable, transit-oriented, high streets that are one of the great amenities of New York City, and to the New York City way of life.
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