Customers Flock to Blackballed Stores

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The snowstorm that blanketed much of the East Coast last weekend left experts predicting that the big retail winners would be super discounters like Wal-Mart and Target, who gained as consumers scrambled to make up for lost shopping time by heading to the large, everything-in-one-place stores for heavily discounted goods.

But chugging out to your local big-boxer for some last minute bargain hunting isn't all that easy for shoppers in some of America's biggest cities and most union friendly suburbs because politicians, goaded by labor supporters, have blocked the big, nonunionized stores from opening in some major markets. In a holiday season of discounting and price wars, millions of shoppers don't have easy access to these retail players because of highly choreographed battles fought in city councils, zoning boards and environmental review boards. The one constituency that's rarely mentioned in these debates is the customer, who typically votes with his or her feet by traveling to seek out the best bargains and best prices despite the efforts of politicians.

New York City politicians, for instance, have blocked Wal-Mart from entering the city for nearly half a dozen years, which is one reason why more than half the city's residents shop outside Gotham at least once a month. The giant discounter first considered coming directly into New York when it noticed a sharp increase in credit card receipts from customers who lived within Gotham limits but were shopping at the chain's metro-area stores. In 2005, shortly after Wal-Mart began its first push to get into the city, the company estimated that Big Apple residents spent $128 million in its suburban stores, so Wal-Mart decided to bring the stores to closer to its customers. But the chain never figured on the power that unions hold over Gotham's city council, which effectively blocked Wal-Mart's entry at sites that required council approval, even though a Quinnipiac Poll found that 65 percent of the city residents, including 63 percent of union members, would shop at a Wal-Mart if one opened nearby. Recent news that Wal-Mart is again looking at sites in the city has union leaders sharpening their knives.

America's Second City, Chicago, has just one Wal-Mart for 2.8 million residents, which the city council approved in a bitter battle. Efforts to expand well beyond that have faced resistance. The application for a second store has been bottled up in the city council because of opposition from union leaders, even though a Chicago Tribune poll found 68 percent of residents want the big stores. But as an editorial in the paper recently noted, local aldermen remain silent on the expansion application because, "They've seen how much the unions are willing to spend to stack the council with anti-Wal-Mart votes." Meanwhile, Chicago residents "have been schlepping to [suburbs like] Niles or Orland Hills or Evergreen Park to shop at Wal-Mart" in this season of joy, the Tribune noted.

Some cities have used creative legislation to blunt the kind of big stores that pose the biggest threat to local chamber-of-commerce retailers and unions. Tucson has a law on the books restricting stores bigger than 100,000 square feet from carrying more than a sampling of grocery items. Why would politicians care about a store's product mix? Because Target and Wal-Mart have rolled out highly successful super centers, a version of the European hypermarket which combines a supermarket with a discount store. These hybrids have captured a big chunk of the nation's fragmented grocery business, which had been dominated by smaller regional grocery chains, many of which happen to be unionized. And so local pols are helping their friends in the labor movement blunt the spread of a new retail model.

Over time local zoning laws have become increasingly complex in many communities, requiring virtually every new development of any size to seek extensive variances. That has let local pols into the approval process for many big stores. One of the favorite political tools for blocking a big store is to issue a series of increasingly unreasonable demands in exchange for zoning variances. When Wal-Mart wanted to expand a small store in Chico, California, into one of those super centers feared by unions, the town heaped on a series of demands unrelated to shopping, including that the store incorporate solar power and that the company contribute $1 million to a town fund to help poorer residents swap their environmentally unfriendly wood stoves for more modern heating methods. An editorial in a local newspaper advised the retailer to "bring the loot" if it wanted to build in town.

The consequences of efforts to block these successful businesses are lost jobs, lost taxes and lost shopping opportunities for residents. That's why some politicians have been willing to face down union opponents when big stores want to come to their neighborhoods. When Wal-Mart wanted to open a store in a closed Macy's outlet in Baldwin Hills, Los Angeles, unions rose up in opposition but local council leaders and the L.A. Urban League lobbied for the store. Some 10,000 people showed up for a job interview when the store started hiring, and the store's presence turned around the dormant shopping center, attracting new tenants and revitalizing the shopping experience for locals.

But in other cities the price of defying unions is too high for some politicians. Even though private sector union power is diminishing, the politics of many cities is firmly in the hands of public sector union groups, and they have shown themselves willing to support the wishes of their union brethren, especially when it comes to protecting retail union jobs.

The only thing these powerful political alliances haven't been able to control is the behavior of shoppers.


Steven Malanga is an editor for RealClearMarkets and a senior fellow at the Manhattan Institute

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