Wal-Mart Rankles Tempe

Pictured, L to R: Tempe Mayor Hugh Hallman, an outpost of the world's largest retailer

The activities of Wal-Mart and the happenings in my hometown of Tempe, Arizona have been two common topics on this blog. I suppose it was only a matter of time before those topics converged.

In recent years, Wal-Mart has been subject to a barrage of criticsm, ranging from its labor practices to its reliance on products made in China. Most importantly, communities across the nation have organized against Wal-Mart's expansion plans, arguing that its massive Supercenter stores (with an average size near 200,000 square feet) will have negative impacts on their surroundings. Among the concerns commonly cited are increased traffic, environmental degradation, compatibility with surrounding land uses, and the viability of local businesses.

As we focus on the greater Phoenix area, Wal-Mart has not often met oppostion. Supercenters are now as common as cacti and backyard swimming pools. However, Wal-Mart has been adept at targeting the fast-growing fringes of this Sun Belt metropolis, obtaining approval to build stores before neighbors (and potential opponents) move in.

Unlike many Phoenix suburbs, Tempe has been substantially "built-out" for some time. Wal-Mart opened a store in the southern portion of Tempe at the northeastern corner of Elliott Road and Priest Drive in the early 1990's (subsequently expanded to a Supercenter) but has yet to establish a presence in the remainder of the community.

In the central portion of Tempe, just across the street from the City's library and historical museum, department store chain Mervyn's has long operated an 86,000 square foot store at the northwestern corner of Southern Avenue and Rural Road. While negotiating with Mervyn's to renew its lease, the building's owner, Diversified Partners, sold the property to Wal-Mart. In late April of this year, Wal-Mart announced that Mervyn's would close in May 2008 and that a Supercenter would open in the building a few months later.

Although Diversified Partners, specializing in new shopping centers on the edges of suburban growth, has a history with Wal-Mart, the move came as a surprise. Mervyn's, after nearly three decades of operating at the site, announced that it would seek a new location. Area residents identified the Wal-Mart Supercenter as a "high impact" use that would further clog traffic at the intersection and reduce property values. Officials from the City of Tempe acknowledged that Wal-Mart had been looking for a site in the area for the past year but that they did not have prior knowledge of the plan and had little power to stop it, as the zoning allowed for retail use and additional floor space was not proposed.

The Mervyn's building is less than half the size of a typical Supercenter. However, Wal-Mart has begun to acknowledge the increased "barriers to entry" in established neighborhoods (i.e. opposition) and is demonstrating a willingness to buy existing buildings in order to serve those areas, even if on a smaller scale. In fact, this trend is not new to greater Phoenix. In 2006, Wal-Mart acquired a similarly sized Burlington Coat Factory store at Cactus Road and Tatum Boulevard near the affluent community of Paradise Valley. The reaction in that neighborhood was similar but the store is scheduled to open soon.

In mid-May, Tempe Mayor Hugh Hallman, influenced by numerous calls to his office and (perhaps) his re-election campaign, sent an "unofficial" letter to Wal-Mart asking that the company reconsider. The letter, on City letterhead but not identifying Mr. Hallman as the Mayor, acknowledged that there is little his government could do to stop the store from opening but offered to help find alternative sites. In a "built-out" community like Tempe, such sites are nearly impossible to find, so the plea is likely to fall on deaf ears in Arkansas.

This story of real estate, retailing, and politics in an Arizona town demonstrates that Wal-Mart remains desperate to break into new markets, especially those that can't (or won't) accomodate a 200,000 square foot "big box." While Wal-Mart has begun to taper its expansion, expect continued corporate "ingenuity" related to finding smaller store locations that don't require governmental review or public input. A Supercenter is likely to rise at the Mervyn's site, offering benefits in the form of new jobs, a variety of goods at low prices, and competition to supermarkets in the vicinity -- and costs in the form of added traffic, a significant change in community character, and a loss of sales at locally-owned busineses.