The Bully of Bentonville

by Anthony Bianco

  Kroger’s fate is a subject of debate among the retail cognoscenti in its hometown, but on this there seems to be universal concord: There will be no stopping Wal-Mart in Cincinnati. Birdsall predicts that Wal-Mart will take 25 percent to 30 percent of the market within a few years. “In four years, they will be in every major submarket, no question,” Birdsall says. “Probably it will take less time than that.”

  “How many Supercenters will Wal-Mart need to cover the market?” I ask.

  Birdsall gets up from his chair, stands before his giant wall map, and begins counting. “About twenty,” he says finally. “This is a good, stable market, but there are only so many dollars to go around in Cincinnati, Ohio. Somebody is going to get hurt.”

  Cincinnati’s hometown supermarket giant may have been slow to recognize the threat posed by Wal-Mart’s Supercenter expansion program, but there is nothing lethargic now about the defense it is mounting in its hometown. Even as it was besting the UFCW in contract negotiations, Kroger significantly added to its share of the Cincinnati-area grocery market. During 2004, the company bought eight stores from the defunct Thriftway, opened nine new stores of its own, and remodeled a dozen other supermarkets to carry a broader array of food and general merchandise. The new Kroger outlets include a 104,000-square-footer in Anderson Township that is the largest Kroger in the country. (The Anderson outlet is superstore in all but name, containing a Fred Meyer Jewelry Store, a Starbucks, a drive-up pharmacy window, a gas station, and a photo lab.) By mid-2005, Kroger’s market share hit 58.1 percent, up from 44.6 percent at the start of 2004. 35 “There’s no way Wal-Mart will run us out of town,” vows Robert Hodge, the head of Kroger’s Cincinnati/Dayton division. 36

  Birdsall agrees with Hodge, though he expects Kroger’s market share to decline substantially as Wal-Mart’s expansion whips into high gear in 2006 and 2007. “Kroger will hold its own,” he says. “They are the hometown boys and are still very good operators. I see them being the convenient neighborhood groceries that they’ve always been.” Eichelbaum, the local retail consultant, thinks less highly of Kroger’s management than Birdsall does. Not to put too fine a point on it, Eichelbaum thinks Kroger stinks. “This is a company just waiting to die,” he says. 37

  Kroger’s gains appear to be coming mostly at the expense of Meijer, which has seen its market share drop to 11.8 percent from 12.6 percent since the start of 2004. Emerging from a protracted bout of cost-cutting designed to make it more price competitive with Wal-Mart, the superstore pioneer announced plans to open five new superstores within its five-state territory in 2005, including three in Cincinnati. “Meijer’s expansion here surprises me because they’d lain down and been dormant for a while,” Birdsall says. “They’re a good operator, but still. How many damn stores can we do here? I think Meijer will be squeezed by Wal-Mart because they don’t have the dominant real estate position Kroger has and that Wal-Mart will have.”

  Birdsall believes that Meijer will survive Wal-Mart’s invasion in diminished form, but prophesies doom for Bigg’s, the city’s homegrown superstore chain. Bigg’s took over one vacant Thriftway store but otherwise is standing pat, with a share of 8.4 percent as of mid-2005. “Of all of the chains, I see Bigg’s as the most vulnerable,” Birdsall says. “Bigg’s is a pretty decent operator, but is always competing on price and will get squeezed by Wal-Mart. I’d be very surprised if Bigg’s is here in five years.”

  Birdsall’s analysis squares with a Safeway Stores study of the impact of Wal-Mart’s entry on established grocers in seven metropolitan areas across the country from 1997 through 2003. The number-one supermarket chain in these markets actually gained 1.5 percent market share on average while the number-two grocer held even. However, the other grocers—the lesser chains and independents alike—collectively lost a catastrophic 17.7 percent of their market share. The Safeway report also documented the dire financial impact of Supercenter entry on all of the supermarkets. The number-one grocer continued to turn a profit, though it declined to $12.3 million on sales of $350 million from $30 million on sales of $400 million. But the number-four grocer in these cities saw a profit of $5 million on sales of $250 million turn into a loss of $13.5 million on sales of $200 million. In all seven cities, the fourth-ranked grocer went under within a year. 38

  In Cincinnati, Birdsall expects Kroger, Wal-Mart, and Meijer to carve up the mass market, with wholesale clubs like Costco and Sam’s Club and high-end specialty vendors like Wild Oats, Whole Foods, and Jungle Jim’s taking a slice at the margin. Meanwhile, drugstore chains like Walgreens and CVS will continue to expand their food and beverage offerings and win an increasing share of convenience buying. “That’s it,” Birdsall says. “I just don’t see any other grocery operators surviving.”

  Among the scores of independents that Birdsall is consigning to history’s dustbin is Remke Market, a little seven-store chain descended from a Covington, Kentucky, meat market that opened in 1897. Bill Remke, the grandson of the founder, runs the business with the help of his son, Matthew, but in 1996 transferred a majority of the company’s stock to its 700 employees. The new Fort Wright Supercenter is smack in the heart of Remke’s turf, as is a second store that Wal-Mart is building in Florence. Remke is a technologically progressive but low-key retailer that embodies all the virtues of the old-fashioned neighborhood grocer. Its stores are compact by contemporary standards (the largest of them is 45,000 square feet) and easily navigable. Remke’s is the kind of place where the cashiers call you by name and the butchers cut meat to order. Ask for an item, and a clerk will lead you to the spot. “This business isn’t rocket science,” Bill Remke says. “If you give customers what they want, they’ll come back.” 39

  But will enough of them come back after they’ve seen the inside of a Supercenter to keep Remke in the black? Birdsall doesn’t think so. “At the end of the day, a majority of people are shopping on price,” he says. “There’s no getting around it.”

  The consensus in Cincinnati’s retail and real estate circles is that Wal-Mart’s inevitable gains are unlikely to come at Jungle Jim’s expense, even if Bonaminio falls short with his ambitious Foodie Land venture. “Jungle seems wacky on the outside, but he has a consumer brilliance about him,” says Symjunas, president of Cincinnati developer Vandercar Holdings Inc. “He really understands his market.” 40

  For his part, Bonaminio is continuing to shove stacks of poker chips into the center of the table. To give shoppers even more reasons to visit his oversized market, in early 2005 he broke ground on a small strip shopping center adjacent to the store. He had pre-leased all of its 65,000 square feet to a dozen shops and restaurants long before it opened in the fall. Brian Gillan, chairman and CEO of Buck$ Dollar Stores, jumped at the chance to put his seventeenth store next to Jungle Jim’s, despite its less-than-prime location. “Jungle is an icon,” Gillan says. “It’s like doing a deal with Sam Walton to open a department within the original Wal-Mart.” 41 Except, of course, that Bonaminio is not looking to blanket America with stores.

  It turned out that Bonaminio did have one more store in him, though. In March 2005, he finally made a move that he’d been agonizing over for a decade, signing a letter of intent to open a second store. The new, smaller specialty outlet—tentatively named “Baby Jungle”—is supposed to open in 2007 about twelve miles south of Jungle Jim’s, not far from Cincinnati’s center. Part of what finally persuaded Bonaminio to divide his attention between two locations was the building the developer made available: a 120-year-old warehouse formerly owned by Cincinnati Machine, once the world’s largest manufacturer of machine tools. With the warehouse comes a secondhand treasure to rival the monorail. “It has a 25-ton crane that is used to pick up large objects,” explained Phill Adams, Bonaminio’s right-hand man for technology and design. 42

  Bonaminio’s bravado does not extend to making the sort of predictions of certain success to which many entrepreneurs are prone. “No one’s doing what I’m doing, and I don’t know if I’m
going to be able to do it. Ask me in a year,” he says with a shrug. “Business is tough right now. But you know what? If you keep at it and give it all you got, it becomes a personal thing. If you don’t make it, at least you can sit back and look at yourself and say, ‘I gave it a hell of a whack, but it just doesn’t work.’ ”

  DOWN AND OUT IN JONQUIÈRE

  April 2005

  If Sam Walton had been prone to nightmares, they probably would have looked a lot like the Wal-Mart store in Jonquière, Québec, on this Friday evening. Empty shelves outnumber full ones by about five to one. Whole sections have been closed and the remaining merchandise consolidated in the center of the store. The entire contents of the baby department now fits into a single shopping cart left out in the middle of an aisle. Some twenty workers shuffle about forlornly in their blue smocks, tending to a dozen customers searching for a final bargain among the dregs of what had been overflowing abundance a few weeks ago. A tin of oysters is going for $1.10 (originally $1.86), a Johnny Lightning Street Freaks model car is $3 (formerly $3.92), and a quilted lady’s car coat is just $10 (having been marked down in stages from $39.98). Here in Jonquière, the ubiquitous Mr. Smiley Face seems downright deranged. “This is not what a Wal-Mart is supposed to look like,” admits Marc St. Pierre, the store manager. 1

  St. Pierre, a short, thickset man with dark bangs and aviator glasses, begins by politely saying that he is not supposed to talk to reporters, that company policy dictates that all comment come from Wal-Mart Canada’s chief spokesman in the Toronto headquarters. St. Pierre can’t quite bring himself to clam up entirely, perhaps because we are a very long way from Toronto (and everywhere else) and because ministering the last rites to a dying store is dispiriting duty. He would like to return to Québec City, where he worked before he was transferred to Jonquière seven months ago. The store is set to close in about three weeks, but St. Pierre’s boss has yet to tell him anything about his next assignment—or if there will be one, for that matter. “I’d be happy if you could let me know,” St. Pierre says ruefully.

  St. Pierre sent the store’s greeters home long ago. In their place are two uniformed security guards who ignore the departing customers (shoplifting might well be welcome here as a form of accelerated retail euthanasia) to focus their attention on new arrivals. No doubt they would confiscate a gun if they saw one, but what they are really looking for are cameras. A skeleton crew of downcast employees wandering a shambles of a store is not an image Bentonville wants to see splashed across newspapers or magazines. A third security guard patrols the parking lot in a silver SUV, keeping an eye out for shutterbugs. Photographing the outside of the store is allowed, but try to bring a camera inside and this long-haired young man will politely but firmly bar your way.

  I didn’t come here to take pictures or to shop, but the hockey fan in me cannot resist a set of Montreal Canadiens salt and pepper shakers for $1.89. As I’m checking out, the elderly man in front of me says to the young woman running the register, “It’s so sad to see your favorite store like this.” She just shrugs.

  On the way to my car, I encounter a man who appears to be in his sixties ambling toward the store’s entrance. “Are you here to buy something?” my companion asks him. “No,” he replies, with a derisive snort. “I’m just here to look at the corpse.”

  “Remote” is an adjective that does not begin to do Jonquière justice. This rough-hewn, clapboard city of 60,000 rests right at the edge of inhabited Québec. To the north is nothing but forest, mountain, and bay all the way to the Arctic Circle. Québec City is a three-hour drive due south, through a wilderness preserve where moose easily outnumber men and make highway driving an adventure. A media capital Jonquière is not. And yet Wal-Mart’s abandonment of this north Québec outpost in the spring of 2005 made news from Tokyo to São Paulo as an object lesson in the lengths to which it will go to throttle the threat of unionization. The company closed its store here a few months after it was certified by the Québec government as the only unionized Wal-Mart in North America.

  Canada is important to Wal-Mart, which, with 260 stores, is the country’s second-largest retail chain. The company is opening new stores at the rate of thirty a year—a figure that will increase sharply if and when it exports the Supercenter to Canada. Although the allure of “Every Day Low Prices” is as strong above the thirty-eighth parallel as below, the Canadian shopper is far more likely than her American counterpart to belong to a union or be related to a union member. Nearly 29 percent of Canadian workers carry a union card, compared with 13 percent of Americans. Labor laws in Canada are more favorable to unionization than those in the United States and also are more likely to be expeditiously enforced—especially here in Québec, where the unionization rate is a robust 40 percent.

  Wal-Mart entered Canada by buying 122 discount department stores from the Canadian subsidiary of Woolco in 1994. (Wal-Mart passed on twenty-two other Woolco stores, including all ten of its unionized outlets.) One was in Chicoutimi, which is a kind of white-collar cousin to the blue-collar mill town of Jonquière. In 2001, these two adjacent cities and four smaller towns merged to form Saguenay, which is the largest city in the Saguenay-Lac St.-Jean region of Québec. It was just about this time that Wal-Mart entered Jonquière, much to the delight of its residents. The opening of the Place du Royaume shopping mall in Chicoutimi a decade earlier had wiped out many a shop in Jonquière, leaving a shopping void that the new Wal-Mart went a long way toward filling. The 190 jobs that the store brought were equally welcome in an area chronically afflicted by one of Canada’s highest unemployment rates.

  Even so, a company as authoritarian and anti-union as Wal-Mart was pushing its luck entering Jonquière. The Saguenay-Lac St.-Jean is the Ozarks of Québec in the sense that its extreme isolation bred a defiant independence of spirit into what is still a remarkably homogeneous population. Nowhere in the province is support for Québec sovereignty—for separation from English-speaking Canada—stronger than among the Saguenay’s French Catholics, every fifth one of whom seems to be named Tremblay. However, the Saguenay, in sharp contrast to the Ozarks, is heavily industrialized. Each of the aluminum smelters and the pulp and paper factories that dot its ruggedly scenic landscape is unionized and has been for decades. The Québec labor movement was more or less born in the Saguenay, and a tumultuous birth it was. In 1942, the army had to be called in when a strike at an Alcan plant spun out of control. Today, a colossal Alcan plant sits right at the edge of Jonquière, the Québec union town par excellence.

  The sentiment that drove Wal-Mart’s Jonquière workers into the eager arms of the United Food and Commercial Workers is best summed up by a bitter pun popular among them. Québec’s official motto is Québec, je me souviens (“I remember”). The workers adopted as their own ironic motto Wal-Mart, je me soumets (“I submit”). Says Sylvie Lavoie, a forty-year-old part-time cashier and single mother who led the worker rebellion in Jonquière: “Wal-Mart will only choose somebody for promotion who thinks Wal-Mart, sleeps Wal-Mart, and eats Wal-Mart, and who puts Wal-Mart before absolutely everything—before their family even.” Like many of her colleagues, Lavoie stood silently through the mandatory Wal-Mart cheer each morning. “It’s not a song, it’s a military chant,” she says. “I found it to be degrading.” 2

  I met Lavoie the morning after my encounter with Monsieur St. Pierre. It is just after 8 o’clock, and she is sitting behind a desk in a union hall less than a mile from the dying store where she worked for four years. Today is the final day for the workers Wal-Mart fired to register for a financial-aid program set up by the UFCW. The union has offered to make up the difference between a worker’s unemployment check and his or her lost Wal-Mart paycheck for a full year or until another job is found—no small challenge in Jonquière. Lavoie, who is unemployed herself, is here bright and early to help with an expected last-minute rush and, in a sense, finish what she started.

  A pretty, vivacious woman with blond-streaked brown hair and a tiny dia
mond stud in her left nostril, Lavoie is dressed in blue jeans and a white, cowl-neck sweater that sets off her tan, which seems incongruous in a place that has yet to fully emerge from winter’s deep freeze. Lavoie was tending bar in Jonquière when the Wal-Mart store opened. She started as a part-time clerk in the baby department and soon became a backup cashier—a proud backup cashier. “My register was always balanced and I had one of the quickest scanning ratios in Québec—close to 700 [items] a minute,” she brags. Although Lavoie liked Wal-Mart at first, she was never one to deny her supervisors the benefit of her point of view. “I am not a troublemaker,” she insists. “But maybe I had a little more character than the others in saying, ‘Look, perhaps there is a fault in the system.’”

  As a part-timer, Lavoie did not qualify for health insurance and was almost always stuck working weekends while her parents took care of her little daughter, who was not happy about her mother’s absences. She repeatedly applied for the full-time cashier jobs that regularly came open and grew increasingly disenchanted as they were filled by co-workers or by new hires. One day an assistant manager called Lavoie in and congratulated her on being selected for a full-time storeroom job for which she had not applied. She refused to take it.

  In 2003, Wal-Mart opened a new store in Alma, about twenty-five miles away, and sent newly hired cashiers to Jonquière for training. Lavoie was outraged to learn that she was being paid less than the new recruits from Alma. As the cashiers in Jonquière got to know and trust one another, they began comparing notes and discovered major pay inequities within their own ranks, too. One day, Lavoie led a delegation of cashiers to the manager’s office to complain. “We were a big bunch of girls and we all went together,” she recalls. “He laughed in our faces. He told us point blank that there would be no report made and that we weren’t supposed to discuss our salaries.”