NEW YORK — Wal-Mart wants Manhattan — and Brooklyn, Queens, the Bronx and Staten Island, too.
The world’s biggest retailer, battling political and organized labor opposition, has renewed its focus on a drive to gain a foothold in the most populous U.S. city.
“We are continuing to look at opportunities to get a store in any and all of the five boroughs,” said Philip Serghini, community affairs manager for Wal-Mart’s Northeast division.
After being defeated last year in its initial expansion push here, the retailer has gone on the offensive. It is seeking potential store locations that don’t require zoning changes that must be approved by the 51-member City Council, real estate brokers said.
Wal-Mart is lobbying key New York officials in an effort to generate good will and “clear up misconceptions about the company,” and it is prepared to revamp the customary size and layout of stores, as well as consider changing its merchandise mix, Serghini said. “If it took not selling groceries to open a store in New York City, we would be open to listening,” he said.
New York, where land is scarce and costs are high, is a notoriously difficult market to break into. In addition to the City Council, community boards in each borough may block a project if it requires a variance or a special permit. The company, which has resisted efforts to unionize its workers, is also fiercely opposed by unions, as well as by small shopkeepers.
The stakes are high, because Wal-Mart is focused on expanding in urban markets as it begins to reach saturation levels in suburban and rural areas across the U.S. The retailer, based in Bentonville, Ark., has embarked on a series of initiatives to improve its image and rebut criticism about its wage, health care and environmental policies. Wal-Mart announced plans this month to build 50 stores in the next two years in city neighborhoods across the U.S. that are struggling with high unemployment or crime rates and on sites that had been contaminated.
Helen Sears, a Democratic councilwoman from Queens, said although Wal-Mart is “aching to come in here … a store would be difficult for us to support … It isn’t a question of keeping big boxes out, it’s a question of our responsibility to see that people are treated fairly in our city. I met with [Wal-Mart] several times last year. Wal-Mart is huge; they’ve got a big stick.”
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Wal-Mart has faced battles in other cities. Two years ago, in Inglewood, Calif., near Los Angeles, voters rejected a ballot initiative to allow construction of a Supercenter. The company also was successfully opposed when it tried to open on Chicago’s South Side.
As recently as this month, Wal-Mart considered opening a store in an empty former Caldor store in Flushing, Queens, but backed off because it did not “meet the company’s criteria,” Serghini said. “It actually got fairly far along in the review process internally … For our first store, we want to put our best foot forward and provide the best shopping experience” for customers.
“Opening a Wal-Mart is not politically popular,” he said. “We’re beginning to try to meet with [New York] legislators to set the facts straight as to what’s been said about the company. Much of it is misleading. We’ve met with some elected officials who’ve said, ‘You’re not a union shop, you’re not getting in here.'”
Mayor Michael Bloomberg has said legal guidelines must be met. “There are regulations about where you can build and how big you can build,” Bloomberg said last year. As long as a company complies with zoning regulations and gets the necessary approvals, “I shouldn’t be the one to dictate whether [a store can be built] based on who owns the store.”
Wal-Mart was rebuffed in 2005 after it was revealed that the retailer was part of Vornado Realty Trust’s proposed mixed-use development in Rego Park, Queens. Vornado ended discussions with Wal-Mart in the face of a fierce backlash.
“In many ways, with any big-box deal in New York, the stars really have to align,” said Peter Ripka, principal of Ripco Real Estate. “The site needs to be large enough, and the land price has to be within reason. Construction costs are astronomical here, which only puts more pressure on the land price.”
Ripka said Wal-Mart is “slow and deliberate and very fiscally disciplined.”
Wal-Mart’s rival Target has managed to open two units in Brooklyn and stores in Elmhurst and Flushing, Queens, and on Staten Island.
While the retailer has been trying to appeal to upscale shoppers with merchandise such as its Metro 7 clothing collection and a new store in Plano, Tex., that sells $557 bottles of wine, Serghini said that in New York, consumers’ attitudes about Wal-Mart fall along economic lines. “People from higher incomes tend to be opponents of Wal-Mart,” he said. “People who live in the boroughs, who make less money, tend to be supporters.”
He cited a new study by the company that found shoppers living in the boroughs spent $128 million in Wal-Mart stores that are just outside the city. There are Wal-Marts in suburban New Jersey as well as in New York’s Westchester County and on Long Island.
The city’s own research shows that Wal-Mart has a large fan base in the New York City metropolitan area. “We’ve gotten some numbers on their New Jersey stores,” said a city official, who asked not to be identified. “They have a couple of stores in Union County [N.J.] on Route 9 that do huge numbers. A store in Valley Stream, over the Queens border, has 80 percent of its sales coming out of New York City. To some extent, Wal-Mart is already serving the market with their suburban stores.”
But the city itself is the prize. Avoiding or minimizing governmental approvals is difficult, said David Rosenberg, a broker at Robert K. Futterman Assoc.
Wal-Mart had shown interest in a midtown Manhattan retail site in a Vornado tower at 59th Street and Lexington Avenue that ultimately became a Home Depot unit. “It was too expensive,” Rosenberg said. “Home Depot was willing to do a much smaller store.”
Finding a suitable location “requires a certain amount of creativity in acquiring and assembling pieces of land,” he explained. “There aren’t that many buildings large enough to house Wal-Mart’s format as it is now, with 120,000 to 150,000 square feet on one level.” As evidence of the company’s adaptability, however, Rosenberg pointed out that certain stores on Long Island have about 100,000 square feet of space, less than the traditional footprint.
“We’re used to our traditional stores, but I think you’ll see us being more progressive in the future,” Kim Lane, Wal-Mart’s vice president and real estate director for the Northeast, said at the International Council of Shopping Centers’ national deal-making conference here this year.
In about three weeks, Wal-Mart is to open a two-level store in White Plains, N.Y. — a departure for a company that usually builds on one level.
While other big-box users have adapted to lower-level or basement space, the cost of such real estate is “hard to swallow,” Lane said.
In New York, “We’d be paying more money than we ever paid,” she said. “We have to figure out how to get the freight on the shelves in a timely manner so we can pay for those rents.”
As for local opposition, Lane said, “We’re not looking in non-retail locations. We’re taking the concerns and needs of the community into consideration … We’re not sitting back and letting a vocal minority oppose us.”