Wal-Mart Builds, Waits for Communities to Catch Up
It started out in mostly rural areas where other large retailers chose not to build. More recently, Wal-Mart has begun a well-publicized urban push. Now, the retailer is looking to add stores in communities “in the making.”
A report by The News & Observer points out that Wal-Mart is now building stores in markets that appear headed for major spikes in population, even if they are not there yet.
A case in point is Holly Springs, N.C. Recently, the pharmaceutical manufacturer Novartis announced plans to build a $267 million manufacturing plant in the community. The facility is expected to create 350 jobs over five years, bringing new people to the community and the need for more retail options.
Marshal Cohen, chief analyst for research firm The NPD Group, said, “Wal-Mart can certainly afford to have a store sit in an up-and-coming community for 10 years. That’s why they can afford to enter some of these communities that other retailers cannot.”
One benefit of Wal-Mart getting into a market early is that the chain can build its supercenters while the cost of land remains reasonable.
Some have suggested that Wal-Mart has saturated markets with stores and is simply cannibalizing its own business. By building in still developing areas, however, the retailer is comfortable there is room for additional stores.
“We follow the rooftops, of course,” said Tara Stewart, a spokesperson for Wal-Mart. “We are looking to serve a population right now that we feel is underserved.”
Being first to a market doesn’t guarantee success, even for Wal-Mart. In Holly Springs, Harris Teeter has announced plans to build a second store.
Still, observers agree that it is better to get in early rather than late, especially if you’re Wal-Mart.
Connell Radcliff, president of Cary’s 1st Carolina Properties, said, “It’s going to be more difficult later than it is today to get into that market. Land costs will go up, No. 1. But then the people come out of the woodwork who are anti-Wal-Mart. So if you wait, along with paying more for the property, you’re also having to fight the anti-Wal-Mart movement.”
Discussion Questions: Concern has been expressed about Wal-Mart taking business from itself as a result of store growth. Do you believe there are enough
underdeveloped markets (urban, suburban, rural) left where it can build and add to its business? Where do you see the greatest opportunity, in terms of communities, for Wal-Mart
to grow its business?