Walmart competitors stir up protests

Safeway, Supervalu and others help organize opposition to new Walmart locations to preserve market share.

By InvestorPlace Jun 7, 2010 12:47PM

walmart logoWhen Walmart (WMT) identifies a new location for one of the chain's supercenters, that often generates some degree of local opposition. Some of that, it turns out, is coming from outside agitators.


The Wall Street Journal reports that competing chains such as Safeway (SWY), Supervalu (SVU)  and others retain a consulting firm to lead the charge against a new Wal-Mart store. That means that some of those "concerned citizens" writing letters to the editor may actually be sticking up for corporate interests and not the community’s welfare.


It is obviously not kosher for a giant national chain like Safeway to rail against Wal-Mart for sticking it to the "little guy." With a market capitalization of $8 billion, Safeway is hardly a small business. But throwing their weight behind efforts to keep out Wal-Mart shouldn’t come as too much of a surprise.

WMT is well-known for grabbing sales from competing stores, particularly grocery stores, with its low-priced model. In fact, Wal-Mart generates more than half its U.S. profit from grocery sales.

The battles are over market share, which Wal-Mart usually wins because of its focus on low prices. Rival chains, which often don't win the battles, at least delay the opening of a new Wal-Mart store and gin up serious negative publicity for the retailing giant.


The WSJ article reviewed documents that demonstrated how Supervalu had blocked a new Wal-Mart store from being built near Chicago where it would compete with nine nearby Jewel-Osco stores. The city lost millions of dollars in property and sales tax revenues as a result of a three-year delay in building the Wal-Mart supercenter.


The consulting firm, Saint Consulting Group, uses tactics adapted from political campaigns. Phone banks, petitions, targeted websites and Saint operatives who used assumed names helped stir up local opposition. The company claims it has launched more than 1,500 such campaigns in 44 states, with about 500 campaigns involved with trying to block development.


Safeway, according to the WSJ, hired Saint to block Wal-Mart supercenters in more than 30 locations. In some cases, grocery store unions have paid a portion of the fees for the clandestine operations. A union spokesperson said, "The work we've funded Saint to do to preserve our market share and our jobs is within our First Amendment rights."


There is nothing illegal about any of this cloak and dagger work, although companies that consistently harass developers do get more scrutiny under existing legal doctrines permitting the work. That's partly the reason that Saint staffers use aliases and other techniques to withhold client identities.


Apparently now all is fair in love and war -- and retailing.

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