Altadena Walmart: Small businesses worry about competition from major retailer
This story is part of a series on the disruptions to local small businesses expected in the community of Altadena when a new Walmart Neighborhood Market opens next year. To read the rest of the series, check out the links at the end of this story.
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These days, Sanghui Yoo says her husband has trouble sleeping. He tosses and turns, stressed out about the construction across the street on a new Walmart Neighborhood Market that threatens to kill their tiny liquor store.
Yoo and others in the community say they are scared of what will happen when the retail giant opens its doors. For five years, the empty building on Lincoln Avenue in Altadena was an eyesore. While the neighborhood might not be the most attractive, small businesses nearby—several of them run by first generation immigrants—have continued to operate.
There are about a dozen family-owned businesses from a clothing shop to a party store filled with piñatas that dot the street and cater to the working class community. Wal-Mart could change all that.
“I don’t understand Wal-Mart, why they (would) open around here,” Yoo said, as she watched over her store, All Star Liquor. “I know all of the small businesses in this area will be worse than right now. It’s bad news to the small business owner.”
Wal-Mart is planning to open a 28,000 square foot Neighborhood Market next year on the corner of Lincoln Avenue and Figueroa Drive. A Neighborhood Market is one-fifth the size of a typical Walmart Supercenter and stocks items found at a grocery store, like fresh produce, meats and household items like paper towels and cleaning supplies. The store won’t carry things like TVs, clothing or video games.
The community has largely welcomed the company, said Wal-Mart spokeswoman Rachel Wall.
“This store will serve as a choice," Wall said. "I think people will be pleasantly surprised by how much Walmart can save them money.”
The retailer plans on hiring 65 employees for the location, which will open in the first quarter of 2013. Full-time hourly workers will earn on average $12.82 an hour.
Kimberly Ritter-Martinez, an economist with the Los Angeles County Economic Development Corporation, said it's encouraging to see businesses expanding and adding employees. Los Angeles County's unemployment rate is 10.6 percent, higher than the national rate of 7.8 percent.
The Walmart jobs pay above minimum wage and will give young people and less-skilled workers a chance to enter the workforce, Ritter-Martinez said.
"These jobs will generate income for retail workers, who will likewise spend for goods and services, helping to create more jobs," she said.
The rapid rollout of Neighborhood Markets is part of Wal-Mart’s overall strategy to build a larger number of smaller stores that cost less to run and require less capital to build than large supercenters.
There will be more than 500 Neighborhood Market stores grossing more than $10 billion in sales by fiscal year 2016, according to a presentation made by Bill Simon, CEO of Wal-Mart U.S.
Today there are more than 200 Neighborhood Markets in the United States, with seven in Southern California. Three Neighborhood Markets are under construction in Altadena, Downtown L.A.'s Chinatown and Downey.
“We’re able to build more stores and more square footage with the same or less capital,” Simon told investors earlier this month. “It’s really exciting. It’s very effective.”
Wal-Mart still makes the majority of its money through its larger stores, but analysts note that the smaller grocery store format is a fast growing segment in retail.
In the past, grocers moved out of urban areas because of increased crime and followed more affluent shoppers to the suburbs. But as young professionals move into low-income areas and back into downtowns, the retailers have come back too, moving into smaller, existing storefronts.
That is bad news for family businesses like Yoo’s All Star Liquor, which sells similar items to Walmart.
“Their price will be very, very much lower than ours definitely,” Yoo said.
The liquor store is 3,000 square feet and on its small shelves are household supplies, clothing and food items like cookies and soups.
Yoo said sales took a 10 to 15 percent hit when a competing independent grocery chain, Super King Markets opened down the street several years ago. Then, the recession made business slower. She estimates Walmart could eat up 20 to 30 percent of her sales.
Williams Perera, 71, is also worried about the future of his small business, which sells big jugs of water, soda and piñatas. He’s run his store, Agua Pura Vida, for five years, investing the money he made fixing cars into having his own store for his retirement.
“My business, pretty soon I may need to close, because (Walmart) might kill me,” Perera said.
Business is steady now, but he fears sales will decline when Walmart opens.
There have been studies that show small businesses located near a Walmart that sell similar items are more likely to fail, said Jenny Schuetz, assistant professor with the USC Price School of Public Policy.
A 2004 University of Missouri study said a new Walmart store creates 100 jobs in a community when it opens, but years later that gain is reduced by 40 to 60 jobs in part because other competing retailers shut down.
Already on Lincoln Avenue near the new Walmart, there are two grocery stores—independent chain Super King Markets and Poncitlan Meat Market. Poncitlan declined comment and Super King did not respond to requests for comment.
Small businesses can’t compete with the sheer bargaining power of Wal-Mart, which has more than 10,000 stores worldwide. Wal-Mart can negotiate lower prices and buy them in bulk at a central location and then distribute it to all their stores, Schuetz said. A small business with a single location can’t do that.
“Wal-Mart is really the 800-pound gorilla of the retail industry,” Schuetz said. “The mom and pop stores don’t have the same kind of bargaining power and so they are paying a higher price directly from the suppliers and that gets passed along to consumers in a higher markup.”
But Wal-Mart said small businesses benefit from its presence. Wal-Mart pointed to a shopping center in Panorama City where a Neighborhood Market opened last month. Before, the shopping center had trouble keeping tenants, but now there's less vacancy because of the increased traffic from Walmart shoppers.
Cheaper prices at Walmart does mean better discounts for consumers looking for a good bargain in a sluggish economy.
Trevon Williams, 34, already shops at Walmart but he has to drive to get there from his Altadena home. He’s looking forward to a shorter commute.
“There’s nowhere to go shopping and get what you need done," Williams said.
Some Altadena residents disagree. They formed a group called Save Altadena, which has posted anti-Walmart signs and have advocated against a second Walmart on Lake Avenue and Calaveras Street. Wal-Mart has looked at the site, but no deal has been signed yet.
The group is also petitioning for stricter zoning rules to stop big retailers like Wal-Mart from coming to Altadena until a study is conducted on their economic and environmental impact to the community.
“We want to prevent big businesses from coming in here ... and (destroying) the mom and pop business atmosphere that we have in Altadena,” said Gail Casburn, an owner of the Altadena Ale and Wine House, which hosts Save Altadena meetings.
Casburn said she wished a smaller grocer like Trader Joe's could have moved into the space. A representative of the building's owner who declined to be named said Trader Joe's considered the site, but ultimately turned it down. Walmart was picked over multiple dollar stores and places of worship because the community said it needed a mainstream grocer, the representative said.
Tecumseh Shackelford, a former Altadena Town Council member, said neighborhood liquor stores like All Star Liquor are "a real problem" because they encourage crime and loitering. He would like to get rid of them and have supermarkets like Walmart sell alcohol instead. Walmart hasn't applied for a liquor license yet, but could request one in the future.
"We're upgrading," Shackelford said.
The amount of police responses to the area near Lincoln Avenue and Figueroa Drive, where All Star Liquor is located, have been among the highest in Altadena, said Lt. Duane Allen from the Los Angeles County Sheriff's Department's Altadena station. There have been 68 incidents there in the last year, he added. Incidents can range from fights, panhandling, to people being drunk.
Amir Siddiqi, owner of Jim's Burgers, said he likes the idea of Walmart coming to his street.
When Siddiqi took over the restaurant two years ago, the property was run down and there were bullet holes in the window.
Lincoln Avenue used to be home to many liquor stores, but several years ago, a 24 Hour Fitness and a Super King opened across the street, bringing in shoppers from La Canada-Flintridge, La Crescenta and Pasadena. Siddiqi thinks Walmart will increase the crowd even more.
“It will actually bring in more traffic to the area," Siddiqi said. “More traffic means … people shopping more and getting more aware of Altadena."
But Sanghui Yoo is gearing up to battle Walmart with her business, All Star Liquor. She plans to reduce the amount of food items sold at her store like cookies, candy and canned items. She'll increase the alcohol to offset the expected sales loss. Her husband, Jaeil, declined to go into the specifics.
Ever since she came to the United States more than 20 years ago from Korea, Yoo says she has been in the convenience store business and her family has invested so much money into the store already.
“If this business will be worse, we don’t have any choice,” Yoo said.
All Star Liquor has been on Lincoln Avenue for seven years and she hopes the business can compete.
She’ll find out when the Walmart opens.