February 23, 2003

Local grocers bank on neighborly service

By Kathy Helms-Hughes
STAR Staff
khelms@starhq.com

   Is it possible that the site of a former rayon plant which help build the city of Elizabethton could also be the site of a facility which could lead to this small town's demise?
   It's a question many area residents are asking. And the overall consensus among merchants who stand to be affected by the erection of a Wal-Mart Supercenter is that the behemoth shopping center will gobble up regional grocers, mom-and-pop businesses, pharmacies, video stores, tire dealerships, eyeglass businesses, clothing stores -- indeed, anything standing in the way of the mega store and its profit margin.
   Wal-Mart sells almost everything, which makes local merchants nervous. It also continues to add to its line of services. According to USA Today, last year, Wal-Mart teamed with Asbury Automotive, the fifth-largest dealership chain, to offer used cars through Price 1 stores as part of a six-month test project in Houston which could go nationwide. It also made an apparent attempt last year to get into the banking business by filing a request to purchase a struggling California bank it wanted to use to save millions on debit-card processing.
   Wal-Mart is the nation's largest jeweler, with jewelry and watch sales topping $2.3 billion in 2001. It also leads the nation's toy industry with $34 billion in sales, and as of the end of 2001, it was the third-largest drug chain, trailing Walgreen and CVS. It's grocery sales of $65 billion sailed past Kroger ($50 billion), the industry leader, in 2001. Wal-Mart also has started a new chain of supermarkets, known as the Neighborhood Market, and has been reported to be testing "dollar store" areas inside some locations.
   According to Equal Employment Opportunity Commission data, women make up almost three-quarters of Wal-Mart sales workers yet only 10 percent of its store managers are female. A survey by The National Organization for Women (NOW) showed that full-time sales associates earn $6.10 an hour and that half of those full-time employees qualified for food stamps.
   The Star spoke with various business owners throughout the city and county whose businesses stand to be affected by a Wal-Mart Supercenter. Here are their responses.
  
Fighting the competition

   Jeff Jackson, manager of Ingles in Elizabethton, says, "Competition is great, and some areas they have built in are super, but I just don't think our little town can handle it. There's not the volume."
   More than 700 signatures opposing the Supercenter were collected through petitions at his store and other locations and were presented Wednesday to the Elizabethton City Council.
   This is not the first time Ingles has had to face the mega competitor. In Morristown, where the store has two locations, a Supercenter went in across the street from the Morristown Mall.
   "I used to own a candy store in there, and when super Wal-Mart came to Morristown it basically turned over about 65 stores and made that mall look like a ghost town. I was fortunate. I sold my business and got out.
   "We have an Ingles in Lenoir City. They came in and were a big impact on the town. They basically closed everybody down and when that happened, they raised the prices back up, so they weren't really lower than anybody," Jackson said.
   A Supercenter which opened in Ingles' Knoxville operating area also had an impact, he said. "They own so many stores and they are so powerful that they can buy cheaper because they buy in volume and they can undercut us because they get it at cost. If you get something a nickel a can less than cost, then you can lower your price a nickel a can in retail and still make the same gross margins. That's where it hurts. It's just not the same company as when Sam Walton owned it. They're rude and crude."
   Rather than generating new revenue, Wal-Mart and other retailers will be swapping out money, Jackson said. "It's going to kill Winn-Dixie, it's going to kill White's; it's going to hurt me; it's going to hurt Firestone; it's going to hurt the eye doctors in town. And all that revenue they were bringing in, all they're doing is just swapping it over to Wal-Mart."
   Rather than a Supercenter, he said, "We need industry in this town to make jobs so we can put people to work. Then there would be plenty for everybody."
  
Banking on service

   Marilyn Ellis, who with her husband has operated Pierce's Grocery on Watauga Road for four years now, said she feels a Supercenter will hurt a town already affected by a downturn in the economy.
   "The economy has affected everybody. We're just not getting any new businesses here. It's going to affect all of these supermarkets here," Ellis said. "I don't know how long the United States can keep supporting everybody else when we can't support ourselves."
   Pierce's has five employees, and Ellis said she works right alongside them. "My husband is concerned about the employees and that they have a family to feed. The employees that are going to stay here, I tell them, 'You help me and we'll help you, because we need you; we can't run it without you.' "
   Ellis feels her store has something which Wal-Mart can't offer: personalized customer service. "We have a really good customer base," she said. She jokes with some. "I tell them, 'I want you to feel at home,' so I give them a hard time. I say, 'Where have you been? Have you got everything?' "
   Ellis sometimes shops Sam's Club for some items she needs for her store. "They called me from Sam's and said, 'We noticed you didn't buy as much last year. Is there something we could do?'
   "I said, 'Yes, you could boost the economy if you want to help me out here, and maybe go up on your prices ...' They're becoming a conglomerate and a monopoly; and you can't compete with them," she said.
  
What the market will bear

   Sutton Brown is the third-generation owner of Brown's Supermarket and Hardware in Hampton. When the regional supermarket chains came into the area, they naturally took away some of Brown's customers. While a Supercenter might drain a few more, Brown feels it might actually boost business in his hardware store and meat department.
   "It's nice to have a place that you can go and pick up supplies, and do it reasonably, with extra attention. For some reason, the smaller stores seem to give better customer service. I know that Wal-Mart has somebody there at the door to greet people. We may have somebody in the back that's threading pipe, but we'll get to you eventually -- and we'll probably do it quicker than if you'd talked to the person at [Wal-Mart's] front door."
   A Supercenter has the potential to drive some smaller businesses completely out of business. Without those friendly neighborhood grocers, "What do you do if there's a snowstorm and you can't get to town?" Brown asked. Or in the event of a terrorist attack, "What do you do if you need duct tape and Wal-Mart runs out?"
   Brown says Wal-Mart can adjust its market to a larger extent than most people would imagine. "Once they establish a market, in my opinion, and reach dominant position, then they can do whatever they want to with their price structure. They are the driving force. In our particular situation, I have some items that are less expensive than Wal-Mart, but I can't compete with anything that they decide they're going to sell cheaper. I'm not sure that's a benefit to everything. It's a benefit to the stockholders of Wal-Mart," he said.
   "I think that you're better off with a lot of small markets as opposed to one big one. When you cut a pie into so many pieces, and you look at the total picture, you've still got a pie. But Wal-Mart cannot provide the customer service that the little guys are doing."
   Brown's banks locally, hires local employees, and all of the money stays within the community, he said, unlike Wal-Mart, whose profits go to its headquarters in Bentonville, Ark.
  
Jobs for the community

  
Carrie Bernier, director of human resources at White's Fresh Foods, says White's is not against having Wal-Mart as a competitor. "They're a very good competitor; they do it, and they do it better than anyone else. Where we're concerned is if they take any of our customer count, our customer base, of course, that is eliminating positions there in Elizabethton.
   "We hire and promote from Elizabethton. Both of our store managers are from right there in that community. We have a grocery supervisor that's from Elizabethton, a dairy supervisor that's from Elizabethton, as well as a lot of the full-time positions here in the office and warehouse," whereas, Wal-Mart typically may import employees, she said.
   "They may promote from within, but I know that our basis and our foundation is a lot stronger with promoting and giving jobs to the local natives."
   Would White's lose some of its associates to the Supercenter's grocery business? "Yes, we all trade them back and forth -- Food City, Ingles, Winn-Dixie. We kind of train each others help."

Focusing on customers

  
Any new supermarket moving into an area near one of Winn-Dixie's stores will have some impact, according to Mickey Clerc, company spokesman for Winn-Dixie in Jacksonville, Fla.
   To what degree Winn-Dixie would be affected, Clerc said, there's no way of knowing in advance. "But the fact is, there's X amount of business and X number of supermarkets; and if another one comes to town, they will share that business and nobody knows what percentages any of them will have."
   Winn-Dixie competes in its marketplaces against most of the area competitors, including Wal-Mart, Clerc said. "We compete against a large number of Wal-Mart stores throughout our operating area. This is not something new for us."
   But competing is not Winn-Dixie's focus. "We stay focused on our customers. Our focus is to serve our customers the best we can, to have the best supermarket in the neighborhood, to do everything that we can to earn their patronage and not to give them a reason to go anywhere else to shop," Clerc said.
   Yet Winn-Dixie understands that it has to be competitive not only in price "but in merchandise selection, quality service and convenience," Clerc said. "Customers want everything, and it's our job to give it to them."