The Breakdown

Explaining Southern California's economy

How Chinatown could keep Wal-Mart from expanding in California

Wal-Mart is the largest private employer in the U.S. It has its critics. It's expanding in California. And it want to bring a smaller store to L.A.'s Chinatown. But opposition is mounting.
Wal-Mart is the largest private employer in the U.S. It has its critics. It's expanding in California. And it want to bring a smaller store to L.A.'s Chinatown. But opposition is mounting. Robyn Beck/AFP/Getty Images

One of the most famous movies ever made about Los Angeles is Roman Polanski's "Chinatown." In that 1974 film, starring Jack Nicholson and Faye Dunaway, "Chinatown" is 1930s police shorthand for cynicism: a place where everything is so complex that it's better to do nothing.

Discount retailing giant Wal-Mart is currently going through it's own Chinatown moment. Today, a protest by labor leaders and U.S. Congresswoman Judy Chu will take place in the neighborhood. The reason? Wal-Mart wants to bring in a Neighborhood Market — a smaller-box concept that the big-box retailer introduced in the late 1990s and has established as a middle tier, between its well-known Super Centers and it's recently developed Express Stores.

You might think of Wal-Mart as a place where you can buy everything from snow tires to computers to very large quantities of frozen everything, but that's not what the pretty unimaginatively named Neighborhood Market is all about. A good analogy in the SoCal grocery space would be British retailer Tesco's Fresh & Easy stores, which offer a broad variety of everyday goods in a no-nonsense, relatively discounted shopping environment where customers handle their own checkout and bagging.

L.A.'s Chinatown is adjacent to the city's downtown, which in recent years has undergone something of a renaissance. In 2007, Ralph's opened a location in Downtown L.A., the neighborhood's first "real" grocery store in decades. Wal-Mart's focus on Chinatown made sense because it's on the opposite side of the area and is currently served largely by local stores that lack the range of stuff that a Neighborhood Market typically stocks.

Predictably, the Chinatown Chamber of Commerce and the neighborhood's Business Improvement District are behind the store, while it's opposed by various residents, labors advocates, the aforementioned Congresswoman Chu and the L.A. City Council, led by Councilman Ed Reyes, who expressed concern about Chinatown losing its character and suffering from too much traffic (Wal-Mart got the store permitting before the City Council's 13-0 vote against the Neighborhood Market).

Wal-Mart isn't unionized, and it would be heavily understating the case to say that it's been embattled on the labor front over the years. This recent story from USAToday pretty well sums it up. And there's really no point in sugarcoating it. Wal-Mart uses its leverage to drive down costs wherever it can find them. This has led to allegations of late that it will even resort to bribes — allegations that arose from its efforts to expand in Mexico.

That said, Wal-Mart employs more people in the U.S. than any other private employers (only the government employs more). It's a job-creating machine, but those jobs don't pay very well. Benefit packages are also priced in such a way that employees often can't afford them or don't qualify, based on hours worked (which Wal-Mart has been accused of intricately manipulating). This means they have to turn to public assistance, and that's led some to argue that Wal-Mart is basically using a government subsidy to hold down its human costs and juice its profits.

However, in a classic example of disruptive innovation than KPCC's business team explored last year in the lead-up to a grocery workers strike here in Southern California that ultimately didn't happen, Wal-Mart is trying to reduce its reliance on its Super Centers and tap into a healthy wave of innovation that's currently happening in the California grocery market.

The big supermarket players here are getting hit from all sides. They have Whole Foods attacking them at the high end, Trader Joe's and Fresh & Easy on their flanks and a host of ethnic upstarts disrupting them from below. Meanwhile, stores like Target are introducing greatly expanded food offerings. 

Wal-Mart wants in on this action. Which doesn't mean that it isn't moving forward on bigger stores. As California Watch reported last year, it's been more than aggressive on that front. However, it's clear that Wal-Mart wants to be able to establish retail outlets up and down the consumer food chain, so to speak.

The arguments against a Neighborhood Market in Chinatown, given L.A.'s 11 percent unemployment rate, are not particularly strong on their face. Chinatown's character hasn't exactly been set in stone over the years, as this Huffington Post story points out. The new store is also moving into a space that's been vacant for some time, and empty stores aren't what a city facing a $200 million budget deficit needs. 

That said, Wal-Mart's issues with labor are only going to get worse as it pushes into the California market, where as California Watch reported, the company has always faced serious opposition. Today's protest should be a vivid demonstration of that. And it somehow seems appropriate, given L.A.'s actual and cinematic history with Chinatown, that it should come to head there.

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.

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