An Overview of Big Box Retail

Al Norman
(From his book Slam-Dunking Wal-Mart)

Tom Coughlin
Executive Vice President, Operations
Wal-Mart Stores Division

Over the last decade, economy of scale and volume of sale have driven numerous retail corporations throughout the United States to abandon their traditional stores in favor of Big Box superstore operations. From hardware supplies to athletic equipment and from music to garments, companies such as Wal-Mart, Target, Home Depot, Sports Authority, Costco, and Ikea have made it their collective goal to provide cheap, convenient shopping for consumers and to dominate local markets while laying smaller businesses to waste.

What is a Big Box Retailer?

While the designation, “Big Box” holds no explicit parameters, most stores that garner the title adhere to a few guiding characteristics. Most prominently, Big Boxes are enormous. A typical Big Box ranges in size from 20,000 to 130,00 square feet for a category killer to over 200,000 square feet for a Supercenter department store.

Big Box architecture is sparse. As the name would suggest, a typical Big Box stands as little more than a windowless, rectangular box, three-story in height, with few adorning awnings or arcades. Almost all Big Boxes employ standardized architecture and signage so that a retail store in California will be indistinguishable from the same retailer’s store in Delaware.

Big Boxes cater to automobile-based consumers. With acres of parking lots and often little access to public transportation, Big Boxes rely on auto-borne customers to patronize their stores. Big Box roadway configurations rarely accommodate pedestrians or bikers.

Unlike traditional retail stores, Big Boxes profit predominately from sales volume rather than price markup. Where traditional retail stores rely on a distribution channel to acquire merchandise from manufacturers, Big Boxes purchase in such volumes that they can deal directly with the manufacturers, eliminating the middleman to offer a massive quantity of products at low cost and with a maximum profit margin.

Finally, Big Box retail stores exist regardless of locality. One can find them in depressed rural regions and affluent city suburbs. Corporations tend to build Big Boxes within close proximity to highway interchanges and other regions of high-density traffic but with the notable exception of downtown urban centers, Big Boxes exist ubiquitously.

While a variety of businesses have bought into the Big Box model, the actual stores are more easily classified. Civil engineer and sprawl theorist, Dean Schwanke divides Big Boxes, also known as Large Retail Establishments (LRE) in the planning community, into the following categories:

Discount Department Stores: These superstores rely upon a vast volume of merchandise in order to offer varied products and low prices to consumers. Often times, these Big Boxes offer such a vast range of products, as many as 60,000 distinct items, as to persuade consumers to shop exclusively at one or two stores for all their needs. Examples include Wal-Mart, Target, Kmart, and Target.

Category Killers: These specialty operations apply the discount store philosophy to a specific niche market in order to dominate its field. Examples include Circuit City in the electronics industry, Home Depot in the home improvement industry, Sports Authority in the athletic equipment and apparel industry, Walgreen’s Drugs in the medicine industry, and Kohls in the garment business.

Warehouse Clubs: These Big Boxes rely on membership-driven clubs to push a more limited number of products (3,000 to 5,000 distinct items) of nationally branded merchandise. Their success is largely founded by their establishment of a perennial customer base, that frequently makes bulk purchases. Sam’s Club, Pace and Price-Costco are representative of this category.

Though most Big Boxes fall within these three categories, a few Superstores elude classification. Ikea, for example, represents a combination of Category Killer and Discount Department Store. While dominating large sectors of the furniture market, the Swedish hybrid warehouse/department store draws profits from its vast quantity of merchandise. Furthermore, Ikea attracts customers through its ability to immerse consumers within its Big Boxes, offering childcare facilities and food courts to help keep potential buyers within their walls.

A growing phenomena within big box retail is the power center or mega-center where two or more big box retailers will co-locate on the same property. In some cases the buildings may be free standing while in others they may connected directly or by intervening smaller stores. These mega-centers can range from 250,000 square feet to over a million square feet in size and are always accompanied by enormous parking areas.

How Big is Big? How Bad is Big?

To illustrate the magnitude of Big Box retail, consider the example of Wal-Mart. From a single store opened in Rogers, Arkansas in 1962, Wal-Mart has grown to the largest company in the world exceeding Exxon/Mobil in size. The speed with which Wal-Mart has grown has been staggering. From $12.6 million in 1967 to $44 million in 1970 to $1.25 billion in 1979 to $105 billion in 1997 to $165 billion in 2000. In 2002, Wal-Mart sales hit $217.8 billion dollars including a single day sales record of $1.43 billion dollars on the day after Thanksgiving.

With 3,000 stores, 100 million customers per week, and over 950,000 employees Wal-Mart is now the largest private employer in the United States. In addition to stores within the United States, Wal-Mart also runs operations in Canada, Britain, Germany, Korea, Mexico, Brazil and Argentina, and plans to open 50 new discount stores, 180-185 new Super centers, 50-55 new SAM'S CLUBS in US in 2004. At a 1996 annual stockholders’ meeting, Chief Executive Officer Dave Glass promised boldly, "We're going to dominate North America. " They have.

Behind Wal-Mart’s behemoth operations front and million-dollar publicity facades lies a more deceitful side to the corporation. For instance, while Wal-Mart qualifies as one of the most profitable companies in the United States and boasts that it provides college scholarship money for local high school seniors, the Big Box superstore donates only .004% of its earnings to charitable ventures, one of the lowest rates of any large-scale retail chain in the nation. In similar fashion, Wal-Mart frequently advertises its American-made products even though only 15% of the store’s merchandise is actually manufactured in the US. The other 85% of the chain’s products come from overseas, often from sweatshops .

Employee relations represent another juncture where Wal-Mart exerts its financial prerogatives. Despite cheerful commercials and its slogan “We make a difference everyday,” the vast majority of Wal-Mart employees work under the poverty line and each year, the retailer sees a huge employee turnover. In fact, Wal-Mart hires 550,000 new employees a year while its total workforce is approximately 965,000. For those willing to remain with Wal-Mart for an extended period of time, the corporation provides health benefits. However, since the cost of this program often consumes up to 35% of a typical Wal-Mart employee’s paycheck, few workers choose this plan .

Finally, Wal-Mart has struck national controversy through its de facto censoring policies on incoming music and periodicals. The Big Box retailer refuses to sell CDs, magazines, and other products that it deems overly violent, pornographic, or warrant parental warning stickers. Since Wal-Mart commands the largest music customer base in the world, record companies often issue “cleaned-up” Wal-Mart versions of rock and roll and hip-hop albums whose lyrics and cover-art would not otherwise meet the chain’s moral standards. Magazines such as Vogue and Cosmopolitan routinely run their storyboards by Wal-Mart to avoid seeing their publications removed from the shelves.

Although Wal-Mart represents the largest Big Box operation, it is by no means the only company pursuing this retail business model. Rather, a plethora of corporations have stretched their stores to epic proportions in the hopes of monopolizing local niche markets or providing massive “one-stop” convenience shopping for more eclectic operations. Like Wal-Mart, most of these corporations have billions of public relations dollars at their disposal to advertise products and mask brutal corporate practices.

Big Boxes and Market Domination

Today, Big Boxes stand as one of the largest and most visual symbols of suburban and rural sprawl, pose points of contention among municipal planners and entrepreneurs, and pose one of the greatest threats to community integrity across the nation.

When arriving in a community, Big Box retail stores tend to follow a general strategy to entice employees, attract customers, and eliminate local competition. When a Big Box, such as Wal-Mart or the Home Depot opens in a new town, the store will hire more employees than it needs while establishing base prices significantly lower than any surrounding competition. In one specific tactic, known as variable pricing, Big Boxes offer some products as “loss leaders” (a product sold at a loss to the company in order to lure customers into the store) . This pricing/service combination, in addition to wide merchandise selection usually results in a customer walking away from a new Big Box with a positive experience and the desire to return.

Over time, Big Boxes leverage their volume and convenience over local retailers to the point that many of these smaller establishments go out of business. As its competition thins, a Big Box will often layoff a substantial number of employees while raising prices to maximize its profit in a near monopolistic environment. In some regions, local retail businesses face such decimation to the point that Big Boxes alone remain to compete for local consumer dollars.

In his report, “Measuring the Economic and Sociological Impact of the Mega-Retail Discount Chains on Small Enterprise in Urban, Suburban and Rural Communities," Professor Edward B. Shils of the Wharton Business School at the University of Pennsylvania enumerates the fundamental advantages Big Boxes hold over smaller business:

At the surface level, local consumers seem to benefit from lowered prices and greater convenience. However, as many of the communities surrounding Big Boxes can attest, the drawbacks of superstores often outweigh their assumed benefits.

Community Concerns Regarding Big Box Retail

Communities around the nation have offered a slew of concerns regarding the large-scale construction of Big Box Retail Stores, many of which are extensively detailed elsewhere in the section The Impact of Big Box Retail. Among the topics discussed there at length are the aforementioned devastation of local businesses as well as the increased traffic and pollution drawn into a community from outsiders patronizing the stores. Since nearly 100% of Big Box customers arrive to the stores by car, Big Boxes often induce road congestion and in some cases have even rendered surrounding road networks obsolete. Many times, local taxpayers have needed to foot the bill for new road construction in order to accommodate the added traffic generated by the Big Box.

Citizens and theorists have also discussed more aesthetic concerns stemming from the size, location, and architecture. Many have expressed a fear at the destruction of harmony within a community caused by the presence of a hulking structure, buffered by vast parking lots, and offering little continuity with any surrounding buildings and architecture. Since Big Boxes require large land areas for the store structure and parking, the superstores are often responsible for mass destruction of open space forests, fields, and wetlands. Considering the meteoritic rise of the Big Boxes, the nationwide environmental damage caused by these centers is nearly incalculable.

However, in the commercial cycle, active Big Box stores do not represent the worst-case scenario for a given community. Since corporations employing the Big Box commercial method tend to run hundreds of operations simultaneously, any given store can face relocation or closing at any time for any reason. Presently, thousands of abandoned Big Box stores sit idly across the nation standing only as reminders of retail glut and corporate avarice.

Wal-Mart alone has abandoned 380 stores in the United States, many of which sit within miles of newer, larger operations . To further exacerbate this situation, Wal-Mart refuses to sell its stores to competitors (often the only potential tenants who could ever make use of the floor space) and in at least one case, an abandoned Wal-Mart was torn down at taxpayer expense . When not resold or raised, abandoned Big Box stores fall into disrepair, often attracting vandalism and crime. Regardless of given store’s fate, abandoned Big Boxes represent economic and esthetic wasteland that can mar communities for decades.

For example, in Albert Lea, Minnesota Wal-Mart has decided to close one of its stores, though the operation is only 11 years old. This sudden corporate decision will leave Albert Lea planners scrambling for solutions to an abandoned 80,000 square foot shell . Lacking funds and political clout, the small town may stare out over a decaying retail shell for many years to come. In Tampa, Florida, local officials will face a magnified situation as three Big Box businesses have decided to abandon the same strip mall. Sports Authority, Mars Music, and Service Merchandise Company have each chosen to leave their storefronts along Hillsborough Avenue leaving hundreds of thousands of square feet unoccupied and unusable.

Community Action Against Big Box Retail

Having witnessed secondhand the devastating effects of Big Box Retail stores on their surrounding communities, many towns and villages have decided to stand up against the giant corporate chains to either discourage or bar their opening of new stores in their local regions. Though most of these efforts have met with failure, nearly 200 communities have succeeded in stopping Big Boxes, preserving their communities while leaving conservationists hopeful .

Recently, a Public Broadcasting documentary detailed the story of Ashland, Virginia, a picturesque southern town, and its struggle to keep Wal-Mart from building a Big Box in their community. The narrative showed how corporations would convince local politicians that potential employment and tax revenues from the new store would more than offset the detrimental environmental impact caused by the Big Box. Wal-Mart prevailed in the bitter fight after making a few concessions to funding road improvements in Ashland, however, this struggle certainly illustrates the will of citizens to preserve their communities.

In response to the tidal wave of Big Box construction, some towns have established ordinances designed either to discourage Big Boxes from building in their communities or to mitigate their aesthetic blight. Some of these rules include architectural, landscaping, and signage regulations, as well as rules placing the onus on businesses to allow safe pedestrian access to their storefronts. Some other rules speak directly to the ugliness of Big Boxes: Some ordinances forbid businesses from constructing uninterrupted façades greater than 100 feet. Other rules stipulate that 60% of any storefront must offer windows, awnings, or arcades. Still another category of ordinances attempts to soften the blow of Big Box Construction. Such rules force all stores to make documented efforts to blend in with the surrounding community and existing architecture. Since most Big Boxes are long, windowless, and unadorned structures, these rules have served as effective legal ammunition for small towns to use in their battle with Big Box retailers.

Finally, a number of grass roots organizations have authored books and offer consulting services to aid those in the fight against Big Box superstores. Sprawl-Busters is a nationwide grass-routes organization that strives to “help local community coalitions on-site to design and implement successful campaigns against mega stores and other undesirable large-scale developments .” The group is headed by Al Norman, a writer who gained nationwide fame in 1993 by spearheading a successful campaign to halt Wal-Mart from building a Big Box in his hometown of Greenfield, Massachusetts. In his book, Slam-Dunking Wal-Mart, Norman lists the “10 Sins of Retail Sprawl.” He claims that Big Boxes:

1. Destroy the economic and environmental value of land.

2. Encourage an inefficient land-use pattern that is very expensive to serve.

3. Foster redundant competition between local governments, an economic war of tax incentives.

4. Force costly infrastructure development at the edge of towns.

5. Cause disinvestment from established core commercial areas.

6. Require the use of public tax support for revitalizing rundown core areas.

7. Degrade the visual, aesthetic character of local communities.

8. Lower the value of other commercial and residential property, reducing public revenues.

9. Weaken the sense of place and community cohesiveness.

10. Masquerade as a form of economic development .

By offering consulting services to small towns around the nation, Sprawl-Busters hope only to decelerate the construction of Big Box superstores around the nation, but also to empower local activists, citizens and communities to voice their interests in the face of overwhelming corporate influence.

Conclusion

From Chandler, Arizona to Warwick, Pennsylvania and Northboro, Massachusetts to Gig Harbor, Washington, citizens around the United States have joined a common cause to preserve the nature, lifestyles, and businesses of their communities from the onslaught of prefabricated commerce. Hopefully, with greater citizen awareness, stricter local and state ordinances, and more extensive grass roots activism, a greater number of communities will find the means to effectively bar Big Boxes. Then, having escaped the environmental and devastation embodied in Big Boxes, as well as the looming potential for a permanent eye sore, these communities can progress with greater integrity, dignity and health.

Bibliography

“Big Box Retail”

“Costco”

Cronan, Carl. “Hillsborough Avenue expansion may leave big-box retail in dust.” The Business Journal: Tampa Bay. 19 May 2003.

Mitchell, Stacy. “Commentary: When a Giant Retailer Moves On, It Leaves its 'Big Box' Behind.”

Shills, Edward B. “Measuring the Economic and Sociological Impact of the Mega-Retail Discount Chains on Small Enterprise in Urban, Suburban and Rural Communities.” 1997.

“Sprawl Busters”

“Store Wars”

“Wal-Mart.com”