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Walmart: An economic super power retrenches

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The economic impact of the closure of Walmart that is expected to hit the Baldwin Hills Mall is bad and inevitable, according to Stuart Rosenthal, an urban economics professor at the University of Syracuse.

Rosenthal believes that “when one large department store leaves a mall or shopping center, other occupants may follow and according to the economist, “this is a geographical area that was just beginning to show promise of recovering from the riots of 1992.”

Rosenthal compared Crenshaw to other main inner city boulevards like Western and Vermont avenues, and referred to these streets often during our conversation.

I explained to Rosenthal that Crenshaw was always considered an elite street in the inner city in comparison to Western and Vermont avenues.

Rosenthal informed me that he is familiar with South Los Angeles and has worked on various urban city projects; his first was as consultant with the Dunbar Hotel Economic Council in the 1970s; then he worked with the National Housing Services of Los Angeles in the 1980s with former director Marcia Hampton; and finally recently as a former consultant to Capri Capital LLC (owners Baldwin Hills Mall).

Rumors are running rampant in the community, that Macy’s and Sears may follow suit and close down their Baldwin Hills location as well.

Professor Rosenthal responds that the rumors could be very accurate at some point in time. However, Rosenthal said the Baldwin Hills Macy’s did not make the list of projected closures, according to a recent BusinessWire report dated Jan. 6.

Rosenthal refers to Walmart’s departure as a failed experiment with a smaller-than-usual version of Walmart, known within the Walmart company as mini urban store. He says the company’s decision to create mini urban stores as opposed to super stores was a theory which may have backfired.

“Walmart mini or urban stores are one fourth the size of the larger stores, and when you locate smaller stores in urban areas as opposed to the larger suburban stores, it creates distrust within the community. These urban communities already have a distrust when it comes to products sold in their community. They (the shoppers) believe the stock is substandard and Walmarts outside their community in suburbia might have a better selection of goods since their stores are and have a wider range of product selections.

The same feelings about quantity and quality may exist towards the other two anchor stores that share space at the Baldwin Hills Mall, Sears and Macy’s. Now these fears local residents have of retail redlining may have caused individuals in Crenshaw community to avoid shopping there and instead prompted them to travel to stores outside of their community. Rosenthal believes this may have impacted revenue, and is a common phenomenon often observed in the inner city.

Rosenthal believes that in order to lease out the space Walmart has vacated requires thinking outside of the box. He said you have to think about who will come to Baldwin Hills mall and remain?

Rosenthal believes the first concern is safety.

Baldwin Hills Mall may have a difficult time filling that space since brick and mortar retail is hurting.

In contrast to the concern about the closure of the Baldwin Hill store, many Long Beach residents rejoiced when their local Walmart closed because they are attempting to attract high-end stores, to accommodate the new urban White gentrified consumers they are experiencing and expecting.

When the Walmart first opened in 2003, many of the area’s middle class African Americans frowned on its arrival, but some have come to depend on it as a source for purchasing various electronics.

Rosenthal said thinking out of the box means approaching hospitals like Kaiser, or developers like Kaufman and Broad who might turn it into living space; contacting local universities who may be looking for an urban or satellitte campus; contacting Microsoft or Google. Google has opened Google Glass offices in former malls.”

Rosenthal shared a little bit of trivia that I found interesting. He believes Baldwin Hills Crenshaw Plaza was the first suburban shopping mall in the United States, and I was able to verify that by researching and finding an old Herald Examiner article that described how competing stores realized Baldwin Hills  had a good thing going and began cooperating with the mall.

Developers took notice and began building similar shopping centers–featuring food courts, integrated malls with big department store anchors linked by smaller shops and food courts.

Prior to ending our phone interview Rosenthal added: “also in reference to thinking outside of the box, I would suggest you look up journalist Julie Morris and read her Walmart article written maybe 40 years ago. She saw what Walmart was capable of doing to communities and warned us about the term she coined the “Walmart Effect.”

The USA article Rosenthal was referring to was published October 11, 1990, and described how Walmart stores would (if not contained) ruin small retail businesses and become a company controlling people and an economy similar in size to a small country.

In her article, Morris described the “Walmart effect,” which included local effects such as possibly inadvertently forcing smaller competitors out of business and driving down wages, and broader effects such as helping to keep inflation low and productivity high.

Nelson Lichtenstein teaches history at the University of California Santa Barbara, where he directs the Center for the Study of Work, Labor, and Democracy. He is the author of “The Retail Revolution: How Walmart Created a Brave New World of Business.”

He remembers when the corporate players at Walmart, which at the time only had locations in rural areas and in suburbs, started looking at larger cities and the process of how to establish stores in those areas. According to Lichtenstein, from Walmart’s point of view, those out-of-reach urban consumers represented somewhere between $80 and $100 billion in potential sales.

In an article by Lichtenstein in the magazine American Prospect, he wrote that “America’s mega-retailer can’t boost profits unless it gains entry to America’s largest cities.” According to Lichtenstein (Walmart) initially encountered stiff resistance to their incursions. Walmart was barred from these cities because of a coalition of unions, liberals, and environmentalists, including a large slice of those elected officials representing African American and Latino communities.

According to Lichtenstein, Inglewood residents overwhelmingly rejected Walmart’s proposal to build a colossal retail and grocery center without an environmental review or public hearings, and the super Walmart never came.

He believes Inglewood’s refusal to build a Walmart allowed the city do better things with the land and not impact the mom and pop businesses in the city.

In fact, refusing to allow the building of the giant retail store eventually enabled the city to bring in a football franchise.

Lichtenstein said, Walmart’s attempt to establish a store in South Los Angeles was unsuccessful and the company pulled out. The internet is buzzing with accusations of poor customer service as well as low revenue for that particular store: There were also a number of other reasons offered that individuals were unable to agree on. However, one thing for sure is the “Walmart Effect” is here as predicted 40 years ago by journalist Julie Morris, and it has impacted Crenshaw Boulevard and its community.

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