Impact of Walmart was underestimated

Written by The Curry Coastal Pilot August 20, 2013 07:29 pm

CRESCENT CITY — Years before the Walmart Supercenter opened its doors, economic analysts predicted the expanded store may cause another supermarket to shut its doors, but any other impact on local businesses would be spread evenly.

Now that two supermarkets have closed following the expansion, it may appear that analysts underestimated Walmart’s impact on other businesses, but any impacts so far appear to have affected just one company.

 

Three months after Walmart opened its supermarket, the Brookings-based C&K Market closed Ray’s Food Place in Crescent City “due to an increased presence of retail competitors.” Last month, the Brookings-based company announced it was closing Smith River’s Ray’s Food Place, the community’s only grocery store. When residents demanded an explanation, company representatives blamed Walmart.

“Walmart had an impact on both of our stores in Crescent City and Smith River in terms of performance of those stores,” said C&K Market spokesman Grant Lunde. “Walmart has an impact in every market they come to.”

An economic impact analysis on the Walmart expansion prepared by Bay Area Economics for Del Norte County in September 2007 stated that the expanded store may cause one local supermarket to close. The analysis didn’t specify which store would be at risk of closure, although it considered the Ray’s Food Place in Smith River too far away to be “as affected by the Walmart expansion.”

Bay Area Economics is an urban economics and public-benefit real estate development consulting firm with offices in San Francisco, Sacramento, Los Angeles, New York City and Washington, D.C.

At the time the economic analysis was published, the expanded Walmart was scheduled to open in 2009. In 2007, the project was projected to achieve total annual sales of about $62.2 million in 2009, with $16.3 million coming from the store’s supermarket area. 

The Walmart Supercenter opened its doors on Nov. 15, 2012. The expansion added nearly 100,000 square feet to the store, with 39,000 devoted to the new supermarket. The remodeled store also included a full-service hair salon, a Subway and a Java Hut Express.

“We’re pleased to have the opportunity to serve our customers better by providing access to affordably-priced groceries,” Walmart spokeswoman Delia Garcia said last week. “Now we can offer the convenience of one-stop shopping for affordable, fresh groceries in addition to general merchandise.”

Although Garcia said she couldn’t give out any current sales figures on the Crescent City store, customers have responded favorably to “the convenience of one-stop shopping.”

For its report, Bay Area Economics tried to obtain sales information from local supermarkets. When they weren’t forthcoming, the firm visited Safeway, Grocery Outlet, Shop Smart Food Warehouse, Ray’s Food Place in Crescent City and Ray’s Food Place in Smith River. Bay Area Economics also visited Eller’s Fort Dick Market on Lake Earl Drive.

At the time of the firm’s visit, Safeway and Shop Smart were “moderately busy,” according to the economic analysis. Grocery Outlet appeared to have “slightly less traffic relative to its size.” The two Ray’s Food Place locations had the least amount of traffic, according to the economic analysis. 

With the exception of Smith River’s supermarket, all of Del Norte’s grocery stores are less than 2 miles away from the Supercenter. As a result, the analysis predicted that impacts from the expansion would be felt fairly evenly throughout the immediate Crescent City area.

The economic analysis also stated that the Walmart Supercenter’s impact on Grocery Outlet would not be as great because it fills a market niche for deeply discounted grocery, household and health and beauty care products.

The Walmart expansion was projected to have a smaller impact on general merchandise retailers in Del Norte County, according to the economic analysis. But the analysis also showed that general merchandise sales at Walmart accounted for over 80 percent of general merchandise sales in the county. 

General merchandise sales in the county accounted for about $54 million, according to the economic impact analysis. The analysis included sales from Rite Aid as well as the Medicine Shoppe and Pacific Drug, the latter two independently owned drugstores. 

At the time the economic impact analysis was published, Bay Area Economics noted that the proposed Walgreens and the expanded Walmart may result in the closure of an existing drugstore. Both the Medicine Shoppe and Pacific Drug closed in 2008, turning customers’ prescriptions over to the Safeway and Walgreens pharmacies.