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Pride Is Costing Wal-Mart and Washington

Tickers in this article: WMT
NEW YORK (TheStreet) -- defines pride as "an inordinate opinion of one's own dignity, importance, merit, or superiority." And nowhere was pride more evident than last week in the confrontation between the Washington, D.C., City Council and Wal-Mart . Pride got in the way of both sides, turning what was at least three years of hard work and promise for Washington redevelopment into a political fiasco.

Wal-Mart has a reputation of using its size and economic power to get its way. Today we call that "bullying." Ask any vendor about margin squeeze. Ask any community banker with a Wal-Mart account about negative float.

Until recently, Wal-Mart's business model kept its stores in rural and suburban areas. But over the past few years, sales growth in the U.S. has stalled. So Wal-Mart has sought to put stores in urban areas. The governing councils in large cities, however, tend to have more liberal-minded majorities with ties to unions and sympathy toward small business.

Wal-Mart is non-union and has a track record of driving out small business when it arrives in a market. It has been rejected by the New York City Council and apparently gave up on stores in the Boston area last year.

When it came to Washington, however, Wal-Mart appeared to have turned over a new leaf. Working closely with Mayor Vincent Gray, Wal-Mart established the "Community Partnership Initiative" to help the city. Last year, through its foundations, Wal-Mart contributed $3.8 million to charitable organizations in Washington, including those helping the poor and homeless.

"This agreement represents an unprecedented citywide commitment from a retailer... Wal-Mart is showing what it means to be a good corporate neighbor," Gray said.

With the blessing of the city, Wal-Mart decided to build six stores in Washington -- three stores under construction and three in planning. The stores would mean 1,800 direct new jobs, and 3,000 jobs when multiplier effects are added, plus 1,000 temporary construction jobs. At least three of the stores are crucial to economic redevelopment and renewal in the Washington neighborhoods of Sykland, Capitol Gateway, and New York Avenue.