California Apparel News

A recent study released by the Los Angeles County Economic Development Corp. said the 40 “super centers” that Wal-Mart Stores Inc. intends to build in California would not devastate the state’s economy. On the contrary, the study suggests the super stores would strengthen it.

But members of the Los Angeles Fashion District Business Improvement District beg to differ. On Jan. 29, the district’s board voted to back a city ordinance that would ban the super stores from invading Los Angeles. The vote ran 7 in support, 4 against and 2 abstentions.

Kent Smith, executive director of the Los Angeles Fashion District, which encompasses 90 square blocks surrounding the California Market Center, said his board supported the ordinance because many of his property owners did not believe they were dealing with an innocent competitor. “They feel they’re dealing with a monopoly situation,” Smith said.

“Data says Wal-Mart sells 33.6 percent of the apparel in the country—more than every other department store and Target combined,” he continued. “If the trend keeps moving where it’s going, they can potentially control the retail side of the apparel industry. There are yellow lights going off when many of my property owners look at that organization.”

In December, a Los Angeles City Council committee headed by Councilman Eric Garcetti asked the city attorney to draft an ordinance that would ban retail stores larger than 100,000 square feet that devote more than 10 percent of their space to nontaxable grocery items in city, state and federal economic development zones. The city council is expected to vote on the ordinance sometime in late February.

Los Angeles is not alone in making it harder for Wal-Mart, based in Bentonville, Ark., to come in. Other California counties and cities—including Oakland, Turlock and San Diego—have either passed or considered regulations banning the super centers, which also sell groceries.

Last week, Wal-Mart filed a lawsuit against Alameda County in Northern California to overturn that area’s ban of super stores.

While politicians fret about Wal-Mart’s impact on jobs and competition, the LAEDC study conducted by Gregory Freeman noted that Wal-Mart is being unjustly maligned. “This isn’t a snapshot deal where Wal-Mart enters and everything changes overnight,” Freeman said.

Instead, he found that Wal-Mart would struggle to find enough land to build its super centers, which are equivalent to three football fields. Since much of coastal Los Angeles is built out, the super centers would have to be built in the Inland Empire, which comprises San Bernardino and Riverside counties, and north Los Angeles County. Freeman forecast the super centers would not take business away from existing supermarkets. Instead they would soak up the new business generated by Southern California’s growing population in burgeoning areas.

“Bottom line, we ask what the impact is going to be,” Freeman said. “The short answer is net job creation and savings for consumers. That isn’t an unmitigated disaster.”

Freeman noted in his study, which Wal- Mart commissioned for $65,000, that Los Angeles consumers would come out ahead, saving $1.78 billion every year because of bargainbasement prices. If these savings were redirected to other goods and services, some 17,300 jobs would be created in Los Angeles County.

Freeman, however, acknowledged that Wal- Mart super centers could hurt the economy.

His study noted that super center employees earn $2.50 to $3.50 an hour less than unionized grocery employees. If grocery wages were driven down, Los Angeles County union workers would collectively earn $150 million to $258 million less than they do now. The lost wages could reduce overall household spending, potentially costing Southern California 3,000 to 5,100 jobs.

Freeman also said in his study that Wal- Mart would not hurt California’s apparel retailers. “General merchandising is already a highly competitive market here,” Freeman said. “There’s not a lot of room for Wal-Mart to come in and offer lower prices and undercut people already in the market. The apparel market is different than food. The grocery industry is not particularly competitive.”

While the LAEDC backed the study it released on Feb. 28, Josh Kamensky, a spokesman for Councilman Garcetti, was unimpressed.

“It’s a public relations document,” he said. “Every independent study says super centers result in net and severe job loss, accelerating the transition to a low-wage retail economy.”

Wal-Mart spokesman Peter Kanelos denied his company had a heavy hand in drafting the LAEDC study. “Wal-Mart verified facts and made suggestions on some word usage, but the research was completely independent,” he said.