Wal-Mart focus on close-in suburbs

The world's largest retailer suffered a blow on Wednesday when Chicago aldermen passed a bill that requires big-box stores, including Wal-Mart, to pay a so-called living wage. The ordinance could curb Wal-Mart's appetite to build stores in the city limits.

But it's not stopping the company's longstanding plans to blanket the Chicago suburbs with Supercenters, the giant stores that sell general merchandise and groceries.

Indeed, Wal-Mart for the first time has a veteran supermarket executive planted in Chicago, signaling that big changes are ahead.

Michael J. Lewis, president of Wal-Mart's Midwest division, sees millions of consumers hungry for Wal-Mart's low-priced groceries and envisions operating 40 Supercenters in the Chicago area in the next three years by building new stores and expanding existing stores. Wal-Mart currently has only a handful of Supercenters in the outlying suburbs.

"Our share of the market is relatively low in Chicago," said Lewis. "And that's an opportunity for us. We think there's tremendous opportunity to double or even triple our market share in Chicagoland."

That expansion is a threat to Jewel and Dominick's, the Chicago area's two major supermarket chains, where workers are unionized and where prices are generally 15 to 30 percent higher than those at Wal-Mart.

In an interview at Wal-Mart's Chicago office last week, Lewis said if the city council approved the bill, Wal-Mart would "put more time and effort in the suburbs," in particular focusing on those close to the city in order to draw shoppers across city lines.

"It would stand to reason that we would ring Chicago with Supercenters," Lewis said.

Late Wednesday in a written statement issued after the Chicago vote, Lewis added, "Our preference is to serve the people of Chicago in their communities and we will do what we can to keep up with significant consumer demand from city residents." The official statement didn't address whether Wal-Mart would carry through with threats to avoid opening stores within the city limits.

Wal-Mart is on track to open its first Chicago store in September on the West Side and has been trying for two years to open more stores in the city.

Even though Wal-Mart has operated stores in the Chicago area since 1992, the company avoided establishing a high-level executive presence here until last November--a nod to Wal-Mart's impending push into Supercenters, the 150,000-square-foot to 200,000-square-foot stores that sell groceries along with general merchandise. It is also a signal of how dicey things have become for Wal-Mart as it attempts to carry out its plan to open 270 to 280 Supercenters nationwide this year.

Lewis, 55, took the job as senior vice president and president of the Midwest division overseeing 278 traditional Wal-Mart discount stores and 458 Wal-Mart Supercenters. He opened Wal-Mart's Chicago office in May in a high-rise just east of O'Hare International Airport and now has a staff of 25. Unlike Wal-Mart's reputed sparse offices in Arkansas, the outpost is sleek and modern with warm wooden cabinets, new carpet, slim desks and window views. Wal-Mart is leasing the space and got a good deal, says one of Lewis' assistants.

Traditionally, Wal-Mart has housed its division chiefs at headquarters in Bentonville, Ark. Lewis' predecessor, who retired, had been based at the home office. Putting Lewis closer to the action is part of Wal-Mart's efforts, begun earlier this year, to move top executives into the field where they can mingle with community groups and customers as the retailer battles opposition to opening new stores crucial to fueling its growth.

"They needed to put a senior executive here who can talk to local community leaders and politicians and some of the people who are influencing the conditions under which Wal-Mart's growth will occur," said Bill Bishop, founder of Willard Bishop, a Barrington-based grocery consulting firm.

A competitive squash player and expert skier, Lewis enjoys the outdoors. He plays tennis and golf and escapes to a cabin in the woods north of Toronto, where he attempts to get away from the constant blast of e-mail. A fan of the arts, he also makes a point of reading Vanity Fair and People magazines and watching American Idol. "If you want to connect with the consumer, you have to read what they read," he said.

He spent the 1980s working for Loblaw Cos. Ltd. in Ontario, the largest supermarket operator and wholesale food distributor in Canada. He led the retailer's discount division, called No Frills. Most recently, he was president of the retail division at Minnesota-based Nash Finch Co., a wholesale distributor to grocery stores.

That experience will come in handy here. Wal-Mart opened an 880,000-square-foot warehouse in Sterling, off Interstate Highway 88 in western Illinois, for food and other perishable items earlier this year in preparation for its expansion into the Chicago area.

Last year, Wal-Mart skirted a big-box ordinance in Dunkirk, Md., that put a 75,000-square-foot cap on store size by proposing a 74,998-square-foot store next to a 22,689-square-foot garden center, each with separate entrances and cash registers. When asked if Wal-Mart would attempt the same in Chicago, Mr. Lewis declined to comment, saying only that "consumers like our Supercenters best."

The Chicago ordinance requires big-box retailers that are 90,000 square feet or more and generate $1 billion in annual sales to pay workers a minimum wage of $10 an hour and $3 in benefits by 2010. It's the first ordinance of its kind in a major city and affects a total of 19 retailers, including Target, Sears, Home Depot and Bloomingdale's.

David Vite, president and CEO of the Illinois Retail Merchants Association, said the battle isn't over. Retailers are holding out hope that Mayor Richard Daley will veto the bill. If that doesn't happen, they will file a lawsuit, he said.

"We recognize Chicago is our biggest business opportunity going forward," said Lewis. "I certainly believe they're paying too much for groceries in the city of Chicago."

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