Businesses Doing Their Shopping At Wal-Mart Local Distributors Are Losing Sales To Retail Chain

Denny Helsel remembers business before Big Bad Wal-Mart came to town.

“Expensive,” said the Altoona, Pa., caterer. “I paid a lot more for the same supplies and was at the mercy of the local distributors.”

Fed up with overpriced goods and shoddy service, Helsel did something that used to be unthinkable. He shopped at Wal-Mart.

Helsel joined a growing number of businesses who have defected to Wal-Mart and its Sam’s wholesale club stores as the source of goods they use or sell themselves. They’re buying everything from paper plates to frozen shrimp to motor oil, in effect making the nation’s largest retailer their supplier.

Wal-Mart wasn’t always welcome when it opened in towns around the country. Local folk complained its mammoth stores stocked with products would destroy small businesses by offering one-stop shopping and unbeatable prices.

In many towns, those fears proved realistic. Pressed with tough economic times, shoppers placed value before store loyalty. Many businesses shuttered, unable to keep up with the competition.

But for the survivors, Wal-Mart has proven to be something of a salvation. Like shoppers, these businesses, some of them also merchants, are enticed by cheaper prices and a broader selection than their own local suppliers can offer.

That’s what happened to Helsel, owner of The Calvin House, a large banquet facility that serves Altoona, a western Pennsylvania town of 65,000. For the first 13 of his 17 years in business, Helsel relied on area distributors for all his inventory, anxious to support neighboring businesses.

“I’d buy local to maintain the local economy,” said the former school teacher turned caterer. “Even when I heard that Wal-Mart and Sam’s was coming into town, I was loyal and I didn’t want to switch.”

“Then I started noticing that the people at Sam’s paid attention to me when I came in every day and their prices were better for what I needed,” he said. “They also thanked us for our business, while no one else had ever done that.”

Now, Helsel does more than 80 percent of all his food purchases at Sam’s, spending more than $50,000 there between December and February of this year. He uses the local Wal-Mart store for his core building supplies, like paint and nails.

“I walked into Sam’s and Philadelphia Cream Cheese was a $1 a pound cheaper,” he said. “Every dollar counts when you’re sometimes feeding 250 people a party.”

Others, too, have turned to Wal-Mart. Restaurant owner Chong Song buys all her food supplies except for meat at Sam’s and most of her paper and dry goods at Wal-Mart.

“I don’t even shop around anymore,” said Song, who runs the Shogun Japanese Steakhouse and Sushi Bar outside Atlanta. “I just can’t beat their prices. I haven’t been anywhere else in ages.”

For Wal-Mart, luring local merchants to their stores is a boon to their flourishing business. The Bentonville, Ark.-based company is growing faster than expected, and plans to open at least 100 new stores in the next year.

In 1996, Wal-Mart earned $3.06 billion, up 12 percent from the year before on sales of $104.9 billion. At year-end, the company had 1,960 Wal-Mart stores, 344 Supercenters, and 436 Sam’s stores.

But this new source of business also gives Wal-Mart a greater hold on the economies of many small towns. It’s already the hub of commerce in some locales, and now has a more pervasive hand in the community’s business cycle.

“Wal-Mart reshaped retailing in the United States,” said Fred Hurvitz, a retailing professor at Penn State University’s Smeal College of Business. “They offer a lot of variety in every store and the very best price around.”

“By supplying local businesses, they are taking retailing to another level” by becoming more dominant over local businesses, he said.

But some workers in cities such as Lebanon, Pa., remain steadfast that they will survive, and won’t buy anything for their businesses at Wal-Mart.

“Loyalty from our customers went out the door when Wal-Mart came to town,” said Jon Ream, who owns Jon’s Auto Center. “But we can’t give them our business too.”

Graphic: Wal-Mart