Header Ads

Breaking News

Walmart Finally Makes It to the Big Apple

Category: Business,Finance

On a bank of the Bronx River, below the roar of the Bruckner Expressway, Walmart has finally found a foothold in a city that has long shunned it.

Walmart’s e-commerce business, Jet.com, is leasing a 205,000-square-foot warehouse in the Bronx that will soon begin supplying MacBooks and organic eggs to New York’s well-heeled shoppers.

The physical presence is a victory for the nation’s largest retailer, which has faced resistance from labor groups and their political allies every time it has proposed opening a store in the five boroughs. But it’s also an acknowledgment that the company’s longtime national strategy won’t work in certain big cities.

With a revamped Jet’s new push into New York, Walmart is trying to reach beyond its core base of big-box stores in rural and suburban America and compete for higher-income urbanites. A retailing empire built on no frills and low prices, Walmart is using Jet to entice millennials and young families with trendy, premium products like Big Gay Ice Cream and Dr. Martens shoes.

“We believe we can win in New York,” Jet’s president, Simon Belsham, said in an interview.

By acquiring stand-alone businesses, Walmart has been able to avoid the political furor it typically sets off in left-leaning cities where there is deep support for the unions that Walmart has rebuffed. Jet is also pushing to grow its business in Boston, Philadelphia and Washington, D.C.

It’s a more subtle approach. Walmart agreed to buy Jet, which is based in Hoboken, N.J., for $3.3 billion in 2016 and has preserved the company’s distinct purple logo. Jet’s packages are being ferried around New York by Parcel, a Brooklyn delivery service that Walmart acquired last year. Parcel delivery vans bear no obvious markings of their parent company.

It also helps that Walmart’s status as a lightning rod may be diminishing as working conditions at Amazon make it the target du jour.

The retailer’s previous attempts to enter the New York market, in Queens and then in Brooklyn, ended in stinging defeat. Activists and city leaders turned the proposed stores into a referendum on Walmart’s labor practices.

As recently as 2014, nearly half the City Council accused the Walton Family Foundation, which is funded by the company’s founding family, of trying to curry favor with New Yorkers by donating “toxic money” to local efforts to support charter schools.

This time around, many city leaders either declined interview requests or did not return requests for comment on Jet’s growth plans in New York. Some are skeptical, even if they are taking a wait-and-see attitude.

“Walmart may think they have found a new, under-the-radar path into New York City by buying up businesses already here, but we should not be fooled,” Comptroller Scott M. Stringer said in a statement. “We intend to be watching very carefully.”

Liberals hold at least as much sway over New York politics as they did when Walmart tried to open a store in Brooklyn in 2011. But since then, some activists say, their concerns about labor and the broader economy have moved beyond Walmart.

Maritza Silva-Farrell, executive director of the labor and community group Align, worked to sink Walmart’s plans to open a store in the East New York section of Brooklyn. She and others argued that Walmart’s low prices would endanger local businesses and that its lower wages would depress pay at other retailers.

Ms. Silva-Farrell said she was still concerned about Walmart’s business model. But Amazon, she said, is becoming “a world threat” as the company increasingly dictates the global supply chain and broadens into manufacturing.

“Amazon is going to define how the economy is going to work,” she said. “It’s a bigger problem than Walmart.”

Some labor activists see Walmart’s use of Jet to break into the New York market as a sign of victory.

“The fact that Walmart had to acquire another company in order to operate in New York City is a testament to our efforts to keep them out,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union.

New York is now a testing ground for Walmart’s urban e-commerce strategy, which puts every step of the sale — from the mobile app to the “last mile” of delivery — under the company’s control.

Walmart is also providing a decent amount of local jobs. Jet employs about 1,300 engineers, executives and other white-collar workers at its Hoboken headquarters and is planning to hire more than 100 workers in its Bronx fulfillment center, a warehouse where customer orders will be prepared and shipped.

A spokeswoman said it was too early to comment on the pay at the warehouse since the facility is not yet operational. Parcel employs 150 part-time drivers, all earning $15 an hour, which will soon be they city’s minimum wage.

When Walmart acquired Jet, it was not clear how the large retailer would integrate the website into its larger online strategy.

Founded by the e-commerce entrepreneur Marc Lore, Jet was billed as the “Amazon killer” that could win over shoppers with low prices. But Jet seemed redundant with Walmart.com, leading some in the tech world to speculate the real motivation was to acquire Mr. Lore, who now runs Walmart’s e-commerce business nationally.

About a year ago, Walmart signaled that it was switching gears and focusing Jet’s efforts on certain cities in the Northeast, where Walmart lacks a huge brick-and-mortar presence.

Mr. Belsham, who was hired to run Jet in March, said the redesigned website was meant to be less utilitarian and offer more “inspiration” — enticing shoppers to order groceries and, say, a pair of Nike sneakers, all in the same online basket.

The offerings are upscale, but the prices are not outrageous by New York standards. Pints of Van Leeuwen Earl Grey Tea ice cream for $5.99 and hydroponic Gotham Greens lettuce for $3.49 are less expensive than at some city grocery stores.

Online grocery is already a crowded market: FreshDirect, Peapod, Instacart and Amazon’s Whole Foods are offering grocery delivery in New York. But analysts expect Jet will have the advantage of using Walmart’s buying power with vendors to compete on price. Jet is also offering products, like iPhones and designer clothing, that other grocers do not.

For same-day scheduled delivery, Jet charges a $5.95 fee. There’s no fee for orders over $35 with no scheduled delivery time.

“This is a surgical strike,” said Burt P. Flickinger III, a managing director of the retail consulting firm Strategic Resource Group. “Walmart could be a top-10 retailer in the city within the first year.”

Not all analysts are sold on the strategy, which they say is likely to lose Walmart money in the near term as the company ramps up its marketing and hiring.

For Jet’s “relaunch” party last week, the company rented out a brownstone near Washington Square Park to showcase its New York offerings. One floor of the apartment featured museum-like displays of what Jet said were actual orders by New Yorkers — including an arrangement of Sam Edelman high heels, avocados and rolls of toilet paper — bathed in purple light.

“It feels like a bit of a sideshow,” said Scott Mushkin, a retail industry analyst at Wolfe Research. “Walmart’s strength is in places like Missouri, Arkansas and Mississippi, where their stores are the center of commerce. I don’t know what they bring to the table in Manhattan.”

Source link

No comments