The Big-Box Store Dilemma: Why Large Retailers Get the Cold Shoulder

People tend to want to live near big-box retailers, and yet these stores often get a frosty reception when they propose a new store in town.

A national fast-food chain used to run an ad in which men in three-piece suits and women in expensive gowns would walk briskly up to the counter wearing paper bags over their heads. The point was that people loved the burgers but didn’t want to admit to frequenting such a low-brow establishment.

The same can often be said about big-box stores. Many people love to shop in them. People will drive miles up a crowded freeway to reach their favorites. In some parts of the country, the big box is practically the center of town. People go there to mingle, eat, and shop.

But when a big-box retailer proposes to open a store, folks who might otherwise support them tend to put a proverbial bag over their head and vanish. Big box developers often get a frosty reception from towns and cities. Some major cities have passed ordinances discouraging the stores. The argument usually goes this way: The big-box retailer, particularly a Walmart, with its superstores, will gobble up all the business and drive smaller retailers out of town. Also, the argument goes, these retailers pay unfair wages and benefits. Trade unions are often the sponsors of ordinances that would keep a big-box out, raising the issue of worker compensation.

Sacramento’s Ill-Fated Big-Box Ban

In 2006, Sacramento passed an ordinance supported by the supermarket unions that required big-box retailers to study their impact on the businesses around them, in addition to doing a mandatory wage study. As with many of these ordinances, the law was aimed at discouraging Walmart from moving into town.

Although the local rule didn’t ban big-box stores outright, it was costly to do full-blown studies. The local rule effectively kept big-box developers out. By the time the city started to consider repealing the local rule, only a handful of big-box stores were open within city limits. Investors didn’t want pay for an expensive study and then risk a hostile city council.

However, Sacramento discovered that people want to shop at big-box stores. They’re willing to drive to them and spend their money in the next town over. Sacramento was losing untold tax revenues because these large retailers wouldn’t come to town. Ultimately, the city realized that the ordinance wasn’t working, so they watered it down considerably.

Proposed regulations to ban big-box stores crop up in unexpected places. In rural Etna, a tiny community in Northern California, for example, several business owners tried to get an ordinance passed that would keep out big boxes. In this case, the rule was aimed at a proposed Dollar General store. A discount store would presumably be popular in a place where half the residents were living at the poverty line.  Several businesses, however, didn’t want the competition. So the rule was proposed to protect the community from businesses that were “inconsistent” with the rural nature.

The Silent Majority Remains Silent on a Big Box

Ultimately, though, the majority rejected the ordinance. Interestingly, none of the council members would say they supported the dollar store. They found a technical legal reason to reject the ordinance. Few people were willing to stand up and speak in favor of the store, either, even though, by some estimates, it would eventually take a sizeable chunk of the town’s trade. All those future shoppers stayed home. In this case, the paper bag analogy definitely applies.

It is also true that big-box retailers frequently overreach. In three counties in North Carolina, for example, Walmart was planning to build seven superstores. Some people justifiably accused the company of trying to take over all the retail shopping in that region. Is it good for one large company to dominate all shopping in a community? Probably not, but our purpose here is not to argue whether big boxes are good or bad for communities.

In most cities and towns, people don’t want to live without large retailers. The case of Sacramento demonstrates that ordinances that basically ban these stores may encounter serious downsides if they don’t plan well. Communities have found better ways to regulate the proliferation of big-box stores than by passing ill-conceived laws that target specific companies. With sensible planning and zoning regulations, each development can be studied on a case-by-case basis. The majority will expect and appreciate a fair analysis. The silent majority may not speak up when a big-box developer comes to town, but they will be listening and watching.

Real estate is about more than buildings – it’s about community. It’s important to work with a consultant whose values align with your own. Contact DCG Strategies today to learn more about how they can help you with your real estate needs.