Back to the Big Box Battle: Is New Ad Campaign Deceptive

One of these days, I am going to do a full blown comparison of prices of Wal Mart to other stores. According to much of the research on Big Box retail, is that big-box retail creates the impression of lower prices is by having a few goods that are quite cheap. Stacy Mitchell, who came to Davis last year, is the author of "Big-Box Swindle."

Mitchell argues that Big-Boxes have a number of select products that are essentially "loss leaders" that are used to create an impression of overall lower costs. For instance they may highlight a few items like DVDs and have them appear to be at very low prices, while most of their goods are around the same price you would get at a local business.

This came to mind a few weeks ago when I saw Wal-Mart's latest commercial in their new marketing campaign, "Save Money, Live Better."

The ad points out that the cost to a family of buying a take-out pizza is on average around $14. However, Wal Mart's take-and-bake pizzas are $8. If your family eats pizza once a week every year, that’s an annual cost savings of more than $300.

Sounds great, but the problem is that it is misleading. The ad compares apples (take out pizza) to oranges (take-and-bake pizza). As anyone who orders pizza on even a periodic basis knows, one pays far more for pizza that is already cooked than for pizza that you have to cook yourself.

In fact, a quick look at two comparable locations showed that Safeway in Davis had a 14 inch take out pizza for the same amount as Wal-Mart claimed their pizza cost. Costco had one for $9. Papa Murphy is the chain pizza place best known for take out pizza. Prices vary, but one can get a large take-and-bake pizza for less than $10 at Papa Murphy's and in some cases for as low as $7.00.

The point of this is that Wal-Mart's ad is at best deceptive. It makes a price comparison that is for two different things. By comparing the price of take-out pizza to take-and-bake pizza, Wal Mart distorts the price differential.

So where does that leave us? First, it leaves us with the thought that if you are trying to save money on your household budget do not order a pizza take-out because you can probably feed your family for far less money even if you go into the prepared food section which is generally far more expensive than making it yourself.

Second, the idea that Wal Mart has the lowest prices still remains questionable. I have no doubt that people can cite some examples. I would at some point really like to go down the list on a number of core items to see what the price comparison really is.

But third, why go to misleading ads to sell your products? Wal Mart clearly has taken a hit in recent years for a number of their predatory business practices which has led communities to attempt to freeze them out, stores to close, and legislators to take action.

There are real questions about the damage done to local business by a Wal Mart. Money gets sucked out of the community and the local town pays a huge price for a modest tax revenue.

All of this leads back to Davis because Target is frankly just another version of Wal Mart. They have broken ground on Target finally. You probably saw the pictures of the pro-Target city councilmembers jumping for joy at Davis' version of big-box retail.

The city of Davis is of course claiming (perhaps hoping is the better word) that Target will lead to an increase of $600,000 in tax revenue. Money that the city desperately needs--but is probably a drop in the bucket compared to the increasing costs of the city's top employees and their pensions and benefits. Indeed, research suggests that big-box stores can become crime magnets which may lead to the need for additional police officers. That may eat into that $600,000. As would the loss of business from elsewhere in the city.

The city is getting its Target, the question is how much will cost us--not in terms of money but in terms of losses to our character and by diverting away people and money from our downtown which according to all the councilmembers who ran for election this past spring has never been better.

---Doug Paul Davis reporting

Analysis: RAS Sued to Allow Trader Joe's to Come to University Mall

Davisites who agree on little else and who famously fight on most things, have in large numbers supported a Trader Joe's coming to town. Indeed, Trader Joe's is a small scale retail entity that transcends most of the typical problems in Davis associated with development. For one thing, its product of various wines, beers, organic and vegetarian foods, are right up the ally of Davis' sensibilities.

For those who care about such things, Trader Joe's, fits into the Costco-Starbucks model of employee treatment. They pay their workers well above market and even union wages. Furthermore, for those employees who work over 20 hours, they provide a good health insurance package. This type of socially responsible treatment of employees should be welcomed and encouraged in Davis. This is contrasted by the Wal Mart and Target anti-union, low wages, model, where upon low prices are balances by cut-throat, union-busting activities that deny good wages and good benefits to most of their entry-level workers.

It was for these reasons that last fall, the Davis City Council bent over backwards to throw out the welcome mat to Trader Joe's. They even went so far as to approve a zoning change at the University Mall to pave the way for their arrival. There was just one problem with this plan, the place designated for their arrival was already occupied with a business who had in 2002 signed a 14-year lease. The council at that time was assured that negotiations were underway and that they were occurring in good faith to bring about some sort of an amicable solution for all involved.

And here begins the problem. Even at that time, the move was threatening to doom local businesses in the Mall like Teriyaki Express and La Esperanza, who would have to move if RAS moved into the mall.

That problem has grown worse as last week, it was reported that the landlord of the University Mall is now suing that business, Radiological Associates of Sacramento (RAS). Apparently these negotiations have broken down. Based on reports in the Davis Enterprise last week, the suit caught RAS by surprised who believed they were in the middle of negotiations and that communication had been ongoing.

The Davis City Council has no authority over leases and thus little say in the private negotiations of these entities. However, one thing they did have control over was changing the zoning designation to allow the move. I would argue that perhaps the City Council jumped the gun by approving the zoning change. That they gave away whatever leverage they had over the negotiation process to ensure an amicable agreement between both parties and that RAS received the treatment that they deserved as a long-time and locally based business.

Mayor Sue Greenwald defended the council's decision saying that their top priority was to ensure that Trader Joe's, a business that everyone in Davis wants to come, would come to Davis rather than Dixon or Woodland. She said that the zoning change was unnecessary, rather they used it to signal to the company that they were committed to bring them to town. Moreover they did not foresee this type of situation occurring. Their concern was primary to demonstrate to Trader Joe's that they were serious about bringing their business to Davis given that Davis has a reputation of not being business friendly.

There are concerns about the viability of the Mall in its current composition. Gottschalks is said to be in trouble at that location. The Mall is badly in need of another anchor. There is the belief that an office such as RAS is inappropriate for that location. Given the proximity of the Mall to a large student population, I do not understand how supermarkets at that location have failed. The belief is that a Trader Joe's would be a perfect fit as a small store that is a tremendous draw to the local community.

The belief is that most people in Davis want a Trader Joe's to come here, period. However, the actions of both the company and the landlords who are based in Santa Monica, have begun to give me pause.

First of all, Trader Joe's has basically demanded access to the University Mall or they will not come. That location is a more centrally located location. However, it has some problems as well in addition to the fact that a business with a 14 year lease is already occupy their preferred site and that that business has already pumped in one million dollars worth of upgrades to the site. It would also cause disruption and hardship to a number of elderly clientèle.

Even without the problem facing the move with the lawsuit, there are questionable aspects of the University Mall. The Mall does not have a tremendous amount of parking to begin with and the expansion of the store without adding a facility, would seem to make that even more difficult. Overlap with events at the Graduate could produce catastrophic problems. In addition, the road capacity has to be in question. That is already one of the more congested portions of town from the Sycamore-Russell intersection to the Anderson-Russell intersection, where the mall lies, already has traffic congestion, now add in a major business that will draw traffic from all over town and perhaps from out of town, and you have a real mess at times.

That leads to the question why University Mall and not either Davis Manor or Westlake, both of which have room for a Trader Joe's? Let's face it, they could put their store in the middle of a field up in the Oeste Ranch and people would come. So why the need for a central location?

This gets me back to the Davis City Council approving the zoning changes prior to an agreement was reached. Again, I think the council erred in their decision--which was based on threats from Trader Joe's to give them what they want or go to Dixon or Woodland. It is my opinion that the City should not be blackmailed into making poor land use decisions by threats from companies to take their business elsewhere. If Trader Joe's believed that Davisites would drive to Dixon, why did they have such a problem with locating in West Davis?

The lawsuit has now threatens to undermine the chances of Trader Joe's moving to Davis. Unless RAS bows under pressure of the suit, which many deem unlikely given their financial stake and current legal resources, this will drag out the fight for a couple of years, delaying or even preventing a Davis Trader Joe's store. The council having already granted a zoning change, now has no power to act in this fight at all or to try to even broker an amicable agreement.

This entire episode is as unfortunate as it was unnecessary. I would have liked to have seen Trader Joe's come to town, but these events are changing my view on such things. I think it was unreasonable for them to demand University Mall, I think it was a mistake for the City Council to encourage that move at the expense of a successful existing business. I think it was a bigger mistake for them to cede whatever formal power they had in this entire process--limited as it was.

I like small and progressive businesses like Trader Joe's. I think that is the kind of retail that we need to encourage in Davis. What I do not like are the hardball tactics that they have displayed. There are many suitable locations in Davis, in my opinion, the issue of RAS aside, the University Mall is not. Davis Manor or Westlake are the places to go. Now we just need someone with the power and prestige who can make that happen.

---Doug Paul Davis reporting

Fairfield and Wal Mart: Illustrates the Pitfalls of Big-Box

Some interesting notes from the Vacaville Reporter on Fairfield and Wal-Mart.

Apparently Wal Mart has a store that they are closing down at one location and want to buy a new store--a SUPER store--at another location. A 200,000-square-foot SUPER STORE.

Currently there is a Shopping Center there that would be destroyed and the residents were upset about the location for the wall near a residential area and two schools. And they met until 1 a.m. Sounds familiar.

There are two things of great interest from the standpoint of Davis. First, is that Wal-Mart was closing their current store regardless of how the council voted. So they basically threatened the city council with the loss of $400,000 in annual sales tax if they did not approve the new supercenter.

It is worth noting that in August the city passed an ordinance that limits the size of retail projects in Fairfield to 80,000 square feet. So just four months later, Wal-Mart is able to force the hands of the city to get what they want.

Second, is that $400,000 figure in annual sales tax, which is two-thirds of the projected Target sales tax in Davis.

That leads me to a number of questions. What is the comparison in size between the existing Wal-Mart on Chadbourne Road and the proposed Target in Davis? Why is the tax revenue for a Fairfield Wal-Mart only two-thirds of the projected revenue for a Davis Target?

In any case, this illustrates for the Davis community the fundamental problem of big-box retail stores--once they come in, they have tremendous power to dictate their terms and they can basically threaten the City Council with the loss of huge revenue to get what they want. Or they can go elsewhere and the city loses a sizable tax base. All of these promises that the council has made regarding this development seem questionable at best. Look at Fairfield, just four months after passing an ordinance to limit the size of new retail development, they grant an exception.

---Doug Paul Davis reporting