St. Louis braces for Wal-Mart's invasion

Discount Store News, Dec 14, 1987

St. Louis Braces for Wal-Mart's Invasion

Wal-Mart is making a major assault on this 10-county market.

Within the coming year, the dynamic discounter will open between five and eight new Wal-Mart stores, at least two Sam's Wholesale Clubs, three dot drug stores and its Hypermart USA format.

Recently, Wal-Mart opened three dot stores here and already has two Sam's locations and 11 Wal-Mart discount stores.

Other chains have also targeted St. Louis for growth. Several months ago, Best Buy, the consumer electronics specialty retailer, entered the market with three stores and promises to have seven in the area within three years. Locally-based Grandpa Pigeon's, with seven stores, one of which just opened, will add one more store next year and another in 1989, said president Tom Holley.

And although K mart has not yet identified any new store sites in St. Louis, where it already has 22 discount stores, it is looking additional sites. Last spring, K mart gave up two stores for its Builders Square home center division, which also is expanding in this market.

Venture, based in nearby O'Fallon, Mo., will add one store next year to the 16 sites it already operates.

And Syms, an off-price apparel retailer, just entered the market.

"St. Louis has been on the go lately," observed Rex Sims, advertising manager for the St. Louis Post-Dispatch, a local newspaper.

Until two years ago, the area had been experiencing negative population growth, a lingering byproduct of economic decline during the 1970s. But all that has reversed itself due to greater corporate interests in this Midwestern city and renewed migration to the area, local experts explained. Now, St. Louis' economic foundation more closely resembles the nation's, growing modestly but steadily every year.

Ranked by Sales & Marketing Management in its 1987 Survey of Buying Power as the 11th most populous city in the country, St. Louis has a population of 2.45 million, up 1.6 percent from 1985, and a suburban population of 1.8 million, up 5.8 percent, earning it a ranking of ninth in the country.

Its residents, with a median age of 32, are scattered along a 10-county region in two states--Missouri and Illinois --bisected by the Mississippi River.

Population and business expansion is mostly to the west and north of St. Louis proper where the socio-economic base is diverse.

St. Louis is widely known as home of the famous 630-foot Gateway Arch located on the banks of the Mississippi River. But it is also the home of 10 Fortune 500 companies, six Fortune 100 firms, and produces more American-made automobiles than any other U.S. city with the obvious exception of Detroit.

Anheuser Busch, the nation's largest brewery, has its U.S. and world headquarters here, as does Ralston-Purina. Four universities are located here.

McDonnell-Douglas is the largest employer in this region, employing 40,000 people, followed by May Department Stores, parent company of Venture Stores, which is also based here, Southwestern Bell and Monsanto, according to the St. Louis Regional Commerce & Growth Association.

Currently, St. Louis' population is split almost evenly between professional and non-professional workers. The growth, however, appears to be more on the professional side now that the region is attracting more high-tech industries and manufacturing becomes more automated, observed Stephen Taylor, research manager at the chamber of commerce.

Many of these businesses are lured to the area by relatively inexpensive land costs in comparison to other major metropolitan areas, more than acceptable demographics and very affordable housing costs. A typical 1,800-square-foot new home in this area cost an average of $85,030 during the second quarter of this year, Taylor said.

Last year, the St. Louis region tallied $16.1 billion in retail sales, making it the 13th largest region in this category, according to S&MM. These sales reflect an increase of 5 percent over 1985. Per household retail sales were $18,181 last year compared to $17,622 the year before, an increase of 3 percent.

General merchandise store sales in the region were ranked 11th in the nation by S&MM with nearly $2.3 billion in receipts, an increase of 4.3 percent over the year before.

St. Louis-area residents have improved their buying power over the last year, too, according to S&MM. Effective buying income or EBI, a measure of one's ability to buy, totaled $31.4 billion, up 5.7 percent.

Suburban EBI also rose between the 1986 and 1987 S&MM reports, from $23.2 billion to $24.7 billion, and median household EBI rose from $26,667 in 1985 to $27,518 in 1986. Households with EBI's of $50,000 or more surged more than 13 percent to 157,600.

These statistics provide fertile ground for retailers. And for discounters, St. Louis is a very competitive market that is heating up. The three top discounters, K mart, Wal-Mart and Target, all have multiple store locations here as do other top discounters, such as Venture, Marshalls, Service Merchandise and Grandpa Pigeon's. And, they all advertise aggressively.