Crowded K.C. braces for hypermarket - Wal-Mart's Hypermart USA to open in Kansas City; effect on discount store chains - Regional Analysis: West North Central

Discount Store News, May 8, 1989

Crowded K.C. Braces for Hypermart

KANSAS CITY, Mo.--This bi-state heartland city of more than 1.5 million people, which will be home to Wal-Mart's fourth hypermarket, is struggling to maintain a healthy level of economic growth.

Kansas City boasts of, among other things, having more fountains than any other city except Rome, as well as being the nation's most centrally located principal city. Ranked 25th in population and retail sales and 29th in per capita income, this 10-county metropolitan community (four in Kansas, six in Missouri) is situated within 250 miles of both the geographic and population centers of the United States.

Like other United States cities, however, Kansas City is experiencing steady losses in construction and manufacturing (especially durable goods manufacturing) jobs while seeing gains in service employment such as telecommunications, health care and air transportation.

With a projected decline in inflation-adjusted retail sales in 1989, and with several local observers calling the Kansas City metropolitan area "overstored," industry observers will be watching to see what sort of miracles Wal-Mart will be able to work with its new Hypermart USA.

The 268,000-square-foot hypermarket, scheduled to open in August, anchors a new strip mall/office complex that's being built directly opposite the existing Bannister Mall, the most popular mall in the Kansas City area.

With a 7.9 percent population growth rate since 1980, Kansas City has been increasing its population during the decade at a greater rate than such cities as St. Louis (a 3.4 percent growth), Cincinnati (3.3 percent), Columbus, Ohio (6.1 percent), Indianapolis (5.3 percent), New Orleans (5.1 percent) and Portland, Ore. (6.6 percent). In 1987, Kansas City's population grew by 1.6 percent to 1,546,400.

Yet the 10-county area saw employment grow by less than 1 percent last year, down from 1.1 percent in 1987 and 2.9 percent in 1986. The Kansas City Chamber of Commerce predicted employment would rise only 0.8 percent this year and 0.3 percent in 1990. The area will add about 6,000 new jobs, mostly in services, trade, chemicals, printing and publishing.

Since 1985, the Kansas City metro area has lost about 12,000 jobs in the durable goods manufacturing sector, with steel, auto assembly and electrical equipment industries hardest hit. Fortunately, these job losses have been offset to some degree by gains in non-durable goods manufacturing, which grew by 2.1 percent last year. Printing, publishing and the chemicals sector, including pharmaceuticals, were strong in 1988.

Construction employment was almost unchanged last year, reflecting the slowdown in multifamily housing. Employment was supported by work on projects begun in prior years. Wholesale and retail trade employment was also sluggish, growing at the slowest annual rate since the recession. Even the service sector had a slower rate of growth, though the sector still added about 4,000 jobs in 1988. The financial sector also grew by less than 1 percent, while government employment continued to grow by 2.0 percent last year, mainly as a result of state and local employment increases.

The city's unemployment rate averaged 5.0 percent last year compared to 5.5 percent in 1987. While Kansas City's unemployment rate continued below the national average of 5.5 percent, the U.S. rate continues to fall faster than the local rate, causing the rates to converge. According to the city's Chamber of Commerce, the local and national unemployment rates will "edge upward as economic conditions weaken in the second half of the year."

Local retailers are getting used to fighting for shrinking consumer dollars. Personal income, adjusted for inflation, declined by 1 percent in 1988 to $19.8 billion, marking the second year in a row of a drop in purchasing power.

The outlook for 1989 is for total personal income to grow by about 5.0 percent to $25.8 billion, yet adjusted for inflation income is expected to be unchanged, as the rate of inflation will wipe out any rise in personal income.

However, total retail sales in 1988 in the Kansas City metro area registered the first year-to-year gain since 1984, rising by 1.9 percent to $10.6 billion. Yet part of the increase was due to rising prices, which inflated the value of goods sold. In 1987, retail sales declined by 11.9 percent.

The outlook for retail sales in 1989 is for growth of about 4.0 percent before adjusting for inflation. With the adjustment, and figuring on a 5.0 percent inflation rate, retail sales are expected to decline.

According to a local survey conducted by the Kansas City Star & Times, there was a decrease in the number of shoppers visiting area malls during March of this year compared to March 1988. The only mall not showing a decline was Bannister Mall.

"Retailing is fairly flat. In fact, it's declining a little," said Bill Slaughter, senior research analyst in the Star & Times' marketing department.

In downtown Kansas City, the most upscale department stores are Dillards (the store had been a Macy's) and The Jones Store. The big upscale center, called Country Club Plaza, is at the very northern end of downtown, with such stores as Saks Fifth Avenue, Bonwit Teller, The Sharper Image, Ann Taylor and Banana Republic.