Big Box Battle

Will plans for a Wal-Mart supercenter box out Kauai’s mom-and-pop shops?

June, 2007

In the rural town of Kapaa on the east side of Kauai, lurks a treasure on the verge of extinction.

Kojima’s kalbi — mouthwatering short ribs marinated in a top-secret teriyaki-style barbecue sauce — has been a local favorite on the island for decades. Akin to Molokai sweetbread and Two Ladies’ mochi on the Big Island, the marinated meats sold at Kojima’s Store are an island staple. Just ask Kauai locals, they’ll tell you: They’ve been grilling the ribs at barbecues, potlucks and picnics for years. 

“The short ribs are our best-seller, for sure. People come from all over the island to pick up ribs. Generation after generation of locals grew up eating our ribs,” says Glen Kojima, vice president of Kojima’s Inc., attesting to the popularity of the delectable meats.

Sadly, this generation may well be the last ever to sample Kojima’s mouth-watering Kalbi. The reason? The same thing threatening mom-and-pop shops like Kojima’s across the country — big-box retailers.

It used to be that Kauai was Hawaii’s hidden gem, a clandestine island that attracted only the savviest of travelers. That’s so not the case anymore. The past several years have brought more visitors, more cars and more transient residents to the island than ever. And along with growth, come growing pains. While no one is arguing the economic benefits of Kauai’s increasing popularity, there is definitely rising discontent over how and where the island should grow.

The latest debate centers around City Council Bill 2203 (widely referred to as the Big-Box Bill), which limits the size of retail and wholesale operations to under 75,000 square feet, roughly twice the size of the average Safeway or Foodland. Introduced by council members JoAnn Yukimura and Kaipo Asing (with support from Mayor Bryan Baptiste), the bill seeks to “protect the citizens from net adverse impacts caused by large ‘superstores’” … which “do not match the rural character that Kaua’i is striving to maintain.”

These superstores, the bill claims, “contradict the very ‘smart growth’ policies that the island is seeking to follow in order to … perpetuate ‘walkable,’ ‘bikeable’ small town communities and encourage and support small businesses that have been an integral part of the landscape for years.” It’s an emotional, complex issue; one which the Kauai community is split over.

Led by a small group of independent local retailers, the bill’s supporters are primarily concerned with preserving Kauai’s “rural character” and ensuring the island doesn’t turn into another cookie-cutter town. But opponents of the bill say it is a deliberate, underhanded attempt to protect a handful of mom-and-pop shops from the threat of a formidable competitor with cheaper prices and more variety, namely Wal-Mart Stores Inc. (NYSE:WMT).

Last September, Wal-Mart announced plans to expand its store in Kauai’s urban center of Lihue from 119,000 square feet to 205,000 square feet, converting it into the state’s first Wal-Mart Supercenter. The upgrade to a supercenter would supplement Wal-Mart’s already vast sales floor with a full-line supermarket and a slew of other services, such as optical outlets, bank branches and tire centers. Wal-Mart has since downsized its planned supercenter to 185,000 square feet, but that was still big enough to ruffle a few feathers and smother a few businesses like Kojima’s store.

The next month, talk of a Big-Box Bill surfaced via the coconut wireless. By March, the bill limiting stores to 75,000 square feet was introduced by the City Council.

“I know the opposition claims the bill isn’t focused at Wal-Mart, but the timing could be no less than perfect, considering we talked about building a supercenter in September and a month later the bill was being discussed,” says Kevin McCall, senior manager of Wal-Mart’s public affairs division. “So whether in effect or by intention, the bill is directly aimed at Wal-Mart.”

Hawaii Business met McCall, Wal-Mart market manager Brian Halsey, local publicist David Sayre and public affairs consultant Chris Parsons of Becker Communications on Kauai in late April. The group was in town to testify against the Big-Box Bill at its final public hearing.

Armed with stacks of surveys, research and statistics detailing all the “community benefits” the retailing behemoth provides, the Wal-Mart team was impeccably prepared and polished.

In contrast, supporters of the Big-Box Bill are, for the most part, soft-spoken, media-shy and modest. Their demeanor is so unassuming, in fact, that some worry it may be undermining efforts to get their message across. “At times, our voices are overshadowed by outsiders, and for many of us, this is the first time we’ve ever spoken out against anything. The sad thing is, Kauai people just think that, as businesspeople, for us to be speaking out, we’re being self-serving. But supporting the bill goes way beyond that,” says Kojima. “They just don’t realize how much is at stake here.”

Of all the small local retailers Hawaii Business spoke to, not one denied the threat of closure if a Wal-Mart supercenter opened. Many of them, including Kojima’s, Ishihara Market in Waimea and Big Save (a full-size supermarket with four locations across Kauai), admitted revenue losses of 15 to 20 percent since Costco opened its doors on the island last November. With those kinds of losses, it’s plain to see why the issue may be as much about self-preservation as it is about historic preservation. The advent of yet another big-box competitor would almost certainly be the death of some smaller retailers.

But the small shop owners we spoke to say protecting their respective businesses isn’t their main concern. It’s not, they claim, the real reason they’re fighting the bill. “Yeah, we’re business operators and owners, but I’m a big supporter of this bill because I’ve got a vested interest in this community. I was born and raised here, I live here and I want to preserve what’s left of this island for future generations,” says Derek Kawakami, assistant operations manager of Big Save. Derek’s grandfather, H.S. Kawakami, started the family business on Kauai 80 years ago, in 1927. The company employs 420 local residents.

“This island is only about 60,000 people strong. Big boxes take such a huge piece of the pie that the small, family businesses around the island can’t compete and close up shop,” says Ray Ishihara, president of Waimea-based Ishihara Market, which his grandfather opened in 1930. “When that happens, it affects the look of the island. It affects our visitor industry, because they like to stop in the little towns and see what we have to offer. It affects our locals and elderly, who are all going to have to go to Lihue just to grab a few groceries.” (Oahuans, imagine having to drive into town from Hawaii Kai to pick up a tube of toothpaste.)

For the Ishiharas, Kawakamis, Kojimas and all the other supporters of the Big-Box Bill, the issue is about much more than saving their businesses. It’s about preserving the rural character and local sense of place that they grew up with. It’s about growing the island in a manner consistent with Kauai’s General Plan, the county’s blueprint for growth. It’s about keeping Kauai, Kauai.

It’s an admirable effort, to say the least. But the reality is, even if the bill does pass — and there’s a good chance it will — history has shown that there’s no stopping economic growth. “I don’t think you can stop economic development over the long term. It’s eventually going to happen, and honestly I don’t think you want to stop it. Look back 50 or 100 years. You could’ve made the same arguments then about preservation, but think how much worse off the citizens would’ve been if they hadn’t gotten some of the modern conveniences,” says Leroy Laney, professor of economics and finance at Hawaii Pacific University.

Besides, the bill doesn’t technically prevent Wal-Mart from entering the market with its grocery line. Although McCall and Halsey claim the company has no Plan B should the bill pass, they’ve got at least a couple options. For one, the company could open one of its Neighborhood Markets, which, at around 40,000 square feet, would be about a quarter of the size of the proposed supercenter, and well within the size restrictions proposed in the bill. Or, just as it has already done on the Big Island for a planned supercenter in Hilo, Wal-Mart could strike a deal to lease land from the Department of Hawaiian Home Lands to build its supercenter on, since DHHL lands would be exempt from the zoning ordinance.

Opponents would probably fight that as well, but the point is, no matter how well-intentioned you may be, you simply can’t prevent competition in the marketplace. Just ask veteran retailer Glenn Kaya, who rode one wave of deep-discount retailers and then was eventually wiped out by another. As a young man, Kaya helped open Hawaii’s first discount chain, GEM Discount department stores, which eventually closed when bigger, better discount merchants like Wal-Mart and Target surfaced on the Mainland.

“The provincial politics of Kauai may stop the big boxes for now, but there’ll be others. From a legal standpoint, you can’t keep competition from the marketplace forever just because they built a better mousetrap,” says Kaya. “There’s no question big boxes will affect the mom-and-pop stores, but does that mean you deprive the people of Kauai the benefits of better selection and prices?”

The majority of Kauai residents appear to be in support of Wal-Mart’s supercenter. And it’s pretty obvious why. With a price savings of 40 to 60 percent on a single shopping trip (see bottom of page), it’s a costly bill to support. Sure, big-box discounts are available for all the obvious reasons — cheap labor, Asian imports, reduced shipping costs — but the bottom line for many local residents with kids to feed and a mortgage to pay is price.

“We need this low-cost option because it’s very expensive to live here, and having more choices lowers everybody’s cost of living, and in the case of Costco, raises the standard of living,” says North Shore resident John H. Gordon, adding that his occasional trips to Costco don’t stop him from picking up small items at the local supermarket.

It appears that the majority of residents agree with Gordon. Of the roughly 100 or so people who showed up at the public hearing, slightly over half were sporting blue T-shirts with the phrase “Let Kauai Choose” printed on the back. Supporters of the bill had on purple “Pass the Big Box Bill” shirts. Recent letters published in The Garden Island have been overwhelmingly anti-Big-Box Bill (although supporters of the bill say their letters haven’t been published). Perhaps most telling, were the results of a March 2007 survey commissioned by Wal-Mart. Of 385 registered voters, 56 percent were in favor of a supercenter, while 39 percent opposed the idea. Six percent were undecided.

“If the politicians decide to go the other way, they need to understand that they’re going against the wishes of the clear majority of their voters,” says Parsons. “The numbers are valid, and they show that people on this island, while they want Kauai to be Kauai, don’t want to pay more for groceries than they have to.”

At press time, it was too early to tell what the outcome of the vote would be on the bill. But whatever the outcome, experts say retailers on Kauai need to heed the wake-up call. “I realize some people might be nostalgic about the loss of an old kamaaina restaurant or store, but from a purely objective standpoint of economic efficiencies, I don’t see keeping larger, more efficient operators with more variety out of the market as the best route,” says Laney.

Both Laney and Kaya insist that, with or without a supercenter, in order to remain competitive in the ever-changing world of retail, local businesses need to rethink their strategies and get proactive. When big boxes landed on Oahu, for example, Foodland CEO Jenai Sullivan Wall did presentations revealing how much the stores donated to the local community. Sure, tooting your own horn isn’t considered local style, but Sullivan Wall did it to show the value and importance of Foodland’s contributions to the community.

Some other things businessowners might consider: carving out niches, offering unique goods or services and occasionally, completely reinventing themselves. “Discount stores are just too cheap. Local shops can’t compete selling the same items as the big boxes. They need to take a good look at their products and strategies and see what they can do better,” says Kaya.

Big Save, for example, could focus on customer service and specialty foods. Ishihara Market, its fresh fish and pupu. And Kojima’s, which owns every inch of the prime real estate its store sits on, could redevelop the property, leasing out the majority and keeping just enough space to continue selling its mouthwatering short ribs. It may not be exactly what Glen’s grandfather envisioned when he built the store 60 years ago — it may not even be Glen’s ideal modern-day family business. But another generation will get to eat Kojima’s Kalbi.

Because the alternatives — hot dogs and rotisserie chicken — aren’t very Kauai at all. At least not for now.

 

The Price is Right
Because small local retailers don’t have the purchasing power of their big box counterparts, it’s difficult for them to compete. A recent price comparison of three Lihue-based retailers reveals the dramatic savings big boxes are able to provide as a result of their tremendous buying power.
WAL-MART
COSTCO
BIG SAVE-LIHUE
2% Milk 1 Gallon
$3.78
$4.45
$5.29
Bread 1 Loaf
$4.83
$2.43
$5.19
Duracell AA Batteries 8-Pack
$4.84
$2.80
$9.98
Rice 20 Lbs.
$6.85
$7.00
$8.89
Tylenol Extra Strength 100 Capsules
$5.85
$4.38
$17.58
JIF Peanut Butter 18 Oz.
$1.88
$1.31
$3.89
Campbell’s Chicken Noodle Soup 1 Can
$0.97
$0.62
$1.49
SPAM 1 Can
$2.12
$1.90
$2.39
Cheerios 15 Oz.
$3.97
$1.86
$7.15
Kraft Singles 16 Slices
$3.98
$1.57
$6.75
Aloha Maid Juice 1 Case
$8.32
$6.89
$11.96
Charmin Ultra 24 Rolls
$8.38
$6.40
$10.55
Tide Liquid 32 Loads
$6.56
$6.52
$10.99
——————————————–
TOTAL
—————–
$62.33
—————–
$48.13
—————–
$102.10

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