Enter The Giant -- Largest Retailer In The Nation Steps Into Small- Town Washington

OMAK - On a scrubby hill above the Okanogan River, inside one of the county's biggest buildings, more than 100 people are gleefully shouting and pounding their hands together, whipping themselves into a frenzy of surrender to the group.

"We need 110 percent. Can we do it?" a leader shouts.

"Yes we can!"

"Let's say it again!"

"YES WE CAN!"

Is this another cult taking root in rural America?

No, it's a scene inside Wal-Mart, which is almost as much a religion as a retailer. Founded by Sam Walton, the late Arkansas businessman and genius motivator, Wal-Mart is a hugely profitable empire with a work force that starts each day with exercises, cheers, celebration of the team, and a rousing recitation of Wal-Mart slogans. They don't worship "Mr. Sam," but his spirit lives on.

Expanding from its base in Bentonville, Ark., the nation's No.1 retailer is opening 150 stores a year, spreading westward across America like sunshine - or smiling locusts, depending on your point of view.

Now the cheer brigade is here.

Wal-Mart drew a big crowd last week when it opened its first Washington store here, the first of five that have been officially announced by the company. The others are Aberdeen, Colville, Moses Lake and Kennewick. Two others, in Wenatchee and Shelton, are reportedly in the planning stages.

As many as 15 are expected in Washington by the end of next year, none in the Seattle area - yet.

Already battered by competition from highway malls, many downtowns in the state's smaller cities are bracing for Wal-Mart, perhaps the fiercest retailer in the nation.

"It's overwhelming for a little town like this," says Omak Mayor Walt Smith. "It's going to change the flavor of our community."

When Wal-Mart moves in, downtowns can no longer assume they will remain the social center. Wal-Mart competes for both hearts and dollars with its staged ice-cream-eating contests and other civic events.

The company's 1,900 stores last year sucked up $56 billion in sales, largely in small communities where Wal-Mart dominates. It uses volume-buying power to obtain cut-rate prices from suppliers and undercut smaller competitors.

Some shopkeepers adjust and thrive, but others go under, hence Wal-Mart's derisive nickname, "The Merchant of Death."

A 225-mile drive from Seattle, Omak (population: 4,120) in north-central Washington learned it was getting a Wal-Mart about a year ago. Shoppers in this depressed timber and ranching community have been eager for a chance to save money.

"I'm excited," says Betty Baker, a maid at the Motel Nicholas. "I talked to my cousin in Oregon. She said, `You're going to love it - the prices, the selection, everything.' "

But along Omak's faded Main Street, where the look had changed little in a half-century, the reaction was much different. Merchants went on alert. They scrambled for information about what Wal-Mart had done in other towns. Some drove to Oregon and walked through Wal-Mart stores.

Mike Striggow was three months into his job as the manager of the small downtown J.C. Penney store when he got the awful news.

Like the biblical Job suddenly afflicted by boils and horrible pains, Striggow suddenly felt the competitive burden he had to carry.

"Why me?" he asked. "Why Omak?"

This is Striggow's first managership. His corporate bosses not only expect him to survive Wal-Mart's ferocious competition, but to boost sales.

For months, his waking moments have been focused on getting his store to meet the challenge. "Every day I ask, `What can I do? What can I do differently?' "

For all his efforts to freshen the place, Striggow's 1928 store has the frayed look of an old black-and-white photograph.

By contrast, the Wal-Mart store sits out on Highway 97 like a beacon to passing cars, inside its 93,000 square feet a riot of colors and 80,000 things to buy. The one store roughly equals all of Omak's downtown, Striggow says.

Today, most merchants here assume Wal-Mart will cause some casualties, but every business owner thinks the other guy will catch the bullet. In defense, several shops have changed their signs, painted their walls, turned up the friendliness and switched their merchandise.

Some have done nothing, assuming no need to change. They weathered the opening some five years ago of Omache Mall, about a mile from downtown. The mall features a PayLess, Safeway, a Sprouse-Reitz and a surrounding collection of fast-food restaurants.

At the downtown Ulrich Drug, Bev Kent is not wearing a Wal-Mart-style name tag with, "We Care," in bold type. But she is busy wrapping a purchase for a customer, the sort of effort Mr. Sam would have admired. She also mails gifts, takes phone orders and delivers on her way home.

"We're going to give personal service, as always," she says.

Striggow says Wal-Mart can dominate a town.

In Omak, the numbers are stunning.

According to figures supplied to the city, Wal-Mart expects 258 cars an hour during peak periods, disgorging shoppers from a 70-mile radius that includes more than 60,000 people.

The company expects $23.2 million of sales this year. That will generate roughly $200,000 in sales-tax revenue - roughly the amount generated by Omak's entire downtown.

Wal-Mart says those dollars will come from shoppers as far away as Canada, and that Wal-Mart could actually draw business to other retailers.

Steiggow, however, doesn't see it that way.

"They like to say they're here to help the downtown. I don't see how they can do anything but hurt the downtown," he says.

He's not about to surrender. J.C. Penney Co.'s experiences against other Wal-Marts have prompted some strategies. He's dropped some items, such as cheap clothing, where Wal-Mart is strong, and added others, such as dresses, where Wal-Mart is not. Mainly, Striggow expects to compete on service and value to customers.

"You have to earn their business," he says of shoppers.

Mary Henrie, owner of Gene's Harvest Foods and president of the Downtown Business Association, says merchants just need to figure a way of getting a piece of the traffic headed to Wal-Mart, a few minutes from the downtown. "Omak is coming alive," she says.

That's a sentiment shared by Jim Rowland, co-owner of "Eleven North," a clothing store aimed at fashion-conscious buyers. Just a small boost in downtown traffic can help him.

"We can live on five customers a day," he says. "Wal-Mart is going to drive the health of this community, not the death."

Inside the Wal-Mart across from the Omache Mall, store manager Pam Casey is grinning. Her employees are pumped. Now comes the oath:

"I swear," proclaim the employees, arms raised like witnesses at an Iran-contra hearing, "that today I will not have an accident. I swear today that I will not let another person have an accident.

"So help me, Wal-Mart."

She puts down a radio she uses to reach employees within the store and takes a few minutes to talk. It's been crazy, more than a month of 60- to 80-hour weeks. She doesn't seem tired.

This is her first opening and her second managership. She started with Wal-Mart 10 years ago as a 25-year-old "plant mommy" in the garden department.

With 179 "associates" as the company calls them, Casey's store is already one of Okanogan County's largest employers. Wal-Mart regards anyone working 28 hours or more as full time. Starting pay is $5 an hour, but the company contributes 15 cents of every employee dollar to a stock ownership plan.

The stock-buying plan has enriched many long-time employees, though not as much as Walton's family, whose wealth soared to $24 billion, according to an estimate last fall by Fortune magazine.

The message to employees is simple: Work together and everyone shares the benefits.

"It's a team concept," says Casey."Look at their faces. `They're happy here."

Casey says most managers stay at a store two or three years, but there's no time limit. She wants employees of her store fully trained in the Wal-Mart culture before she even thinks of leaving.

"In a lot of ways, I'm kind of a mom to them," she says.

Last February, she spoke to the Chamber of Commerce and tried to calm worried business owners. Born in a small town in Oklahoma, she understood their fears.

"They see this huge conglomerate moving in. That's very different from meeting me. I'm a friendly person," she says. "I'm a country girl. I can talk to them at their level."

Casey says the Merchant of Death tag is just not fair. She displays a bookful of letters from small-town chambers, written a year after a Wal-Mart arrived, thanking the company for improving the town.

"We're not stealing business from the locals. We're bringing in additional dollars from outside the county," she says.

It may not be so simple.

Studies have shown that businesses in Wal-Mart towns can thrive. Even some new businesses, such as discount shoe stores, may arrive to feed off the expanded customer group. But often there is damage, particularly in outlying communities whose spending and traffic is sucked from afar by Wal-Mart.

Cynthia McBurney, a retail specialist with the Portland-based Oregon Downtown Development Association, has tutored merchants in Oregon and Washington in "weathering Wal-Mart."

McBurney knows of several businesses in Oregon that suffered a dramatic drop in sales or even went out of business after Wal-Mart arrived. But retailers who prepare themselves, renew their focus on service and who put aside cash as a cushion for a temporary drop in sales will survive, she says. Unfortunately, many small-town businesses are not skilled at strategic planning, she says.

McBurney says free enterprise means that Wal-Mart has a right to come into a town and raise the level of business performance. But on balance, she isn't a fan of the results.

"I don't think they're particularly good for a community. They often make it hard for small business to operate and it's small business that built this country," she says.

If there's early evidence of hurt in Omak, most merchants point to Phil Leise, owner of The Office Center and a Radio Shack franchise downtown. Leise, with shelves full of gadgets priced lower at Wal-Mart, has reduced his display space by about half. He declines to comment specifically on Wal-Mart, but it's clear he's not happy with the newcomer.

"There's been more retail growth than the introduction of money," he says. "The retail pie is being split smaller and smaller."

Gregg Grattan is 30 years old, with a wife and toddler and he's not giving 10 cents of business to Wal-Mart.

Grattan plans to buy his father's Ace Hardware outlet on Main Street when his father retires in five years. After examining Wal-Mart's goods and prices in Oregon, the Grattans changed their inventory of 23,000 items and spent $5,000 on a new store front, signs and fresh paint.

He assumes business will drop and then rebound to even greater levels. At least that's the hope. "Who knows? Maybe I'm doing everything wrong," he says.

Wal-Mart has changed Omak. You can feel it, says Mayor Smith. For decades, businesses could act any way they wanted, knowing in a remote town that people had no choice but to come back.

Downtown merchants never had to worry.

"Now they do," says Smith.