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The Bentonville Boom: Wal-Mart Leads Region To Explosive Growth

About 1,000 people a month move to Benton County, Ark., to work with or for Wal-Mart, as the boom in Bentonville attests.

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Wal-Mart’s headquarters

Wal-Mart’s headquarters.

Photo By WWD Staff

There’s a rush to build offices in the Bentonville area
A house for sale in one of the many new developments designed to attract executives moving into the area
A truck passes Vendor Boulevard and a Wal-Mart distribution center
BENTONVILLE, Ark. — Sam Walton is buried in the cemetery directly behind Wal-Mart’s headquarters, within sight of its huge data satellites and surrounded by the rapidly populating cities that are as much Wal-Mart’s progeny as its nearly 5,000 stores worldwide.

Like the sales data streaming to those satellite dishes, the world is being drawn to Wal-Mart’s hometown.

Flight attendants greeting passengers at the regional airport freshly carved out of farmland acknowledge this fact. “Whether you’re visiting Wal-Mart or returning home,” one announced recently, “welcome to northwest Arkansas.”

Executives from Fortune 500 companies are doing both — and the signs are all over, from endless construction sites to the status-symbol cars tooling the area’s roadways. The executives come to conduct business with Wal-Mart and then, with increasing frequency, end up opening branch offices and calling the region home.

Some 1,000 people move into Benton County each month, mostly to work for or with Wal-Mart, said Jeff Hawkins, executive director of the Northwest Arkansas Regional Planning Commission. Benton is the third-fastest-growing county in the nation, behind Orange County, Fla., and Clark County, Nev. The metropolitan statistical area — 1,800 square miles encompassing Benton and Washington Counties — has a 311,121-person head count, the second-highest job-growth rate in the U.S. and unemployment of less than 2 percent, according to the 2000 census and chamber of Commerce statistics.

Wal-Mart itself is a huge contributor, directly employing about 17,000 people in northwest Arkansas.

The gravitational pull is so strong that 25 percent of the workforce from nearby McDonald County, Mo., and Madison County, Ark., commutes to Benton or Washington Counties for jobs. The two counties are within an hour’s drive of Bentonville.

And when vendor executives relocate here, they mostly notice two things: Their paychecks go a lot further and they miss the amenities they left behind.

“There’s definitely an upper-middle-class demographic here that’s under-served in goods and services,” said John Schupp, senior vice president with developer Jones Lang LaSalle, which is active in $1 billion worth of regional construction. “It’s no slam to Wal-Mart, but the people moving in want to shop other places. They want Steve Madden shoes and Chico’s clothes.”
Rich Davis, director of economic development for the Bentonville-Bella Vista Chamber of Commerce, put it another way: “We’re building gated communities in Bentonville not because crime is a problem, but because it’s chic everywhere else.”

Indeed, signs for high-end retail, residential and office complexes bristle from red clay construction sites and grassy fields all over the area. Several million square feet of new construction are either proposed or under way in the 20-mile chain of communities running north and south along I-540. Most projects are in Fayetteville (home to the University of Arkansas), Bentonville or Rogers (site of the first Wal-Mart and the area’s first gated community).

Plans call for several lifestyle malls, myriad housing developments with names like Allencroft and Stonehenge, 20-story office towers and a 250-room Marriott with an adjoining convention center. That hotel, Marriott’s first in Arkansas, will bookend the 250-room Embassy Suites, which opened in May and charges, in local terms, an astronomical $200 a night. Prior to the hotel opening, visitors had a choice of stale-smelling motels along Walton Boulevard, Bentonville’s main commercial artery.

Development — much of it Spanish-tiled, stucco or fieldstone — stands shiny-penny new against the region’s rolling fields, abandoned chicken coops and Dairy Queens.

An occasional homespun business survives along highways, like Stuff Mart, with the slogan: “We get real good stuff.” In a land where admiration and emulation blur, there’s also a Sam’s Furniture and a Car Mart (neither is connected to the Walton family or Wal-Mart.)

Raymond Burns, president and chief executive officer of the Rogers-Lowell Area Chamber of Commerce, estimates he’s fielded more than 100 retail inquiries in the last 12 months, during which time Barnes & Nobles, Linens ’N Things, Old Navy and Chico’s all opened their first units in the region.

Kohl’s and Target are also relatively recent entrants to northwest Arkansas, apparently willing to face the competitive nightmare of playing on the home turf of the world’s largest company in exchange for a slice of the burgeoning market.

Kohl’s has doors in Fayetteville and Rogers. Target, which opened less than a year ago in Fayetteville, announced it also wants to open in Rogers. Local scuttlebutt — and perhaps poetic irony — places Target across the street from Wal-Mart’s oft-expanded first store, in a space Kmart recently abandoned.
It begs the question: In an area so tied to Wal-Mart, who shops Target? Plenty, apparently, as the lot was a respectable three-quarters full on a Saturday this spring.

“My wife loves Target,” Hawkins said. “She likes the wide aisles and the selection. It doesn’t seem so cluttered with stuff piled in the aisles like you’re seeing at Wal-Mart.”

Not to be outdone, Wal-Mart is plunking a second supercenter in Rogers, its sixth in a 30-mile radius already rife with Neighborhood Markets and discount formats.

Needless to say, Wal-Mart stores are such community institutions here it’s difficult to imagine saturation. On Bentonville High prom night, bored couples strolled the aisles in taffeta and tuxedos, checking out televisions and stereo equipment as if Wal-Mart was the only place to wait for the party to start.

To put a scope on all the construction activity, Rogers issued a record $128 million worth of construction permits in 2002. This year, permitting is up 63 percent over last year, according to chamber statistics.

“There is not a better ‘if you build it, they will come’ story in America,” Rogers mayor Steve Womack crowed.

Many locals believe the real gold rush is yet to come, mostly because of lagging data that misses the nearly 30,000 people that have already arrived. Nearly 50,000 more are expected in the metropolitan statistical area (MSA) in the next two years.

The Latino population, in particular, has exploded. The group has gone from less than 1 percent of Benton County’s population a decade ago to 8.8 percent in 2000. Rogers has seen its Latin minority leap from less than 1 percent to 19 percent in that period, according to Burns at the chamber of commerce.

Despite these statistics, many national retailers are absent from the region. Ann Taylor, The Limited, J. Crew, Urban Outfitters, Wilson’s Leather, Pottery Barn, Crate & Barrel and PacSun all lack an outlet within 50 miles of Bentonville, according to their Web sites.

Most of the growth is propelled by “Vendorville,” the estimated 500 to 600 vendor branch offices clustered within a five-mile radius of Wal-Mart’s headquarters.
Vendorville is a Fortune 500 microcosm, with everyone from Procter & Gamble to Exxon and Mobile running offices dedicated to serving Wal-Mart. Kraft redefines “branch office” with 200-plus employees ensconced in a 50,000- square-foot building. Like Kraft, many vendors are choosing to open in new construction areas, rather than repopulate the sleepy town centers.

This spring, Levi’s opened a dozen-person sales office near a cluster of Wal-Mart warehouses. The office will run the Levi Strauss Signature brand business, bowing at Wal-Mart in July.

The thought of working in Bentonville might initially send chills down the spines of many vendor executives. But many big-city expats become enamored with the region’s mild seasons, low cost of living and wide, green spaces and decide to stay. Many switch to another vendor, rather than take a promotion back to corporate headquarters. Locals call it “vendor hopping.”

“Most come here for a two- or three-year stint kicking and screaming, so we must be doing something right,” Davis observed.

The job-hopping goes both ways. Sources say vendors, in hopes of getting insight and an inside track, are luring away Wal-Mart buyers and other junior staffers with higher salaries.

The Village on the Creeks retail/office complex in Rogers — with its freshly potted pansies and “For Lease” signs still draped on some facades — epitomizes the current state of Benton County. The pond centered in the Japanese-style landscaping is not only decorative, but a functional fishing hole. It’s commonplace to see vendor executives cutting out of work early to cast a line.

Given that Wal-Mart has 27,000 vendors, it’s logical that Vendorville is in its fetal stages in terms of clout and scope. A persistent rumor traveling local circles is that Wal-Mart has mandated that all vendors of a certain size will have to open branch offices in the next 18 months if they want to do business with the retail behemoth.

“We do not require suppliers to open offices in northwest Arkansas,” a Wal-Mart spokeswoman responded. “However, when they do choose to do this, it is certainly a convenience for both parties.”

Indeed, the retailer is well known for preferring its operations centralized, even keeping its international top brass planted in Bentonville. Executives have recently been vocal about the time and money saved by having staffers work via e-mail rather than travel to SARS-afflicted countries. Wal-Mart may well continue to operate that way even after the epidemic ends, perhaps prompting some international companies to hang a shingle in Bentonville.
That is, of course, developers’ dearest wish. In Bentonville, population 23,000, there are eight office parks currently under construction.

Architect Perry Butcher, whose namesake firm is developing 250 acres on the outskirts of Bentonville, estimated another 2,500 to 3,000 vendors will arrive in the next five years. “What’s here now is just the first wave,” he said. “We’re planning for a bigger wave behind this, with the people who sell packaging or marketing or other services to the vendors. It’s going to be enormous.”

As for Butcher’s plans for his 250 acres, he envisions placing several residential neighborhoods, a mall, movie theaters and ultimately a 20-story office tower, which would be the tallest thing for miles.

Butcher sees the development, dubbed “Brownstone,” eventually functioning as a 12,000-person township within Bentonville, peopled by white-collar executives who work with or for Wal-Mart. In vision and scope, it’s reminiscent of Limited chairman Leslie Wexner’s New Albany, Ohio, an enclave of white-fenced Georgian mansions and coordinating country clubs housing Limited execs.

Brownstone will be in stiff competition with other locally led, equally ambitious projects.

Developer Charles Reaves is working on Pleasant Crossing, a 345-acre complex of retail, residential and office space in Rogers. About 950 homes, with a median price tag of $350,000, will be master planned around an 18-hole golf course.

Even before Brownstone or Pleasant Crossing hit the drawing board, the Pinnacle projects in Rogers proved there’s a taste and means for luxury in northwest Arkansas.

In 1999, the Beauchene and Walsh farms were bulldozed to make way for Pinnacle, the area’s first gated community of million-dollar homes replete with spurting fountains and flagstone gates. Directly across the street, there’s the preboom picture: a white farmhouse with a corrugated-roof barn nesting blandly on considerable acreage.

Wal-Mart ceo Lee Scott reportedly lives on the gated side of the street. Locals say he gets his hair cut at the Pinnacle Point Aveda Concept Salon, a departure both symbolically and fiscally from the barbershop where paparazzi once surprised Sam Walton getting a trim.

The upscale retail and services at Pinnacle Point — ranging from a gourmet food mart to a plastic surgeon — have been a hit. Sixty percent of Pinnacle Point retail tenants expand within 18 months, according to Hunter Haynes, director of leasing and property management.
In Rogers, there’s now a Pinnacle country club, Pinnacle office towers, the Pinnacle private jet service and the Church at Pinnacle Hills, which has a rotating spire and televangelist aspirations.

And another round of Pinnacle-branded projects is under way. Dubbed Pinnacle Hills Promenade and led by a team that includes trucking millionaire J.B. Hunt and powerhouse developer Jones Lang LaSalle, the $1 billion in new construction will include three 200,000-square-foot office towers; a Marriott hotel and convention center, and a 400,000-square-foot lifestyle mall.

“We’re hoping to attract retailers who haven’t even thought about Arkansas,” said Bill Schwyhart, principal in Pinnacle Development Group.

Signing on a retailer like Saks Fifth Avenue “is not overshooting” the market, Jones Lang LaSalle’s Schupp contended. “Tulsa has a Saks in its trade area.”

Tulsa is, in fact, the model many cite in planning the transformation of Benton County. For years, the city, a two-hour drive, has been the major retail market for northwest Arkansas.

And the area’s household income statistics make Schwyhart and Schupp confident that their upscale development is on firm economic footing. According to 2000 census data, the median household income in Benton County is $40,281, while the state’s median is $32,000. Rogers and Bentonville both have 11 percent of their households pulling in more than $100,000 a year, with 2 percent earning more than $200,000. The median household income is projected to rise 46 percent by 2006, to $58,070.

Wealth is moving into the region, but there are also plenty of homegrown millionaires.

“There are a lot of families around here that Sam encouraged to buy 500 or 1,000 shares to help him fund his beginnings,” architect Butcher recalled. “Many apparently took those shares and stuck them in a drawer. There have been so many splits that it wears me out to do the math on what they’re worth now.”

The younger generation is making some of that wealth liquid, investing it in new ventures or fancy cars, locals said.

Wal-Mart is also reportedly paying more in salary, creating a wealthier citizenry. The image of low-wage Wal-Mart executives toiling for a distant stock payout is no longer accurate, claims a source in the executive placement community, who requested anonymity.
“[Executive vice president, people division] Coleman Peterson and his group have done a yeoman’s job in making their packages competitive,” the source said.

Wherever the money originates, it’s funding the Hummers parked at Pinnacle and BMWs in Wal-Mart’s lot. One local resident is constructing a 20,000-square-foot French chateau replica on 350 acres behind a grandiose wrought iron and limestone wall. Million-dollar homes proliferate on the rugged shores of Beaver Lake, about a 25-minute drive from Wal-Mart headquarters.

Yet, a basic financial pragmatism seems to run deep.

“We aren’t going to pay a premium to put someone’s name on our golf course,” replied developer Reaves somewhat testily — and in the spirit of Sam Walton himself — when asked if his course would be designed by a big name.

The longevity of Walton-think makes sense, since the region is a close-knit web of alliances, most of which connect back to and through Wal-Mart.

Reaves himself serves on the board of Arvest bank, a string of local banks purchased by Sam Walton and recently consolidated under one brand umbrella by son Jim Walton.

“He’s expanded it rather significantly into Missouri, Little Rock and Oklahoma. It’s become a major banking operation in this region,” Reaves noted. “Jim is a good businessman. He has many of the same qualities as his dad.”

Along with the $1.2 billion in Pinnacle expansions, Schwyhart is on the regional airport committee, helping to push through the $20 million expansion of a second runway and 13 new gates that have made travel to and from Wal-Mart immeasurably easier.

Others serve in smaller ways.

Wal-Mart senior vice president and general merchandise manager Celia Clancy, whose husband ditched law to write when they moved to northwest Arkansas, serves on the board of the Writer’s Colony at Dairy Hollow in Eureka Springs, Ark.

“To get a board position like that in Boston, I’d have to be the granddaughter of Dr. Seuss or something,” she laughed at an interview at headquarters in April. “Here there are a lot of opportunities to do things like that. My husband is on the board of the Montessori school and Lois [Mikita, senior vice president and gmm of men’s and boys’ apparel] is on the board of the Boys & Girls Club.”
In northwest Arkansas, as elsewhere, Wal-Mart’s name invokes a “very tough but fair” assessment. The prevailing local sentiment, though, is that Wal-Mart has helped everyone think big.

“There is a confidence we’re beginning to have with ourselves here,” Butcher said, citing his own 20 years spent traveling the U.S. and abroad designing Wal-Mart stores. “The fact is, Wal-Mart made us better. We couldn’t keep to the same mold, but needed to expand our capabilities and horizons.”