Suppliers move closer to retail giant

Procter & amp; Gamble, Disney set up shop in Arkansas.
BENTONVILLE, Ark. (AP) -- Wal-Mart's town is becoming the new global business address.
Hundreds of name-brand suppliers are opening offices and sending top representatives to the Bentonville area to be near the retail titan and, they hope, get a bigger chunk of sales from the nation's largest vendor of DVDs, books, groceries, toys and a host of other products.
They are reshaping the retail business relationship elsewhere, as companies take away concepts and practices that change how they do business within their own firms and with others.
Just as some locals are bristling at rising property taxes and increased car traffic, some industry experts worry about a power imbalance, with Wal-Mart at the apex. But so far those concerns are doing little to moderate a missionary-life fervor among those absorbing the Wal-Mart way of business.
Who was first
"This has helped us reinvent our company," said Tom Muccio, president of global customer teams at Procter & amp; Gamble, the first supplier to open an office in the area, in nearby Fayetteville in the late 1980s. Now it has more than 200 people here.
Over the past few years, P & amp;G has established offices near some of its other key retail customers such as Costco Wholesale Corp. It has begun duplicating initiatives created with Wal-Mart, such as shipping display-ready cases to cut down on store labor costs.
Another big presence is Kraft Foods Inc.
The burgeoning vendor community is a testament to the enormous power of Wal-Mart Stores Inc. -- which made $244 billion in sales last year -- to attract the corporate elite to a region that's still perceived as a backwater.
Levi Strauss & amp; Co., which sells a line of jeans to the discounter, has just set up shop. Walt Disney Co., wanting to bring back the magic of Winnie the Pooh and other characters, doubled its office space this past summer and relocated the head of retail business development from Los Angeles to nearby Rogers.
Common practice
The notion of suppliers' getting close to big-money clients isn't new. Subcontractors long have huddled around aerospace giants like Boeing.
But Wal-Mart's vendor community in northwest Arkansas seems to be taking things to a whole new level. Some worry it has gone too far.
"I applaud this Wal-Mart-vendor partnership, but I think it's getting uncontrolled and creates an economic and competitive imbalance that could cause the collapse of up to half of the U.S. chains in the next decade," predicts Burt Flickinger, managing partner at the consulting firm Strategic Resource Group in New York.
"Vendors cannot afford to do what they do for other stores, and these other stores are not getting their fair share" of staff support, he said.
No one knows the exact number of Wal-Mart suppliers in the area. Raymond Burns, who heads the Chamber of Commerce for the nearby Rogers-Lowell area, estimates there are 500 to 600. That's up from about 200 only two years ago.
Based on the demand for new office space, the total is likely to be 1,200 within two or three years, he said.
That's not including the 200 companies that supply the main vendors, including packagers like Smurfit-Stone and New Creature, Burns said.
Changing the scenery
Wal-Mart has more than 20,000 suppliers in all. As more of the biggest -- or most ambitious -- of them move to the Bentonville area, their offices are stretching out in a 20-mile radius from Wal-Mart's own drab, brick headquarters that has frayed carpets. Many are filling new high-rise clusters, a marked difference from the strip centers that were rented in the past.
In 2005, two 16-story office towers, the tallest in northwest Arkansas, will open in Rogers. Half the space is expected to house Wal-Mart suppliers, according to Bill Schwywart, a partner at the Pinnacle Group, which is developing the project.
These satellite offices become messengers of a corporate culture that shrewdly focuses on squeezing costs and getting the lowest price for the consumer. Some companies like Nestle post specific sales goals for Wal-Mart at their entrances.