Battle Brews in Big Apple Over Bringing In Megastores

For more than 50 years, Coleman Brothers Hardware has sold paint thinner and anchor bolts to denizens of the Sunset Park section of Brooklyn, N.Y.

A sign out front boasts: "Try Coleman's first. They've got it." "We're a service store," adds Aaron Lefkowitz, who has managed the store for 25 years. "People have a problem, we solve it."

But the store may soon face new competition for its spar varnish and claw hammers - from "megastores."

Last year, New York City Mayor Rudolph Giuliani proposed rezoning parts of the Big Apple to lure as many as 100 warehouse-style stores like Home Depot and Wal-Mart to urban neighborhoods over the next decade. The plan would change 20-year-old city laws that now prohibit some of those stores.

While battles have long been fought over the arrival of megastores in suburban America, Mr. Giuliani (R) is attempting to use them as a redevelopment tool in inner-city neighborhoods on an unprecedented scale.

He sees megastores as bearers of lower prices and more jobs and rescuers of the city's many orphaned manufacturing sites. He also sees them as a means of retaining some of the $100 million in sales taxes the city now loses each year to the suburbs.

Residents, small-business owners, and some planning organizations, however, see only traffic clogging neighborhoods and competition bankrupting local businesses - like Coleman Brothers. In December, the City Council voted down the mayor's plan, partly to protect the mom-and-pop operations.

Yet, even without a rezoning - which the city council says is on hold - big retailing operations are finding their way into the city. Kmart recently opened a 145,000-square-foot store in midtown. The GAP is joining Disney and Warner Brothers with megastores on Fifth Avenue. Home Depot skirted zoning restrictions and opened three stores in Queens by calling them hardware stores.

Until now, such retail emporiums have mushroomed across a decidedly suburban landscape. But having conquered the 'burbs, these stores are looking at cities they once avoided due to high real estate costs and limited space.

In some cities, resistance is rabid. Residents and merchants in Seattle have battled five years to keep the Portland-based retail chain Fred Meyer from opening a megastore on the site of a rusted-out steel mill. Elsewhere, retail giants like Home Depot are making inroads into Miami, Chicago, and Pittsburgh. Even Philadelphia, which strictly regulates and discourages megastores in its borders, got one last year.

"We're going into new states and different parts of states that we weren't in before," says Katrina Blauvelt of Atlanta-based Home Depot, which has 500 stores nationwide and plans for 300 more over the next year. Often, Ms. Blauvelt says, the key is offering to renovate old factories and warehouses.

Even in New York, many believe the arrival of more megastores is inevitable. Walter McCaffrey, the city councilman who oversees land and zoning decisions, says the best the council can hope to do is to prevent them from running "willy-nilly" over the five-and-dime stores. He says the council will introduce its own scaled-down proposal this spring. Unlike the mayor's plan, the council may decide to limit the size of the megastores and require a public-review process.

"We all agree that we should bring new, large-scale retail into the city. But we want to protect our existing retailers," Mr. McCaffrey says. "We'll try to do it so there's no direct competition."

Kenneth Stone, author of "Competing With Retail Giants in the New Retail Landscape," says in the '70s, there were six square feet of retail space for every person in America. Now it's 20, and the victims are often mom-and-pop shops.

At Coleman Brothers Hardware, Mr. Lefkowitz worries, "If they knock out the mom-and-pop stores, then they can raise prices. They can do whatever they want."