More research on the economic impact of Walmart

From the Economic Development Quarterly:

New WalMart stores put large retailers out of business, mom-and-pop stores less affected: Focus issue of economic development quarterly reveals economic and social impact of WalMart stores

Los Angeles, CA (October 23, 2012) Ranked as one of America's largest corporations and the largest private employer in the United States, some say that WalMart stores are catalysts for economic growth in U.S. communities, while others claim that they can have damaging effects on local shops. However, a new study finds that it is the larger retailers such as Ames Department Stores, Sears, and Kmart that lose business with the arrival of a new WalMart store, while smaller retailers are not affected to the same extent. This study is published today in a new Focus Issue of Economic Development Quarterly (a SAGE journal) that describes the economic development impact of Wal-Mart stores. 

"Wal-Mart predominantly might be replacing stores already characterized by nonlocal management," wrote the authors. "This seems to contradict a widely held belief that Wal-Mart hurts locally owned subsidiary business establishments." 

Using Indiana as a case study, researchers Michael Hicks, Stanley Keil, and Lee Spector studied the financial impact of new WalMart stores on establishments nearby. They found that competing stores with 49 or fewer employees were affected very little after a Wal-Mart was opened in the county and competing stores with 50 to 99 employees received a very small negative impact, while stores with 100 to 249 workers closed at a rate of about .5 stores per year, and competing stores with over 250 workers closed at a rate of 1.5 stores per year. 

This Focus Issue of Economic Development Quarterly, out today, includes four articles that detail the economic impact of WalMart stores across the nation. These articles include: 

• "Walmart and Local Economic Development: A Survey," by Alessandro Bonanno and Stephan J. Goetz 
• "The Impact of an Urban WalMart Store on Area Businesses: The Chicago Case," by David Merriman, Joseph Persky, Julie Davis, and Ron Baiman 
• "Revisiting WalMart's Impact on Iowa Small-Town Retail: 25 Years Later," by Georfeanne M. Artz and Kenneth E. Stone 
• "Mom-and Pops or Big-Box Stores: Some Evidence of WalMart's Impact on Retail Trade," by Michael Hicks, Stanley Keil, and Lee Spector  

"Where an auto plant or a high-tech research park brings a range of economic development benefits to a community, the economic development benefits generated by a new big-box retailer are far less obvious," wrote the issue editors. "While these articles do not focus on policy implications, the research results reported here suggest great caution in subsidizing WalMart retail locations."


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One of my hypotheses relating to the economic impact of Walmart, in talking with the professor (David Merriam) at Loyola who has done studies of the impact of the first Walmart store in chicago--and they have access to sales tax data by zip code--is that some of the job loss impacts of locally owned stores that close are "mitigated" by the opening of other chains (banks, autoparts stores, etc.) attracted to locating stores in proximity to Walmart, and some aren't retailers (like banks). 

And that a significant (negative) impact in part the coming of Walmart to communities concerns the   reshaping of "local" commercial districts away from being comprised of "local" businesses.  In short local businesses close, chains open. 

But that wasn't something the Loyola study really looked into (and presumably the others did not either).  But you can suss that out kind of impact from the competing positive study that Walmart commissioned from Mari Gallagher Associates.

And because the positives from the economic multiplier effect are less for monies spent at chain stores as opposed to locally-owned stores, this ends up having a significant negative economic impact.  (See "Independent Businesses Deliver Bigger Economic Benefit, Study Finds" from the Institute for Local Self-Reliance.)

I haven't read any of the papers yet, and I do wonder if any of the EDQ studies considered any changes to the composition of the type of retail present in local commercial districts and communities after the entry of Walmart.

Probably more independent stores selling "useful" goods--selling stuff people use (food, hardware, pharmacy, etc.) close and the independents that remain open sell stuff people don't really need--beads, gifts, etc.--or used goods like clothing.

Also see the past blog entry "Lessons from Walmart's foray into Washington, DC."