New WalMarts hurt large retailers, mom-and-pops less affected

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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