Study: How Walmart Displaces Nearby Small Businesses
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September 17, 2012 4:20 pm at 4:20 pm #93798
Radiating Death: How Walmart Displaces Nearby Small Businesses
NATE BERGSEP 14, 2012
In 2006, months before a Walmart store was opened in the Austin neighborhood of Chicago’s West side, researchers counted 306 businesses in the surrounding area. Two years after the Walmart opened, 82 of those businesses had closed.
That some businesses, particularly small businesses, would close after a large retailer moves into the neighborhood is to be expected. But, as the researchers found, the pattern and severity of those closures was far from typical. The closer a business was to the new Walmart store, the more likely it was to close.September 17, 2012 4:39 pm at 4:39 pm #514274
And… The sky is blue.
Really though, if I had to guess, (in the same manner the author has painted a broad stroke with basically a single data point, and little context), I’d say the opening of a Target probably does more damage to small businesses than a Wal-Mart. A Target store attempts to sell more boutique like, exclusive products, which are more indicative of what a successful small business probably carries.
Wal-mart more or less sells commodity goods, which are very difficult for small businesses to survive on selling as a whole, regardless of Wal-mart.September 17, 2012 4:42 pm at 4:42 pm #514275
“The businesses that typically surround our stores either offer a product or service we don’t or are strong in areas we’re not. Just drive around the vicinity of a Walmart and you’re likely to see small, medium and large businesses co-existing.”
CiCi’s Pizza, Hometown Buffet, Little Caesars, Jenny Craig…September 17, 2012 6:14 pm at 6:14 pm #514276
Also, I see that they tracked that 82 of those 306 preexisting businesses closed. But I wonder …
(1) Did no new businesses open in the area other than the Wal-Mart? Did the area suffer a net loss of 81 businesses (82-1)? I find that somewhat less than credible. I would believe that fewer businesses opened than closed, but not that no new ones opened.
(2) What was the average prior lifespan of those 82 businesses that closed? How profitable were they before the Wal-Mart opened? (In other words, is it likely that a number of these businesses would have failed anyway?)
(3) Did the 234 surviving businesses see their aggregate sales increase or decrease?
We get some hints at that because of the sales tax information, but that reeks of massaged statistics:
The research also shows that during the study period, from 2006 to 2008, overall sales tax revenues went down in the two ZIP codes closest to or encompassing the Walmart. Before the store opened, the sales tax revenues for these two ZIP codes were growing at rates of 6.7 percent and 4.3 percent per year. After the Walmart opened, they each saw a boost – up to nearly 18 percent in the ZIP containing the Walmart and slightly up to about 5 percent in the ZIP next door. But by 2008, both of those growth bumps had faded, and the ZIPs were seeing declines – negative 11 percent sales tax revenue growth in the ZIP containing the Walmart and negative 3 percent in the neighboring ZIP. The researchers also argue that by 2008, the amount of jobs lost because of store closures was just about the same as those created by the Walmart store’s opening. It was, Persky says, a wash.
I think that the appropriate read on this is that sales tax revenue was +18% in 2006 and then -11% total over the next two years, for a net gain of 7% over two years, which the authors imply should be unfavorably compared to the previous number of 6.7% every one year. But first, they don’t mention where that 6.7% stat came from; was that just the number for 2005, one of the years at the height of the bubble? Second, they don’t compare it to any control area, which is particularly relevant when 2008 (the year Lehman collapsed and the financial crisis began in earnest) is factored in as one of the study period years. I can see a couple of other problems with such a narrow data set, too.
I also don’t see the expected affirmative representation that the sales tax rate itself did not change in the interim.September 18, 2012 11:48 am at 11:48 am #514277
I wonder what the ramifications will be if Walmart builds the long rumored store at the Timken site in Milo Grogan on 5th? It is really close to the SN and Campus.
Other than grocery competition with the SN Kroger and the coming downtown Hills Market I wonder if it would compete with the more boutique stores in the area? Maybe the Lennox Target would take a hit, but I don’t see a lot of the same type of bulk retail goods being sold in close proximity. I don’t think people who are shopping for skinny jeans on High St are going to say – ‘lets head over to Walmart’.September 18, 2012 12:19 pm at 12:19 pm #514278
I don’t think people who are shopping for skinny jeans on High St are going to say – ‘lets head over to Walmart’.
Probably not. Though I’m sure Walmart sells skinny jeans.
There would probably be a greater impact at places like the Family Dollar in the Short North, any hardware store within 5 miles, gift shops, florists, pharmacies, etc… plenty of places with competing products in the area.September 18, 2012 12:20 pm at 12:20 pm #514279
If I go to Walmart or if I go to the Short North I am going to drop at least $100. That is just the way it is and I have come to accept it. A lot of that stuff is unneeded purchases bought on impulse.
I prefer going to the Short North, but if Walmart is a close option I may browse the aisles there on occasion and probably come back with even more extra stuff. That would be $100 not going to Short North retail. It doesn’t sound like a lot, but multiply that by the number of the people in the area.
It is partly about the discretionary spending in a neighborhood.November 13, 2013 2:56 pm at 2:56 pm #514280
Urban Planner Debunks The Myth That Wal-Mart Is Good For Local Economies
ASHLEY LUTZ NOV. 11, 2013, 12:28 PM
Wal-Mart’s supporters say that the retail giant brings much-needed jobs to depressed areas. But an urban planner from Asheville, North Carolina found that Wal-Mart is much less beneficial than downtown businesses, according to the book “The Happy City.”
READ MORE: http://www.businessinsider.com/is-wal-mart-good-for-local-economies-2013-11
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