Has there ever been a Walmart that went out of business due to all the Mom n Pop stores in a locality taking their business?
I’m not familiar with any such. Most of the WalMarts I’ve seen have been away from any other stores. There is one I know of in a complex near Sturbridge, MA, but it wasn’t built for walMart (they moved in afterwards, I believe). And they’re a pretty good walk from any other stores.
What’s more, the other stores don’t offer the Wal Mart any competition – they’re restaurants, a supermarket, and a couple of specialty stores (Staples).
A&P put the butcher store out of business. Sears put the appliance/hardware store out of business. Wal-Mart put A&P/Sears out of business.
Consolidation is an ongoing trend. From local to dept. stores to Super-Walmart. People prefer to do all of their shopping in one place. If you could create an indoor bazaar of local merchants with shared rent/business costs then you may draw people away. The public no longer wants to go door-to-door, even in a mall. Even if they are walking the same distance from staore to store as end-to-end Mega-Walmart.
The public wants instant gratification. They don’t want to wait until they get to the parking lot to tell hubby they’re coming home when they can call from the checkout line. Having everything in one place has the appearance of being more convenient than having the same goods in attached stores occupying the same floorspace.
People who think Wal-Mart is bad are engaging in the ‘hidden man’ fallacy. Let me explain:
Let’s say there’s a local butcher who makes a profit of $100,000 per year from the community. Wal-Mart comes along and offers cheaper meat, and the butcher goes out of business. Is that a bad thing? Not at all. Because the reason he went out of business was because Wal-Mart sold the meat for less by either operating on a smaller profit margin, or by using its purchasing power to get meat cheaper than the butcher could.
In the first case, a lower profit margin means that the consumers of meat get to keep the money they would otherwise have given to the butcher. This is money they will spend on other local businesses. They’ll eat out more, or go to an extra movie, or rent a video. At worst, it’s a push for the neighborhood business - the butcher loses out, the theater owner gains. But the standard of living goes up for the poor people.
But if Wal-Mart offers cheaper meat because it uses its purchasing power to get it cheaper from the supplier, then it’s acting as a wealth transfer agent from the supplier to the poor people in the local community. And in fact, this is exactly what happens. Wal-Mart drives profit margins down in big businesses all over the place, forcing them to be more efficient, and it transfers that increase in efficiency as wealth to the local community.
It’s a ‘hidden man’ fallacy because the businesses that go under are visible and noisy, but the benefits are spread diffusely and are hard to see other than in the aggregate over time. So we develop a distorted picture of the overall effect of Wal-Mart.
This is the same fallacy that causes people to believe in government job creation. The jobs created are visible and noisy and heavily promoted, while the jobs lost through the extra tax burden required to pay for it all are diffuse and hard to quantify. So you wind up with the government touting all the new jobs it has created, while continually announcing ‘unexpected’ increases in job losses in the economy as a whole - which it doesn’t take the blame for.
That is probably dependent on the location. The Wal Mart near my office is in a strip mall with food, etc. in the same place.
Of course the stores in the strip don’t compete - they complement. A dry cleaner would love to be next door, as would a barber. Someone selling the same goods? Not so much.
Maybe I should have said “strip mall” or “shopping district” or something. I am thinking of a bunch of businesses in close proximity to each other, as with the Wal-mart I described above.
If I misused the term “mall” I apologize, but FWIW the Target nearest my house is exactly the same - there are a whole bunch of other shops and businesses next door and across the street and clustered around it.
Maybe it is just the way my town is zoned, but IIRC Milwaukee is the same.
Regards,
Shodan
Sam - aren’t you missing out one important factor in this though? The $100,000 earned by the butcher was presumably more likely to be spent locally than the profits earned by Wal-Mart, which are redistributed across shareholders/reinvested on a nation/world wide basis.
I’m not a huge Wal-Mart basher, though. If people want lower prices, they get lower prices. Fortunately my neighborhood supports a number of small boutique stores (butcher, cheese shop, wine store, hardware store etc) with higher prices, better quality and better service. But the neighborhood has made that choice. I know we have reasonably local Wal-Marts, but I don’t know where. The Target a mile away, well you can have that when you pry it out of my cold, dead hands.
???
Not the central ones I’ve seen. The one near my house in central Tucson is surrounded by a shoe store, a pet store, an electronics store, several restaurants, a manicure place, etc. The one on Wetmore and 1st.
There is efficiency and efficiency. If the increase in efficiency is being able to move the goods in fewer trucks and using a better inventory control system, all to the good. If the efficiency is that they can force their suppliers to reduce costs such that the maximum labor rate is <$1 per day, then that is bad.
The meats not cheaper. The cost of the meat is shifted from the consumer to the producer in the form of lower wages, lax environmental standards and other costs most people don’t even consider that is built in to every product for sale.
Huh. Almost all the Wal-Marts I have ever seen were in the middle of a sea of other stores. I’ve never seen one that didn’t have a bunch of other stores around it, most of which were built at the same time or after the Wal-Mart opened.
It’s not necessary for a Wal-Mart to be physically attached to other stores (though I know of at least a few examples) to serve as a mall anchor; if a store is across the parking lot isn’t that just as good?
The folks making the cheap shit in China and Indonesia weren’t pulling down big bucks BEFORE Wal-Mart was around.
In any event, I am amazed people think Wal-Mart put Main Street out of business. Main Street was suffering before Wal-Mart; they were put out of business, as has already been said, by Sears and K-Mart and places like that. Long before Wal-Mart was the going concern it is now. shopping malls were supposed to be what put small businesses under. It was a very common refrain in the 1980s that people shouldn’t go to malls because it was killing small business.
Seems to me that the businesses Wal-Mart really kills are the inferior chains, not the small stores that have already weathered the storm of shopping malls. The main victim of Wal-Mart has been K-Mart, and there’s no tragedy there.
The Wal-Mart near me has attached to it:
a large supermarket
a sunglasses store
a GameStop
an Olympic Sports (sporting goods and clothing)
a small dollar store
a hair dresser
a large sewing and crafts store
and a GNC
There’s also a bank there, but that’s not attached.
Let’s say you have a butcher who makes $100K a year and has 100K cash reserves. Now, assume Walmart has the exact same competitive position as the local butcher but has $100M cash reserves. Walmart sells meat at such a price such that both stores are losing $100K a year. After 1 year, the butcher is forced to go out of business when he runs out of cash.
Now, Walmart raises prices such that they make $150K a year but with the implicit threat that if any other butcher opens up, they will drop back down to a 100K loss. Since it now makes no sense for any butcher to open near Walmart. After 5 years, Walmart will have extracted $500K of profit from that store, the same as what the butcher would have but for each subsequent year after that, Walmart is making the town worse off than if they had stuck with the butcher.
Walmart won, not by offering cheaper prices of more efficient supply chains, but simply by having much deeper pockets. What is to stop Walmart from doing this?
Because they do, in fact, have a much more efficient supply chain.
Bottom line is that because of their size, technology and economies of scale, a typical mom & pop store can’t compete with a Walmart or Target or any other box store for any item where price is the primary consideration. Walmart can command bulk rate discounts. They can ship products in larger, more efficent batches. So on and so forth.
You may lament the closing of those stores all you like, however as far as I’m concerned, they are simply two businesses and one is more successful. If you want to compete against a Walmart, you have to do so on specialty items where people make their buying decisions based on some factor other than price.
One can also compete by providing stellar customer service. Some customers will pay more for a product if they are taken care of by expert knowledgeable staff during the purchase and provided service after the sale as well.
Take a lawn mower for example. Ma & Pa hardware may not be able to match WM’s price, but they can offer free delivery and provide regular maintenance service as a follow-up. WM is not going to do this, other than maybe try to sell you an extended warranty.
This is a very scary hypothetical, but does it actually happen?
Can anyone actually provide an example of a WalMart that charges HIGHER prices than small shops used to? We’ve had WalMarts around here for a long time and they haven’t started gouging yet. Is this like a 100-year-long strategy or something?
the Family that owns walmart (all 5 or 6 of them) are each worth well over a Billion dollars, if they gave every single employee they have a 2 dollar an hour raise it woulndt even put a dent in their lifestyles in any way shape or form.
the money that the mom and pop store used to take out of the community went right back INTO the community, the money that walmart takes out? goes into some incredibly rich peoples bank accounts.
and no one has even touched on the strategy walmart has used in the past where they get a big tax break to build in a town, drive out all the local businesses, then just about when the town is due to start seeing tax money from walmart they move the store to just outside the city limits.
there is a nice documentary on this subject well worth watching.
Wal Mart is a publicly traded firm, the insiders own 45% of the outstanding shares. You are welcome to share the largesse by purchasing few shares. Of course, with a profit margin of 3.51% you might find better places for your money. A dividend yield of 2.00% isn’t too bad, combined with any stock price appreciation.
As for companies taking tax breaks, then leaving - it happens all the time. That is why many people argue that you should not offer a tax break to bring in companies - they are not the types of firms that you want.
I only know of three walmarts that aren’t deliberately set off on their own - being stand-alone is the most typical format in both NH and MA. At most some have a single fastfood place sharing a parking lot.
In the case of one store with other businesses nearby (Plaistow, NH) it has pretty much the same businesses that were there when the store in its location was an Ames years ago - Big Lots has come and gone, but that’s the only change of note and BL came in after Walmart anyway.
In another case (Epping, NH) there were no businesses in the area where it was built, but now there are eight or ten plus a Lowes on the same campus. Epping didn’t have many retail businesses to speak of until Walmart arrived.
The last one is in Seabrook, NH, but I don’t know much of anything about that town so I can’t speculate as to what businesses were there before and since Wal-Mart.
The fact that they don’t just compete against small butcher shops. In my local area, I can buy meat from Wal-Mart, Safeway, Costco, Superstore, M&M meats, Sobeys, and a number of other smaller grocery stores. All of them within a ten minute drive of my home.
You’re claiming that Wal-Mart is a predatory monopoly - that it gains absolute control of a market and then uses that control to price goods above what the price would be in a competitive market. Do you have any evidence for this? You’re making the accusation, so the burden is on you to provide the evidence. Because I can’t think of a single Wal-Mart that doesn’t have nearby competition. Not only that, but Wal-Mart has a web site where you can order things, and their flyers and local prices are posted online. It would be a simple matter to compare them and see if they really do gouge some areas where they have monopoly control.
Also, the kind of tactics you’re talking about are illegal and would open up Wal-Mart to anti-trust prosecution.
I think the left has a distorted idea of how many companies manage to pull of this kind of monopoly position. It’s extremely rare. But it always comes up in discussions of large companies. They’ll run the competition out, then raise prices willy-nilly! They must be stopped! But they never have any specific examples.
This love for local business on the left is very bizarre to me. Local businesses often have the worst employee satisfaction. Every crappy job I’ve ever had was in a small business. They’re often under-capitalized and under pressure and the owners take it out on the employees. When I used to work for small outfits, it was common to be asked to put in overtime without pay, or to have a paycheck be late, or have an owner come down on you in a screaming fit for an honest mistake. Employees generally get treated better in large firms.