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The Wal-Mart Steamroller Effect Part 2

Updated on April 29, 2010

A study at Iowa State University used sales tax data to study what happened to the economies of 30 Iowa towns in the years after Wal-Mart located there. In every town Wal-Mart entered, total sales went up. But Wal-Mart was about the only beneficiary. Almost everybody else lost. If a new Wal-Mart store does $17 million worth of business in the first year, the average in Iowa during the period Stone studied, and total sales in the community increase by $7 million, it doesn't take much imagination to guess what has happened to the other businesses in town. They have lost $10 million.
But it goes beyond numbers, and beyond boarded-up windows on Main Street. Gone with those dollars, within a few years, are most of the local merchants who provided the civic and political leadership. If a family gets put out of business, you lose a community leader. It means the community has fewer store owners and more cashiers and clerks.

Meanwhile, the profits made by the new Wal-Mart (or K mart or Target or whatever) do not stay in town. They make a brief stopover at a local bank then depart for the corporate treasury hundreds of miles away. That basically takes money out of the area. It's that much less money in local banks that could be loaned to the community.

To say that is not to accuse Wal-Mart of a crime. Wal-Mart is in business to make money. Keeping the downtown drug store operating is not its responsibility. But local governments do have a responsibility: to learn to cope with the Wal-Mart era and manage it in a way that preserves as much of a town's identity and character as possible.

Theoretically, at least, the range of options includes keeping the discount store out of town altogether. A new 100,000-square-foot store nearly always requires some zoning changes, and a community determined to keep Wal-Mart out has the legal leverage to do it. "If some community, for whatever reason, doesn't want us in there," Sam Walton said, "we aren't interested in going in and creating a fuss."

He could afford to say that because, in most places in America, the political pressure is on the side of bringing the discount store in. It's not that people want their downtown to dry up; it's just that those problems are off in the distance, and bargain prices are just one simple rezoning away.

Most communities are not going to tell Wal-Mart to go away. But zoning power gives them much more leverage over a giant retail company than most of them realize they have. If they use it, they can squeeze concessions that can prove important to community life in the long run and avoid the steamrolling of traditional local businesses.

On the fundamental point, Sam Walton was right: Change was inevitable. Main Street couldn't survive forever as it was a generation ago. If you want to see an American small-town dime store, circa 1951, the best place to see it is probably Bentonville, Arkansas, at Sam Walton's museum.

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    • American Romance profile image

      American Romance 7 years ago from America

      it ruins small business no doubt, just as home depot and lowes ruined the mom and pop hardware stores, but the consumer benifited greatly with lower price and less travel time shopping or looking. Anyone with a business must never get complacent and continue to look for ways to improve and hold on to their customer base. This is part of nature though for all business. When was the last time you went to your electronic store to purchase a tube for your TV? R&R electronics was Tx state wide at one time and now .....gone

    • PaulaK profile image

      Paula Kirchner 7 years ago from Austin. Texas

      I have pondered the Walmart effect for several years. It is a huge problem for small businesses in most towns!