Wal-Mart and Its Effect on the Local Economy Worldwide

As of the most recent list of Fortune 500 companies, Wal-Mart is ranked number one having more than half of a trillion dollars in revenue. (CNN Money, 2013) However, their employees struggle to make ends meet yet The Walton Family only donated 2% of their net worth. However, Bill Gates donated 48% and Warren Buffet donated close to 78% ("Scary (but True) Facts About Wal-Mart", 2010) humbling numbers compared to the Walton’s small contribution.

With an immense quantity of the populous buying from Wal-Mart and super retailers it is making it tough for just not just small and large city small business; it is also has it effects worldwide. Sanghui Yoo and her husband from Altadena, California are experiencing the effects of the Wal-Mart Neighborhood Market opening around the corner from their small family liquor store. The Yoo family is worried about Wal-Mart underselling them and ultimately making them close.

A spokes- woman for Wal-Mart stated “This store will serve as a choice I think people will be pleasantly surprised by how much Wal-Mart can save them money.” (Lee, 2012) Rachael Wall said in the article. It comes as no surprise; people will go where it will save them the most money, which is plausible why Sanghui Yoo and their other fellow local business owners are worried. However, in their defense the area was surviving fine without the Neighborhood Market. The opening seems unfair for the local business owners and several can empathize with their struggle. Although Altadena may have a smaller population it can affect the larger cities across the country.

Chicago is ranked as the number three largest city in the United States, and even they are not exempt from feeling the wrath of the mega-retailers. Another article stated “The opening of a Wal-Mart on the West Side of Chicago in 2006 led to the closure of about one-quarter of the businesses within a four-mile radius.” (Mitchel, 2011) 25 percent is a significant number for a four-mile radius; however, their finding on the wage and tax info was remarkable. “Sales tax and employment data provided by the state of Illinois for Wal-Mart’s zip code and surrounding zip codes confirmed that overall sales and employment in the neighborhood did not increase, but actually dipped from the trend line.” (Mitchel, 2011)

One argument many ‘pro’ mega-retailers have is that the increase of jobs and employment it will inevitably get and the increase in tax revenue for the city. Lastly,” Wal-Mart stores employ an average of 360 workers, this suggests that for every new retail job created by Wal-Mart, 1.4 jobs are lost as existing businesses downsize or close.” (Mitchel, 2011) So, in fact they not only make more local surrounding business close, have a negative impact on the number of jobs overall, and even have the tendency to reduce the overall value of real estate and increase property taxes to help pay for the development.

A study done in a Canadian city on close to 80 stores in showed similar results to Chicago. In the first quarter after a “mega-store” opening it saw a slight decrease in employment and on average about 7.5% drop in sales (Virchez, 2004). The report also showed the actions small business took to counteract the mega-stores. A few of the tactics were to drop some of the lines sold by the large retailers and replace them with more exclusive and expensive lines.

The small business took the initiative to inform the public how “big-box” stores foster a low wage, low cost economy with no job security even though the local consumers keep asking for higher wages and job security.” (Virchez, 2004) There was one tactic that someone stood out, and found interesting. The small businesses avoided cutting cost and starting a price war, which is smart and would not have thought of that.

One store owner had stated that mega-retailers hadn’t affected them in the typical way it had everyone else, they owned a higher end furniture store, something the big-box stores could not offer. However, in order to reach their customer base they had to revitalize their advertising and get in a mindset to catch the consumer’s attention. The world “SALE” is what catches people’s eye, and will more than likely draw them into to the store, or at minimum look at the sales ad which is a good jumping off point.

In reality, mega-retailers and big business such as Wal-Mart are not boosting the economy and providing jobs for the unemployed. From small population towns to megalopolitan areas like Chicago, it closing small businesses and stealing jobs. However, it’s not just here in American where the presence of mega-retailers is being felt, small businesses in Canada are feeling the effects as well. Although it may not be affecting them to the same degree as it is here, it is still a negative impact and hurting their economy.

References Lee, W. (2012. Altadena Wal-Mart: Small businesses worry about competition from major retailer. Southern California Public Radio. Retrieved from http://www.scpr.org/news/2012/10/30/34679/small-businesses-worried-altadena-walmart/

Mitchel, S. (2011). Key studies on big-box retail & independent business. Institute For Local Self-Reliance, Retrieved from http://www.ilsr.org/key-studies-walmart-and-bigbox-retail/

Virchez, J., & Chicon, C. (2004). The impact of mega-retail stores on small retail businesses: The case of Sudbury, northern Ontario, Canada. AMEC, Retrieved from http://www.amec.com.mx/revista/007/03 The Impact Of Mega Retail Stores On Small Retail Businesses.pdf

Fortune 500 2013: Annual ranking of America's largest corporations from Fortune Magazine. (2012). CNNMoney - Business, financial and personal finance news. Retrieved May 20, 2013, from http://money.cnn.com/magazines/fortune/fortune500

Scary (But True) Facts About Wal-Mart. (2010). Business Pundit: Your daily dose of smart business opinion. Retrieved May 20, 2013, from http://www.businesspundit.com/stats-on-walmart/