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Karl Kuehn
Dr. Romano
Eng. 104 sec, 27
3/9/2015
Walmart killing small business or so we believe
July 2, 1962 witnessed the birth of the sometimes loved, sometimes hate, yet always in
the lime light, retail colossus known as Walmart. Since then Walmart has erected over 4000
stores and growing nationwide. But the road to becoming a retail giant isn’t without a price. The
power Hungary Walmart swallows up existing enterprises and spits the shambling remains back
out forcing them to close up shop this is known as the Walmart effect coin by Sheppard and
White in 2005 (Paruchuri, Baum, Potere, 210). It seems to be common knowledge that this is
indeed an issues in today’s economy. Even though locally owned business are the foundation of
the American economy, we have solid evidence that Local businesses are struggling to remain
stable under the crushing weight of Walmart and other major retailers. But these studies may
have miscalculated due to the sample size and calculating only market exits. Recent empirical
studies have shown that Walmart may not be as ruthless as we believed after all. There may be
way for the two to coexist in parallel markets.
Small business are the back bone the American economy local residents wanting to start
their own specialized business. Not only for their own profit but for the opportunity to provide
employment for the members of the community. Although on average local business employ
only about 10 to 30 employees per store (Mitcheii). while Wal-Mart’s is hires much more, small
businesses are much faster at creating new jobs “From 1990 to 2003, they created almost 80
percent of net new jobs” (Paruchuri, Baum, Potere), because they pop up more often than the big
chain stores they can grab employs right off the market because they are so new. The small
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business employees also retain their jobs longer than the Walmart employees: Small firms also
accounted for about 24 percent of gross job losses, while large firms: suffered 43.5 percent of
gross job losses. Also the conglomerate of small businesses can compete with the shire size of
the Walmart Corporation and it being one of the largest employers in the world because
according to Pickman and Viek: microbusinesses employ 260 percent more people than venture
capital-backed firms. Which goes to show small businesses can hold their own when it comes to
employment. On the other hand in some cases some local business such as David Barnette’s
Wizards Keep who chooses not to have any employees for the sake of more direct money to
himself.
Small and local businesses are the heart and soul, the very definition of community. Not
only does the community help the small business thrive“local businesses encourage the growth
of strong community character by "providing a foundation for the web of connections and trust
that are essential to a healthy neighborhood. “These establishments are, by their nature, unique in
that they are not found in numerous other locations. Their products (whether retail goods, food or
other services) are typically tailored to, and unique to, the host community or region, often
contributing to the community's identity” (Salkin). While the dedicated owner helps the
community thrive in turn “SMEs has suggested that many owners adopt altruistic or socially
responsible business goals. Researchers have argued that SME owners have more power to adopt
and implement SRAs, and if strongly committed to such values, persist even when they are less
profitable” or as David Barnette called it “a two way street” unfortunately Walmart is destroying
that web of community that the local business tries to maintain, “study by Penn State researchers
Stephan |. Goetz and Hema Swaminathan. After controlling for other factors that influence
poverty, the study found that counties that gained Wal-Mart stores during the 1990s fared worse
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in terms of family poverty* rates than those that did”(Jurik, Bodine). Fortunately small
enterprises are the glue that hold the community together and help the advancement of the local
economy.
The revenue brought in by local enterprises cycle through the local system. “A 2012 study found
that in Salt Lake City, local retailers return a total of 52 percent of their revenue to the local
economy, compared to just 14 percent for the national chain retailers”( Pickman, Viek). while
companies like Walmart may outsource their business and give their money internationally
leaving the local economy to fend for itself despite the diminishing number of small enterprises
according to “Wal-Mart Watch, one of the largest anti–Wal-Mart organizations, features an
article claiming that in Iowa, Wal-Mart’s expansion has been responsible for widespread
closings of mom and pop stores, including 555 grocery stores,298 hardware stores, 293 building
suppliers,161 variety shops, 158 women’s stores, and116 pharmacies” (Paruchuri, Baum,
Potere). Thankfully we still have local business that keep the money flowing locally adding more
tax revenue for every hundred dollars spent at a mom and pop store 23 more dollars, than for
every hundred spent at Walmart gets cycle back into the local economy (Mitcheii). The revenue
that small businesses amass help build a better community by allowing the local government to
pay for more thing like infrastructure or public education While Wal-Mart spends there money
elsewhere leaving the local government dry if Walmart where to give the same amount to the
local economy as local business think about how nice public schooling would be.
While some studies have concluded that large corporations like Walmart are a menace to
society tearing up: 11,000 pharmacies, 5,000 hardware stores, 2,000 bookstores, and an untold
number of grocers, clothing stores, and other independent retailers since 1990 (Mitcheii). But
according to new empirical studies the previous studies had flaws first of all their sample sizes
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was too small they only studies one county in the studies and not the effect of Wal-Mart across
the united states (Paruchuri, Baum, Potere). They also limited their studies to measuring the exit
of a business from the market and left out the entering of new businesses in a process called
creative destruction beating out the completion for similar goods and services to make room for
new unique business to arrive (Paruchuri, Baum, Potere). Most of the studies I found concluded
that “there is no evidence that Wal-Mart has had a significant impact (either negative or positive)
on the overall size, growth, or profitability of the U.S. small business sector. While the entry of a
specific Wal-Mart store might cause some individual, small mom and pop businesses to fail,
consistent with Schumpeter’s theory of creative destruction, these failures are completely offset
by the entry of other new small businesses somewhere else in the economy” (Hicks) this might
be because small business more flexible than big chain stores and can get new ideas and products
out faster and more efficiently than the big competitors (Molinafi).
In conclusion the common misconception that Walmart is destroying local economies
and businesses was bases on limited empirical evidence new studies have shown that Walmart
has little to no impact on the survival of small enterprise if a business dose fail it is because a
new business is going to take its place in the process of creative destruction. So your favorite
spatialized mom and pop store like David Barnette’s and the ones that you use got to when you
were a kid might still be there because as it turns out small businesses are tougher than you think
so please support your local store because they “provide our communities with: Economic
diversity, Local control, Increased economic development capacity, and Quality job
creation.”(Pickman, Viek). They are the foundation of the American economy.