Q: Will Wal-Mart create more retail sales in the Midway area?
A: Not necessarily. Retail sales in a given geographic area are a relatively fixed "pie". At any given time, one thousand people can only wear one thousand pairs of underwear. Likewise, they can only eat so much bread and use so many Q-tips. Without an increase in either population or household income, the retail sales that Wal-Mart gains will be sales that another retailer loses.
A study of seven Iowa counties revealed that "84% of all sales at the Wal-Mart stores come [at the expense of] existing businesses."(1)
Q: What impact does Wal-Mart have on overall area retail sales?
A: In the long-term, area retail sales may decline. While area sales will likely increase in the short-term, the full impact of a Wal-Mart is felt 5 to 10 years after its arrival, when many small businesses will have closed.
According to Iowa State University Professor Kenneth Stone.s study of 34 Iowa towns, the "total sales for Wal-Mart towns increased by six percent by the second year and held nearly steady through year seven. However, by year eight, a decline began and by year 10, sales were four percent below the pre-Wal-Mart level.. the non Wal-Mart towns, however, suffered a worse fate than the Wal-Mart towns as their total sales continually decreased over the 10-year period, ultimately ending up 15 percent lower than the pre-Wal-Mart level." In fact, his study revealed that "some small towns lose up to 47 percent of their retail trade after 10 years of Wal-Mart stores nearby."(2)
When faced with a proposed Wal-Mart, numerous cities have done Economic Impact Assessments and come to similar conclusions:
- South San Francisco "projected a loss of sales to the area of $11 million to $24 million per year and the closing of up to 30 businesses."(3)
- Greenfield, Massachusetts judged that the construction of a 134,272 s.f. Wal-Mart "would lead to a loss of 239,000 s.f. in retail space, with a loss of nearly $36 million to existing businesses."(4)
- North Elba, New York ruled that an incoming Wal-Mart "will likely result in a large amount of impacted retail space, which could take up to 14 years to refill, over 20,000 s.f. of which could become chronically vacant."(5)
Q: What is the difference between Wal-Mart and Kmart?
A: About $27.8 million per year in Midway sales. Wal-Mart is 8 times the size of Kmart and sells over twice as much per square foot. In 2002, Wal-Mart had $244 billion in sales(6); Kmart had $30 billion(7). Wal-Mart's average sales per sq ft in 2002 was $455; Kmart's sales per sq ft for the same year was $212.
With 114,608 sq ft of space in the Midway Marketplace store, Wal-Mart is expected to have nearly $27.8 million in sales that Kmart never had.
With $52.1 million in sales projected for this Wal-Mart and 84% of those sales likely to come from existing retailers, a projected $43.8 million in sales will be lost from existing Midway retailers.
Q: What businesses are most affected by Wal-Mart?
A: Any retailer that sells what Wal-Mart sells will be negatively affected. Some businesses, however, will be positively affected. As a rule, businesses that sell goods and services that Wal-Mart doesn't do better than businesses that directly compete with Wal-Mart. For example, home furnishing stores and some eating establishments see business increase when a Wal-Mart is built nearby. However, Wal-Mart negatively impacts neighboring apparel and shoe stores, stores that sell building materials, including lumberyards, hardware stores, paint & glass stores, grocery stores, specialty stores, including drug stores, sporting goods, card and gift shops, fabric stores, and jewelry stores. Businesses providing any service that Wal-Mart provides, for example, optical services and car repair, also suffer losses.(8)
Q: What is Wal-Mart.s competitive advantage?
A: Wal-Mart cuts costs. The size, scope, and speed of its operation are currently unmatched. By controlling its own logistics and co-managing its inventories with its suppliers Wal-Mart is able to cut costs at every stage of the process. For example, when controlling labor costs Wal-Mart has used these three practices:
- Cutting employee healthcare: Wal-Mart passes on staffing costs by restricting employee health benefits: "Last year, average spending on health benefits for each of the company's roughly 500,000 covered employees was $3,500, almost 40% less than the average for all U.S. corporations and 30% less than the rest of the wholesale/retail industry."(9)
- Refusing to pay overtime: Wal-Mart has systematically asked thousands of employees to work off-the- clock or simply deleted employees. hours from time cards. "There are currently 37 separate off-the-clock cases seeking class-action status in 29 states..." including, most recently a case filed in Minnesota's Dakota County District Court.(10)
- Paying women less than men: Wal-Mart is currently being sued for what would be the largest sex discrimination case in the history of the U.S. For example: Women employed by Wal-Mart on average make 5-15% less than men working in the same jobs. 65% of Wal-Mart's hourly workers are female, while only 33% of its managers are. Women employed hourly on average make $.34 less an hour than males working in the same positions.(11)
Q: Does Wal-Mart really have the lowest prices?
A: On some items: yes; on most items: no. Wal-Mart frequently uses "loss leaders", pricing popular items at or below cost in order to attract customers. According to Kenneth E. Stone of Iowa State University, Wal-Mart "has created an illusion that the prices of each of the 75,000 products carried in a typical Wal-Mart store are the lowest. In fact, that is only true for about 1 percent of the products, but those products are the ones popular with consumers -- General Electric lightbulbs, name-brand shampoos, deodorants and cleaning products."(12)
Wal-Mart's practice of selling items below cost has repeatedly led to charges of predatory pricing. In a case brought by a group of Arkansas pharmacists, "Wal-Mart did admit selling below cost, but denied the predatory charge. David Glass, Wal-Mart's CEO, said that the Bentonville, Arkansas retailer regularly sells a variety of items below cost, including such standards as Crest toothpaste and Listerine mouthwash."(13)
Q: How much does Wal-Mart spend with neighboring non-retail businesses?
A: Less than it might. Local businesses spend more of their money with local suppliers and service providers.
A recent study in Maine compared Wal-Mart to locally owned business and discovered that when local residents spend $100 at Wal-Mart "their purchase generates $14 in local spending by the retailer. That same $100 spent at a locally owned business generates $45 in local spending, or three times as much."(14)
In other words, 86 cents of every dollar spent at Wal-Mart leaves the local community.