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Posted on March 8th, 2013, by

The impact of Walmart on surrounding businesses and economic situation within the area is very significant, with both advantages and disadvantages for the residents of the area and for the owners of small and medium businesses. The purpose of this essay is to analyze the pros and cons of building a new Walmart in the local area for the above-mentioned categories of people.

Arguments of the owners of small businesses located close to the potential Walmart area:


 Walmart can revive the economic life in the area and attract new businesses
 Construction of Walmart creates temporary growth of employment and additional business opportunities
 Walmart acts as a customary accelerator of sales
 Walmart contributes to interaction with other nearby areas where Walmarts are located


 Local businesses can lose from 47% to 63% of their sales to Walmart (Feigenbaum & Feigenbaum, 2003)
 Small businesses are unlikely to benefit from the new business opportunities brought by Walmart
 Walmart’s economies of scale and low prices of Walmart suppliers make it almost impossible to compete with the retail giant
 Most small businesses will have to enter a price war with Walmart instead of smooth development
 Finances generated by Walmart are likely to flow out of the local area
 Unique character of local business and trade might be destroyed by Walmart intervention since the retailer creates own rules of the game
 Walmart uses its power to gain state subsidies and government support, and creates expensive infrastructure which might not be appropriate for the actual needs of the local area (Feigenbaum & Feigenbaum, 2003)

 Local suppliers and manufacturers are likely to suffer as Walmart has a line of own suppliers and thus the resources are drained out of the local area in favor of the Walmart’s channels

Arguments of the residents of current town and nearby towns


 Walmart represents a significant source of tax revenue for the local community
 The greatest benefit of Walmart is centered around low prices, and thus new Walmart will allow local residents to save more
 The retailer creates a great number of additional jobs, especially for younger people and for middle class people, and thus helps to decrease unemployment
 There are numerous Walmart benefits for employees, such as profit sharing, health care incentives and free training programs
 One-stop shopping at Walmart is convenient and allows to save time


 Local jobs will be replaced by Walmart lower wages and longer working hours
 Walmart often uses the labor of part-time employees, who are not eligible for health care benefits and profit sharing (Hicks, 2007)
 Many of the expected Walmart jobs are to be occupied by its regular constructors, architects, lawyers etc., and the loss of local jobs might not be covered by the additional working places
 Lower prices at Walmart often mean lower quality, while higher-quality businesses might be crowded out of economy by the retail giant
 The locations of Walmarts often change, if the original location was not sufficient
 Walmart is against unionization (Brunn, 2006), and labor conditions of Walmart employees are claimed to be rather poor
 The retailer moves to quickly growing areas, but lowers the living standard of its employees so that they cannot earn enough to survive in the developing areas

Response of Walmart representatives to criticism:

 Although some local businesses may experience the decrease of sales, they can cooperate with Walmart and they are likely to benefit from overall increase of prosperity
 It is estimated that for 1 dollar of Walmart sales growth, overall local sales increase by 5 dollars (Brunn, 2006), so the creation of new jobs and business growth quickly outweigh the redistribution of sales and jobs in the area
 Although Walmart might provide lower payment than the local businesses, it increases overall purchasing power of the population and allows to make significant savings
 Walmart allows people who cannot work full time to have part-time jobs, thus increasing their quality of living
 Walmart treats employees as partners and allows them to benefit from the growth of the company
 The strategy of Walmart is to support American goods and manufacturers, so the growth of Walmart sales also contributes to the growth of national economy
 Walmart contributes to the local community in a variety of ways: helping children, organizing trainings, donating, etc.

Basing on the above-mentioned information, possible negative effects of the new Walmart store on local economy will be quickly covered by the rapid economic growth and increase of tax revenues in the area

Feigenbaum, A.V. & Feigenbaum, D.S. (2003). The power of management capital: utilizing the new drivers of innovation, profitability, and growth in a demanding global economy. McGraw-Hill Professional.
Brunn, S.D. (2006). Wal-Mart world: the world’s biggest corporation in the global economy. Routledge.
Hicks, M.J. (2007). The local economic impact of Wal-Mart. Cambria Press.


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