Large corporations such as Wal-Mart or Home Depot often come under criticism for putting mom-and-pop shops out of business. While this may be a valid criticism, the consumers neglect to realize that they play the biggest part in shutting these businesses down. Consumers across the country are always looking for the best deals or the lowest prices, and in most cases the larger corporations are where products can be found at the lowest price. Many small business owners and the populations of small towns dislike large corporations moving into the area because they believe it negatively effects the local economy. In reality, we should embrace large corporations moving into our communities because they boost the local economy, they lower prices on products we use every day, and they create hundreds of jobs.
Some believe that large corporations harm the local economy. While this is true in some cases, studies have shown that placing a Wal-Mart in an area actually increased sales for businesses in or around the area. In a study conducted in 2002 by Jim Simmons, a retired University of Toronto geography professor, the professor states: “We tried to see if there was a substantial sales decline in the nearby areas, but it was difficult to find,” said Mr. Simmons. “We couldn’t find any situation where people lost sales or went out of business.” (Shaw, H. 2002). This is just one of the many findings from the study. In an effort to further boost the local economies of the areas new Wal-marts are opened in, Wal-Mart has implemented a Locally Grown program that has been enacted since 2008.
Pam Kohn, who is a senior vice president and general grocery merchandise manager, had this to say about the program. “At Walmart we are committed to increasing our locally grown offerings and the number of local small farms we work with. Through this program we are able to cut shipping costs and decrease food miles, but most importantly we are offering our customers an opportunity to support their local farmers without worrying about the impact on their wallets.” (Economics Week, 2008) This means that not only are they benefitting the stores around the area, but also the farmers in the area as well. This leads to a stronger local economy, and ultimately a thriving community.
Stores like Wal-Mart are famous for keeping their prices so low. This is one reason why they are able to maintain a grip on the consumers of an area. They accomplish this by keeping the cost to produce and transport the goods low. In January, a study by the Los Angeles County Economic Development Corp. found that, “an individual family could save $589 a year on groceries by shopping at a supercenter. Overall, shoppers could save $3.76 billion in merchandise nationwide.” (Blazier, A, 2004) A major reason they can keep prices lower than mom-and-pop run businesses is their ability to buy merchandise in bulk. Buying in bulk works the same way it does for a consumer.
The more of a product that is purchased, the less the cost is per unit. Consumers see this every day when they go to stores like Sam’s Club or Costco. When they buy their merchandise in bulk, they are able to offer it to the consumer at a lower price. (Kale, 2011) This is what could eventually drive the mom-and-pop owned businesses out of the area, and draw a negative criticism from the public. The interesting thing about this criticism is that the public complains about Wal-Mart driving these smaller businesses out, yet continue to shop at the Wal-Mart to save money. It would seem as though all that would be needed to be done would be to stop shopping at Wal-Mart and start shopping at the locally owned businesses.
On the topic of jobs, there is a general increase in the availability of jobs after a large corporation moves in. Going back to the Wal-Mart example, a study was conducted to show how Wal-Mart affected job creation. In a study conducted by University of Missouri-Columbia professor Emek Basker, Wal-Mart creates a net value of 50 jobs more than it “destroys.” In her study, she presents these findings: “I find that immediately after entry, retail employment in the county increases by approximately 100 jobs; this figure declines by half over the next five years as some small and medium-sized retail establishments close. Wholesale employment declines by approximately 20 jobs over five years. Restaurant employment increases slightly; there is no change in employment in manufacturing or in automobile dealerships and service stations.” (Basker, 2005)
In addition to the new jobs that are created, most Wal-Mart employees can enroll in health benefit programs, whether part time or full time workers. This means that smaller communities where health insurance options may have been limited will now have jobs where health insurance is a benefit. Also the low income families who can not afford pricey health insurance have the opportunity to receive benefits.
Another benefit of having a Wal-Mart move into a community is the money it brings into the area. As with all businesses, large corporations have to pay taxes that go to local governments in the area they operate. In a bi-monthly publishing by the Department of Agriculture and Resource Economics, Mitch Renkow writes, “Wal-Mart generates substantial sales tax and property tax revenues for the county in which it locates. This could potentially be of great benefit to the fiscal well-being of the local government in the town or county where the Wal-Mart is located.” (Renkow, 2005) This means that there is more money being generated for local spending, With all of the business that Wal-Mart can do, that is that much more money for the local area, much more than any mom-and-pop shops could provide.
We should embrace bigger corporations moving into the area because it ultimately creates a stronger local economy. These corporations bring in products from around the world to communities that would have never gotten a chance to purchase them. They also keep the prices low so that low income families can afford them. Through job creation, slashing prices, and the attention to the area that comes with a big store such as Wal-Mart, it can be said that local economies benefit from these new stores opening in the area.
Shaw, H. (2002). Wal-mart boosts local economies:
Study: Finding shows retail behemoth benefits neighbouring stores. National Post. Retrieved from http://search.proquest.com/docview/329926525?accountid=32521
Sailee, Kale (2011) How Does Walmart Keep Its Prices So Low? Retrieved from: http://www.business-online-news.com/how-does-walmart-keep-its-prices-so-low.html
Blazier, A. (2004, Apr 15). Study concludes Wal-Mart creates more jobs than Retail chain chases away.
Retrieved from http://search.proquest.com/docview/464131659?accountid=32521
Matthews, C. (2012, 07). Ten Ways Wal-Mart Changed the World. Retrieved from http://business.time.com/2012/07/02/ten-ways-walmart-changed-the-world/#ixzz2IYS1yFFm
Renkow, M. (2005). N.C. State Economist. Department of Agriculture and Resource Economics. retrieved from: www.ag-econ.ncsu.edu/VIRTUAL_LIBRARY/ECONOMIST/novdec05.pdf
Basker, Emek, (2005) Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion. Review of Economics and Statistics, Vol. 87, No. 1, February 2005. retrieved from SSRN: http://ssrn.com/abstract=371102 or http://dx.doi.org/10.2139/ssrn.371102
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