Wal-Mart

Wal-Mart's Effect on Local Economies

The superstore chain known as Wal-Mart largely effects local and global economies as the premier super retailer that strategically offers more choices with lower prices. Wal-Mart has become a goods conglomerate for consumers who previously shopped at several stores to get the products they needed for their families. With the help of Wal-Mart, consumers can now save time while shopping at only one store as opposed to several. Since Wal-Mart drives prices down, the consumer can also save precious money as they shop in the one stop shop for everything one might need. This type of immediate economic development would likely only be encouraged by communities; however, there have been many who have protested Wal-Mart coming to their town. This unusual behavior forces the investigation of the effects Wal-Mart has on the economies where it locates its superstores. The effects of the “Wal-Mart economy” are felt globally as economists and city officials around the United States continue to argue Wal-Mart’s benefits and negative affects it has on local businesses and overall economies.

Before 1962, there were not many large corporations or large retailers. The nation was dependant on its relationship with the “mom and pop” stores. These small independent stores were a common way of shopping across the country. They were typically a single-family owned convenience store located somewhere in or near the town you lived in. Most people went to these small convenience stores to do all of their grocery and household shopping.

Sam Walton had operated a store in the Butler Brothers' Ben Franklin chain in Bentonville, Arkansas. Leveraging his previous experience, Walton traveled the country to research his idea of a new way of discount retailing. His idea was to use the formula of buying cheap, selling for less, and making profit on high turn over. Another aspect of Walton’s strategy was to focus on customer expectations and satisfaction. Once convinced that his idea was the wave of the future and consumers actually wanted a new way of shopping, he and his wife put up 95 percent of the funding to open the first Wal-Mart in Arkansas. (http://www.walmartfacts.com) Sam Walton was not the only person with this idea; this was also the same year Target and Kmart opened their doors. While Target and Kmart were expanding across the country, Walton was raising money to build 15 new stores in Arkansas. By 1967, there were 24 stores in total with 24.6 million dollars in sales in Arkansas. (http://www.walmartfacts.com) Wal-Mart did not expand outside of Arkansas until 1968.

The year 1970 was a big one for Wal-Mart stores. By this time, they had been incorporated for one year and they now operated 38 stores with 44.2 million dollars in sales and 1500 employees. (http://www.walmartfacts.com) In 1970, Wal-Mart offered stock for the first time on the New York Stock Exchange. This influx of funding fueled Wal-Mart’s rapid growth. There were 276 Wal-Mart stores by the end of the decade. Using Walton’s original formula, Wal-Mart’s sales grew from 1 billion dollars in 1980 to 26 billion dollars by 1989. (http://www.walmartfacts.com) Wal-Mart went international in 1991 opening the first international store opened in Mexico City, Mexico.

In 1992, Sam Walton passed away. His passing, however, did not stop Wal-Mart’s growth; Wal-Mart continues to rise to the top of the retail industry. In 2002, Wal-Mart ranked number one on the Fortune 500 listing. (http://www.walmartfacts.com)

While some portray Wal-Mart as a corporate monster, numerous statistics reflect how the addition of a store can benefit a local economy. As of March 2005, there are 36,434 individuals employed by Wal-Mart in the state of Indiana. (http://www.walmartfacts.com) According to Wal-Mart’s official website, the majority of hourly Wal-Mart associates work full-time. Wal-Mart also provides entry-level jobs for teens, immigrants, and low-skilled workers. Additionally, Wal-Mart employs many elderly and disabled workers, who would otherwise have no jobs. In 2005, Wal-Mart projects creating more than 100,000 new jobs by adding approximately 325 new stores nationwide. (http://www.walmartfacts.com) Not only does Wal-Mart help local communities by providing abundant job opportunities, in 2004, Wal-Mart spent almost 2 billion dollars in merchandise and services with 1,643 suppliers in Indiana alone. As a result, Wal-Mart supports 87,092 supplier jobs in Indiana. (http://www.walmartfacts.com) Besides helping the communities as an employer, Wal-Mart is also a major player in charitable donations.

According to the Chronicle of Philanthropy, Wal-Mart is the largest corporate contributor in the United States. They give over $150 million a year to various charities, both religious and non-religious, which helps society immeasurably. In 2004, Wal-Mart gave almost 7 million dollars to local organizations and charities in Indiana. In addition, Wal-Mart was awarded Fortune Magazine’s “Most Admired Company in America”. Wal-Mart’s influence has inspired many other retailers to follow their generous example, donating large portions of their income to help the local economy. Commendably, Wal-Mart does all of these good deeds with a profit margin of less than 4%. (http://www.walmartfacts.com) In addition to charitable donations, Wal-Mart also has some positive influence on small town economic growth.

Some smaller towns that are progressing slower than others need the traffic and exposure that a Wal-Mart can bring. Business owners and investors welcome the traffic and exposure a Wal-Mart store can bring to revitalize the community’s economy. Other businesses flock to these areas in hopes of �piggy backing’ on the hoards of shoppers that Wal-Mart attracts. Additionally, without the ability to purchase the inexpensive products Wal-Mart provides, many lower income families would not be able to provide for their families in a satisfactory fashion. The money saved allows them to spend on necessities that are more important.

In addition to boosting local economies, Wal-Mart also plays a role in improving our nation’s economy. According to Bruce Bartlett with the National Center for Policy Analysis, Wal-Mart has a substantial effect on reducing the rate of inflation. For example, Wal-Mart typically sells food for 15 percent to 25 percent less than competing supermarkets. Interestingly, this effect is not captured in official government data. Fully accounting for it would reduce the published inflation rate by as much as 0.42 percentage points or 15 percent per year. (http://www.ncpa.org)

While Wal-Mart’s

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