Do supermarkets damage local economies?

high streetsIt doesn't seem to happen quite so much any more, but it always used to baffle me when people would complain about the arrival of supermarkets on our highstreets, saying that they destroyed local businesses and made our town centres worse off.  The obvious solution seemed to be for those people complaining to continue shopping at the local shops they love so much, thanks to which they would no doubt remain open.

Alas that seldom used to happen and people would typically vote with their wallets and frequent the supermarket instead.  So a new study by Iowa State University should hopefully put the issue to bed once and for all.

They used Wal-Mart as their demonic supermarket of choice and found that total retail sales grew more in towns that had a Wal-Mart in them than did towns without them over a 15 year period.

Ken Stone, an Iowa State University emeritus economics professor and Georgeanne Artz, a visiting assistant professor of economics in the College of Agriculture and Life Sciences, have been studying the economic impact of Wal-Mart stores dotting the Iowa landscape since 1988.

“This is a much longer-term study and it shows that among the Wal-Mart host towns, their total sales went up and stabilized, and they became more of the regional trade centers,” says Stone, one of the nation’s leading experts on the economic impact of Wal-Mart in small towns.

“But one has to keep in mind that most of that gain was by Wal-Mart stores, and they did have negative impacts on a lot of other businesses in town—mainly any store that was selling essentially the same thing they were selling.

“The few towns in our population group that don’t have a Wal-Mart store fared better than I had expected,” he continues. “They too were declining [in retail sales] before Wal-Mart came in, but they kind of stabilized at that lower level from Wal-Mart. And I think it’s because nearly all of them got a regional chain store like an ALCO, or a Dollar General. And in particular, I think every one of them had a good chain grocery store like Fareway or HyVee. So again, they sort of had a critical mass of retail stores to retain people there and it’s my contention that most people don’t really want to drive any farther than they have to shop.”

They found that in the 15 years after Wal-Mart opening in a town, the general merchandise sales in a town increased sharply, compared to a slight decrease in towns without a Wal-Mart.  This increase was also reflected in niche merchandising areas.

“Many of the types of stores that were impacted negatively initially seemed to find their way and figure out how to operate against Wal-Mart as time went on,” Stone says. “As an example, the old line hardware stores back in the 1980s sold toys and sporting goods, too. They tried to be a general store. And that just didn’t work against Wal-Mart because they were dominant in toys and sporting goods, etc.

“But the hardware chains in particular—and I did a lot of work [consulting] for True Value and Ace—finally learned that they had to specialize and find niches. And the first niche was service. They gave better service.”

So, in Iowa at least, having a Wal-Mart in a town was shown to reverse the decline in retail sales and contribute to the local retail market.  A far cry from the armageddon many protestors would have you believe.


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