The "Wal-Mart Effect"

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The Wal-Mart effect is the name given to describe Wal-Mart's tendency to suck away business from every retailer in an area that the store moves into, destroying the local economy and eliminating jobs. Iowa is provides a good example of this.

Iowa and Wal-Mart: Just the Facts

A study conducted by Prof. Kenneth Stone at Iowa State University compared the economic changes of "Non-Wal-Mart towns" versus "Wal-Mart towns", all cities of less than 5,000 residents. The first Wal-Mart in Iowa opened in 1983. Home Furnishing By 1984, sales volume at neighboring home furnishing stores fell 14%. After ten years, home furnishing stores reported a 31% decrease in sales. Many were forced to close. "Specialty" stores (sporting goods, jewelry stores, card shops, florists, etc.) In the Wal-Mart town, after ten years, sales volumes at these stores fell 17%. In neighboring non-Wal-Mart towns, sales fell 28%. Apparel In the Wal-Mart town and the surrounding towns without Wal-Marts, sales volumes at clothing stores dropped 28% in ten years.

Wal-Mart says that, when it opens a store, sales in that town increase dramatically for all businesses, and sales in neighboring towns fall only slightly. It also says that Wal-mart supercenters create 400-500 jobs. "Any time a new Wal-Mart moves in, you'll see a whole new commercial development spring up around it taking advantage of the customer traffic that's someting there," says Wal-Mart's chief spokewoman Mona Williams.

By 1996, sales volumes at department stores in the area of the Wal-Mart town, including the Wal-mart store itself, rose 42%. However, grocery sales at other stores fell 14%, Drug stores sales fell 32% Mens and boys stores' sales fell 59%. Out of towns across Iowa of 5,000 or less, from the opening of the first Wal-Mart in the state in 1983 through 1993, the study showed that 7,326 stores closed their doors.

From personal experience

From living in a small town (Eureka) myself where a Wal-Mart has recently opened, I can attest to the "Wal-Mart effect" on the local economy.      I remember when I was very little going to the supermarket with my mom. We always went to Schnucks or Save-A-Lot. Then, a Wal-Mart Supercenter opened up down the road, and that's where we got all our groceries, because they are cheaper there.      The changes I've noticed in the 8 years since the Wal-Mart moved in include Schnucks closing its photo department, getting rid of its movie rentals, and closing its bakery.      Other business have been affected as well. A local auto repair closed down two years ago (the Wal-mart has a tire and auto center.) A local hardware store run by one of my grandpa's old friends that was right next to the Wal-Mart now has a "for sale" sign in front of its old brick and stone building. The owner said he just didn't have any business any more. In addition, the parking lot of Wal-Mart is almost always full now, but just a few years ago it was never hard to find a parking spot.