Small businesses experess concerns about new Southern CA Walmart

October 31, 2012 at 11:20 am

Recently we blogged about a study looking at the effects of a new Walmart development on nearby small businesses in a Chicago neighborhood. The study found that 35 to 60 percent of the closest small businesses had shut their doors in the two years after the Walmart opened. Walmart (and often municipal officials) assert that their stores generate positive economic development in the surrounding areas. Bottom line is that when a Walmart opens, the surrounding neighborhoods change and the question is, who benefits?

KPCC, a Southern California public radio station, is profiling small businesses in another neighborhood in the town of Altadena, CA that is about to get a new Walmart Neighborhood Market, which is smaller than a superstore (but still 28,000 square feet). KPCC is asking nearby small  businesses and residents about their concerns. While they can all agree that change is coming, not all of them agree on the impacts.

On the one hand are the long-time family run businesses, such as a liquor store and pinata store. These business owners are worried about being undercut by the much lower prices at Walmart, and eventually having to go out of business.

“I don’t understand Wal-Mart, why they (would) open around here,” Yoo said, as she watched over her store, All Star Liquor. “I know all of the small businesses in this area will be worse than right now. It’s bad news to the small business owner.”

KPCC cites a study that showed a new Walmart initially creates 100 jobs in a community, but over time as local businesses close, the addition of a Walmart actually leads to 40 to 60 of those jobs lost. As a professor from the University of Southern California puts it:

“Wal-Mart is really the 800-pound gorilla of the retail industry,” Schuetz said. “The mom and pop stores don’t have the same kind of bargaining power and so they are paying a higher price directly from the suppliers and that gets passed along to consumers in a higher markup.”

On the other hand are the consumers and businesses who are eager to see the new Walmart.  Particularly as many people continue to struggle in this economy, consumers in the area are looking forward to the lower prices and discounts. Some business owners believe that the Walmart will help spruce up the neighborhood, bringing in more foot traffic and reducing crime and loitering.

These perspectives again illustrate just how charged the discussion around big box retailers, such as Walmart, can be.  They also provide an example for other cities looking to do the same. Small businesses can’t compete with the larger stores, and it is inevitable that some will go out of business– a detriment to communities where small businesses help build community and family wealth. On the other hand, for families struggling to make ends meet, the prices at Walmart can offer relief by enabling them stretch their dollars.

At the end of the day, the net effects do not come down to dollars and cents, or numbers of jobs gained or lost. Communities and neighborhoods are built upon economically secure and stable households– people who are invested in the community for the long run. These people create those intangible aspects of vibrant communities, like a sense of place and uniqueness. Workers having access to good jobs and long-term stability is key, as are entrepreneurs who can build wealth for future generations, as well as contribute to the character and fabric of a community. If we design policy to support these things– good jobs, healthy local businesses, and resilient communities– then perhaps the needs that are being met by Walmart can be instead met from within communities.

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Entry filed under: Economic Development, Economy, Jobs & Employment, Small Business. Tags: , , .

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