Wal-Mart: Half-Off the Evil

Living in the middle of the Seattle metro area, I’d have to go out of my way to find a Wal-Mart. I suspect this distance from an actual Wal-Mart Supercenter is something I have in common with the vast majority of people who wring their hands over the impacts of Wal-Mart on everything from family businesses to the health care system to the labor movement.

About five years ago, I had an experience with Wal-Mart that led me to believe that the truth of its impact is far more complex. I was buying a cellular operation for AT&T Wireless on Kauai, and everything seemed to come back to Wal-Mart: Where’s the best place to keep distribution? Where should we advertise? What should we give employees as thank-yous (Wal-Mart gift cards)? Kauai may be an island paradise, but many who live there struggle to make ends meet. The conveniently located Wal-Mart turns out to be the hub of commerce for full-time residents.

While there’s little question that a Wal-Mart opening down the street is bad news for you if you’re running a convenience store, how good is it for the customers who’ve been buying your limited selection of overpriced goods? A recent article looked into this and came up with some surprising conclusions about the sheer size of the benefit to consumers of Wal-Mart’s low prices. One could quibble with the assumption that Wal-Mart’s prices are really 8% lower across the board, and commentators in the past have concluded that Wal-Mart is a sophisticated user of loss leaders and keeps many prices high. However, there’s no question that the prices and selection offered by Wal-Mart represent a major improvement for the consumers in the markets they enter.

At the same time I read the study above, I was reading Dan Baum’s otherwise excellent New Yorker article on the trials and travails of New Orleans’ Ninth Ward and was struck by this comment:

“. . . the city got a federal grant in the nineteen-nineties to raze the St. Thomas housing project, which occupied a prime spot near the Mississippi River, and replace it with mixed-income housing and resident-owned shops. . . . the result, River Garden, is a collection of simple, attractive attached houses that stood up well to Katrina. Somewhere along the way, though, the number of subsidized units fell by more than two thirds; the idea of resident management disappeared; and the small resident-owned stores became a two-hundred-thousand-square-foot Wal-Mart.”

To the residents who otherwise would have run these businesses, this is a failure. But what about the local residents who now have a reliable and inexpensive place to shop? Areas around housing projects aren’t know for having the shopping and service options a Wal-Mart brings to town. Check out the Wal-Mart “store finder” for stores near you. They are consistently in lower income and/or rural areas. Yes, the Bentonville behemoth may not be a role model for employee satisfaction or supplier relations, but like most large systems its impacts are many and varied. For many folks a new Wal-Mart coming to town is – or should be - a cause for celebration.