Wal-Mart’s Effect on Local Economies

Built on the formula “buy cheap, sell for less than the other guy, and make a profit on high volume and fast turnover,” Wal-Mart today is the world’s largest retailer – and one of the most controversial.  Founded in 1962 by Sam Walton, the company’s key focus is selling goods at the lowest price possible, with the slogan “Save Money. Live Better.”  Saving money to help people live better is the goal Sam Walton envisioned when he created the first Wal-Mart (Wal-Mart Corporate).  For Americans with tight budgets, Wal-Mart has become a staple place to shop – a place for people to enjoy the products they need and love, at a price they can afford.

The Wal-Mart effect, in essence, is when a big box retailer comes into town, reshapes the shopping habits of consumers, drives prices down, and ultimately creates a “race to the bottom” among businesses (Fishman, 2006).  Today, Wal-Mart’s ubiquitous presence has subjected the retailer to considerable attention over its effect on local economic activity.  From an economic perspective, Wal-Mart is criticized for “infiltrating small-town America” while offering an extremely large variety of consumer goods at very low prices (McCune, 1994).  Many critics argue that this strategy undermines the ability of small, locally owned businesses to compete, forcing many to close.  Additionally, Wal-Mart has an extensive history of using public money to aid in financing its rapid expansion across the United States.

Up until now, the local and state governments have done little to address the phenomenon known as the “Wal-Mart effect.”  I believe state and local governments need to play a much bigger role in protecting their community’s future.