Special report: Who wins with Walmart?

Experts say Walmart delivers both positives, negatives

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Editor's note: Who wins with Walmart? The answer depends on whom you ask. This is the first in a four-part print series on the impact of Walmart stores on select central Ohio communities.

The construction of a Walmart doesn't necessarily spell doom and gloom for existing businesses in a community, but the world's largest retailer can have both good and bad effects on a city, according to local experts.

There are 16 Walmart stores within a 30-mile radius of Columbus. The first Walmart activity to hit the area was the construction of a distribution center in Grove City that opened in 1992. A Walmart store opened one year later in the city of Delaware. The first Columbus Walmart opened in 1994 on Morse Road.

The retailer that boasted $419 billion in sales during the last financial year, according to its corporate website, bases the location of a store on different factors.

"It's hard to generalize. We try to really respond to consumer interest," said Bill Wertz, Walmart's director of community and media relations for the east. "Obviously, we have stores in many communities and we are able to learn from them where (customers) would like to see more. We often get the comment that it would be convenient to have a store on another side of town We're always looking to grow in a community where we don't have stores.

"Other times, we're approached by a community or developers who may indicate they are about to build a shopping center or community development and wonder if we're interested in participating."

ThisWeek looked at Walmart stores in Delaware, Canal Winchester, Grove City, Lewis Center, Marysville and Reynoldsburg, as well as proposals for stores in Liberty Township and Westerville, and found a range of effects.

In communities such as Delaware, Reynoldsburg and Grove City, local officials said Walmart helps create development. In Marysville, for example, the arrival of Walmart is credited with bringing Coleman's Crossing into existence.

A proposed Walmart in Liberty Township, however, spurred a lengthy and expensive set of lawsuits and appeals. Walmart didn't build, but legal fees for both sides, plus a final settlement, totaled nearly $4 million.

In Westerville, a proposed Walmart received city approval. A November referendum attempt failed because the petition didn't have enough valid signatures.

 

Walmart's benefits

Columbus-based retail expert Chris Boring of Boulevard Strategies, said Walmart, as advertised, offers products at low prices in a one-stop shopping environment.

"From a consumer standpoint, Walmart has more choices and choices that are close to home so they don't have to drive as far," he said, noting that the store offers lower prices on brand-name products. It also stocks its own line, providing for more choices.

In their study, "The Local Costs and Benefits of Walmart," faculty members Elena Irwin and Jill Clark of The Ohio State University's Department of Agricultural, Environmental and Development Economics agree.

"Consumers from the local and neighboring communities enjoy tremendous benefits from access to a Walmart store," the report said, citing studies that found Walmart boasts average prices that are 14 percent lower than those charged by its competitors.

A Walmart can also affect prices at competing businesses, the study found, pushing prices at those businesses down by 7 to 13 percent in the long term.

"It's certainly true that Walmart offers low prices. That's how we built our company. And having a Walmart in the area tends to bring competition and lower prices," Wertz said, noting the company's $4 prescription program.

"When we introduced that immediately, other pharmacies came out with other programs," he said. "If Walmart had not done that, prices would not have been dropped."

According to Wertz, Walmart thrives on competition and customers win.

"When a Walmart comes in, in an effort to retain customers, competitors have to lower prices as well," he said. "We're a better store if we have competitors to keep us on our toes."

Walmart has also prompted major advances in the retail industry, Boring said.

"Competition breeds innovation and efficiency," he said. "They have made some incredible advances in logistics All the stuff that happens behind the scenes is why prices are so low. A lot of the advances made have increased retail labor productivity. They're getting by with fewer employees than in the past."

The opening of a new Walmart store also means jobs. The average hourly pay rate of those jobs in Ohio is $12.17, according to the company's corporate website.

"Certainly, the immediate impact is the amount of jobs we offer directly. The typical Supercenter means about 300 new jobs to the community and they're good jobs with career opportunities," Wertz said. "A lot of store managers start out as hourly associates and work their way up."

However, the OSU study found a "negative impact that Walmart has had on local (and national) labor markets Low wages and limited benefits can have negative impacts on public welfare programs in the local community if these low-quality jobs are replacing jobs of higher quality," the study said.

It also found that while jobs in an area may initially increase with the opening of a Walmart, the number of jobs in the area eventually decreases and Walmart often displaces other retail workers.

Boring said Walmart workers are paid $18,000 to $19,000 a year on average, but, "a lot of times, that is a second or third job ... You pay your mortgage with your primary job and use that money for other purchases."

Teens also hold jobs at Walmart, Boring said, which gives families a supplemental income or money for "discretionary retail purchases" that can stimulate the economy.

According to Wertz, Walmart benefits communities in other ways.

"Of course, there is the direct impact of sales tax revenue and purchases from local suppliers," he said. "Those would all be direct effect; indirect would be the businesses we draw to the store."

In the 2011 financial year, Walmart spent $185 trillion for merchandise and services with 5,797 suppliers in Ohio, the company's corporate website said.

The company also accounted for more than $446.6 million in sales taxes in Ohio during the 2011 financial year, the website said.

Having a Walmart in a community also means some dollars for local groups, Wertz said.

"At the store level, a store manager has a budget and ability to make small donations to Little League teams and neighborhood groups," he said, noting the company also makes donations on a state and national level.

In July, the Walmart Foundation and Honda of America Mfg. gave the Capitol Square Review and Advisory Board and the Capitol Square Foundation a $150,000 grant to fund school transportation for Ohio Statehouse visits.

 

Walmart's effect on

the local economy

The businesses that face the biggest challenge when a Walmart opens are direct competitors, the OSU study found, such as drugstores, florists and stores specializing in apparel, sporting goods, jewelry, cards and gifts.

Boring said he never encourages businesses to compete with Walmart's prices.

"I advise small businesses to try to get into other categories than what Walmart has," he said. "They can't compete on price. That's suicidal. One business told me they can buy their stuff cheaper at Walmart than from their own supplier."

Walmart stores can also have a negative effect on downtown or main-street areas that cater to shoppers. Because Walmart stores require large parcels of land, they tend to be on the edges of a town and "thus may divert traffic away from traditional downtown shopping areas," the OSU study said. "This can have a clear negative effect on the traditional 'Main Street' shopping district while bringing benefits to complementary stores located on the fringes."

"Communities lose their identity when big-box hurts small retailers and downtown," Boring said. "No one wants their (community) identity to be the big-box out on the highway."

But a Walmart development can also bring more business to the area.

"We certainly see a lot of the same chain stores located near Walmart. I don't know if it's deliberate on their part," Wertz said. "They take advantage of the traffic we bring to the area What typically does occur when we have to move a store, it's not something welcomed by nearby merchants because they like the customer traffic we bring."

In communities that already have big-box retailers, the consumers are pushed from one store to another, the OSU study said.

"Most studies focused more on a connection between rural (areas) and big-box stores. That's where the difference is more extreme and there are really big changes in terms of retail distribution," Irwin said. "In suburban and urban settings that already have some saturation of big-box retailers, the same thing happens. It's a zero-sum game.

"They're taking retail dollars from one store to another They're not creating new retail gain, just redirecting profit."

The OSU study concludes, "On the other hand, communities that already have several big-box retailers are unlikely to experience further reductions in consumer prices and are likely to suffer many of the costs. An increasing amount of big-box retail creates substantial traffic congestion and infrastructure costs. It can also lead to an oversupply of retailers that can have adverse community consequences, such as vacancies in older strip and big-box developments as newer big-box retailers out-compete older big-box retailers."

 

 

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