NCPA - National Center for Policy Analysis

BIG BOX RETAILERS

February 21, 2005

Empirical evidence shows that big-box retailers -- such as Wal-Mart -- provide numerous benefits, says Pamela Villarreal, a research associate with the National Center for Policy Analysis.

Kenneth Stone of Iowa State University found that retail sales dollars from adjacent counties are lost to counties with big-box stores. In a study on the impact of Menards home improvement stores on Iowa counties, Stone concluded:

  • Counties with Menards stores averaged about $21 million more in sales six years after the store opened compared to adjacent counties.
  • Adjacent counties lost about $5 million in sales, on the average, indicating that consumers were crossing county lines to shop at Menards.

Critics assume that the greater competitive edge of big-box retailers comes from their ability to hire fewer workers and pay them less. However, empirical evidence has not found this to be true, says Villarreal:

  • Marshall University professor Michael Hicks found that West Virginia counties with Wal-Mart stores experienced a permanent net gain of about 55 retail jobs, on the average.
  • A University of Missouri study of 1,749 counties nationwide showed that Wal-Mart counties experienced a permanent net gain of 50 retail jobs.
  • Bates College researchers Brian Ketchum and James Hughes showed that Wal-Mart host counties in Maine experienced a net gain in average weekly retail wages of $8.24 relative to non-Wal-Mart counties. While this is not statistically significant, it confirms that Wal-Mart did not lower retail wages.

Undoubtedly, as retail evolves and reduces market inefficiencies, small retailers will be affected. But evolving industries are nothing new; transportation, health care and other industries look far different than they did even a few decades ago. The efficiencies and market benefits brought by big-box retailers should not be ignored in community debate, says Villarreal.

Source: Pamela Villarreal, "Think Outside the 'Big Box,'" Brief Analysis No. 501, National Center for Policy Analysis, February 21, 2005.

For text:

http://www.ncpa.org/pub/ba501/

 

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