Executive Summary
Wal-Mart has announced its plans to seek approval from the planning commission of Pullman to build a new store. Wal-Mart has maintained that they strive to establish a Store of the Community, with the intention of ensuring that the entire project benefits the local community by creating more than 400 new jobs, creating new tax revenue and acting as a catalyst for economic development. Despite these benefits to the local community, owners of small businesses nearby, and town residents and residents in nearby towns have expressed their discontent by Wal-Mart opening a new store in Pullman. The aim of this memo is to present the main arguments, pro and con that town resident, residents of nearby towns, and owners of small businesses located nearby could present at a public hearing on the matter. It is evident from these arguments that the demerits of approving building a new Wal-Mart store in Pullman outweigh the benefits of such developments.
Opponents cite that majority of employees at Wal-Mart live on poverty wage and 50 percent do not have retirement packages or medical coverage (O'Connor, 2013). The CEO of Wal-Mart, Mike Duke received a pay package of $20.7 million in 2012, which equals to $8, 532 per hour, more than 1,000 times the average worker at Wal-Mart. Further, an average sale associate at Wal-Mart earns only $9.68 an hour, which translates to annual pay of $15,576 (O'Connor, 2013). This is very much below the 2010 Federal Poverty Level of $22,050 for a family of four (WalmartWatch, 2010). The firm is able to afford higher wages for its employees. Passing this cost directly to Wal-Mart shoppers could mean that average consumer would only pay 46 cents more per shopping trip. In addition, entry into a new market by Wal-Mart has the potential of depressing wages by displacing retailers that offer better paying jobs. A study conducted in 2005 found that entry of Wal-Mart into a metropolitan area eliminates similar jobs that pay about 18 percent more than Wal-Mart. This resulted into significant decline in earnings of retail workers by 0.5 to 0.8 percent (O'Connor, 2013).
Studies have shown that crime rates are higher in areas near a Wal-Mart store than any other retailer. A national survey on 551 Wal-Mart stores found that the average rate of crime rate reported to police for each Wal-Mart store was 400-1000 percent higher than the average rate for the nearest Target store and six times higher for serious and violent crime near small businesses (O'Connor, 2013).
Wal-Mart does not only lower retail prices but your property value. Studies show that Wal-Mart has the tendency to decrease property value in surrounding neighborhoods. Since opening new Wal-Mart stores results into closure of nearby businesses, the property values on these neighborhoods decrease, as more properties remain vacant. According to WalmartWatch, (2010), when Wal-Mart moves close to residential neighborhood, the property values of the homes decrease and people are more likely to move away.
Establishing a 24-Hour Wal-Mart Superstore will increase light and noise population in these neighborhoods. In their present locations, town residents situated near a Wal-Mart usually complain of excessive noise from the refrigeration system at the store and idling tractor-trailers waiting at the loading dock. The noise and light coming from Wal-Mart store in the neighborhood will inconvenience people living around such establishments.
Additionally, Wal-Mart has unethical corporate ethics that are incompatible with the values of our neighborhood. Despite being the biggest private employer in the United States, Wal-Mart tops the list in labor practices. The firm has pending cases in 25 states for forcing employees to work off time without pay (WalmartWatch, 2010). More than 1 million women filed the largest class of lawsuits against the firm for discrimination in promotions and pay levels. On a national level, Wal-Mart has more lawsuits for disability discrimination than any other corporation does, and in Maine alone, there were 1,400 violations of child labor laws (WalmartWatch, 2010). Further, Wal-Mart faces federal racketeering charges for repeated use of illegal aliens on cleaning crews (WalmartWatch, 2010).
The corporation also has a bad environmental record of accomplishment. Wal-Mart has a history of violations of water protection laws, including violations of Clean Water Act, violation of state petroleum-storage laws, selling refrigerants that contain substances that deplete ozone layer among others (WalmartWatch, 2010).
Despite the negative impacts of Wal-Mart stores to local communities, the corporation has a number of community, economic, and environmental benefits that it would bring to the city. It is increasingly becoming difficult for people to make a choice between feeding their families and paying rent. Opening an additional full-service store in a community results into creation of more than 350 jobs for Wal-Mart associates. This number might increase when you put into consideration the temporary jobs associated to construction of a new store. The creation of additional jobs could help improve the economic status of the local community and people living in surrounding towns. However, while the jobs in an area may initially increase with the opening of a new Wal-Mart, the number of jobs in the area gradually decline in the long-term as Wal-Mart displaces other retail workers.
Wal-Mart has benefits to consumers because the store brings more products to choose from and close to homes so customers do not have to drive far. The store offers cheaper prices on brand-name products. A study found that Wal-Mart could affect the prices at competing businesses, forcing them to reduce their prices down by 7 to 13 percent in the long-term. This would mean that consumers would be able to have access to products and services at lower prices.
In addition to providing a substantial number of jobs to the local economy, Wal-Mart uses its revenue from property and sales tax to support basic public services such as fire and police departments as well as local schools. Town residents and residents in nearby towns can benefit from a new Wal-Mart store in terms of economic development, job creation, improved access to healthy, affordable food, and other services and goods. With all the arguments for and against setting a new Wal-Mart store in new location, it is evident that the disadvantages outweigh the benefits of such establishment.
Owners of small businesses located nearby
Owners of small business, which are direct competitors to Wal-Mart, face the biggest challenge when the corporation opens in a new town. These include businesses such as florists, drug stores, stores specializing in apparel, jewelry, sporting goods, gifts, and cards. Wal-Mart offers lower prices to its customers, which makes it difficult for small businesses to compete. Since small businesses cannot compete with Wal-Mart on price, they usually resort to other categories of products that Wal-Mart does not have or close business. Some businesses have reported that they can secure supplies from Wal-Mart at cheaper prices than their suppliers offer.
A study found that the corporation has negative impact on main-street or downtown areas that serve shoppers. Since Wal-Mart occupy large parcels of land, they tend to locate their stores in the suburbs thereby diverting traffic from small businesses located in downtown. This has the potential of producing a negative impact on the traditional ‘Main Street’ shopping centers while bringing benefits to complementary businesses located on the peripheries.
Wal-Mart however argues that setting up their stores in new locations help stimulate economic development and jobs outside Wal-Mart stores. According to Steven Restivo, a spokesperson at Wal-Mart, small businesses offering complementary products achieve great results (WalmartWatch, 2010). This implies that small businesses offering complementary goods and services benefit from the presence of Wal-Mart store. According to representatives, the presence of Wal-Mart store serves as a magnate, attracting customers looking for other services and products. A recent one-year anniversary of the Wal-Mart in Pullman, the mayor acknowledged the new Wal-Mart for helping the area withstand the harsh economy. Some small businesses take advantage of the traffic brought by Wal-Mart to increase their sales.
Presence of Wal-Mart would also benefit retailers as they prompt major advances in the retail industry (O'Connor, 2013). Competition has the potential of breeding innovation and efficiency. Wal-Mart has made some incredible advances in logistics, which has enabled the corporation to keep their prices low. Neighboring small businesses can learn from Wal-Mart in order to improve their operations.
Small businesses make significant contribution more economic contribution compared to Wal-Mart. Studies show that a new Wal-Mart routinely put small businesses out of business. For example, in Oklahoma, a new Wal-Mart store led to closure of 30 supermarkets after it saturated the area with supercenters. A study done in 2002 found that local small businesses generate substantially greater economic benefits compared to chain retailers. Since they spend a large portion of their revenue on local labor, the profits remain in the local community, and they provide a strong support for the local community (WalmartWatch, 2010). The demise of locally owned businesses could have potential devastating economic vitality in the neighborhoods.
After considering the pros and cons of establishing a new Wal-Mart store in Pullman, it is evident that the cost outweighs the benefits. Setting up a new Wal-Mart store will negatively affect both owners of small businesses and town residents, and residents of nearby towns. The negative impacts to the local community include environmental pollution, lower wages, increased crime rates, increased traffic congestion, and unethical corporate practices among others. However, a new Wal-Mart store in town would make life cheaper by offering lower prices, wide variety of products and services, and employment opportunities. Opening a new Wal-Mart store in Pullman would also produce a negative impact on small businesses that compete directly with the store. In contrast, small businesses offering complementary products would gain from the presence of Wal-Mart because of increased market share.
Works Cited:
O'Connor, Clare. As Walton Family Solidifies Majority, Wal-Mart Workers Promise Dissent for Fair Pay. Forbes. June 13, 2013. Web http://www.forbes.com/sites/clareoconnor/2013/06/13/as-walton-family-solidifies-majority-wal-mart-workers-promise-dissent-for-fair-pay/
Renkow, Mallow. Wal-Mart and the Local Economy. NC State Economist. 2005. Web October 31, 2013.
WalmartWatch.com. 2010. Web October 31, 2013, http://walmartwatch.com/img/downloads/outsourcing.pdf
